Rossari Biotech’s IPO Opens on July 13, 2020 – Should You Invest or not?

Next week on July 13, 2020, the Rossari Biotech Ltd. will launch its initial public offering (IPO), and finally, put an end to nearly four-month of inactivity for IPOs due to COVID-19 in the domestic markets. This textile and speciality chemicals manufacturing company will be the first to be listed in the lockdown phase. In times when the pandemic disrupted the economy, many companies postponed their IPO launches except the Rossari Biotech which decides to raise Rs. 496.25 crore by selling 1.16 crore at Rs. 423-425 per equity share, as per the red-herring prospectus.

The company is looking forward to its debt repayment by raising funds by ‘going public.’ The IPO consists – a fresh issue and an offer-for-sale by two promoters which are Edward Menezes and Sunil Chari. Each of them selling Rs. 52.5 lakh shares.

Rossari Biotech IPO Details:

IPO Date July 13, 2020 – July 15, 2020
Issue Type Book Build Issue IPO
Issue Size 11,682,033 Equity Shares of Rs. 2 (aggregating up to Rs. 496.49 Cr)
Offer for Sale 10,500,000 Equity Shares of Rs. 2 (aggregating up to Rs. [.] Cr)
Face Value Rs. 2 per Equity Share
IPO Price Rs. 423 to Rs. 425 per Equity Share
Market Lot 35
Minimum Order Quantity 35
Listing Exchange NSE, BSE
P/E (x) 33.81
Market Capitalisation (in Rs.) 2207

Rossari Biotech: Overview

Rossari Biotech is one of the leading speciality chemicals manufacturing companies in India providing customized solutions to the specific industrial and productional requirements in the FMCG, poultry, apparel, and animal feed industries through its wide range of product portfolio comprising home, personal care, and performance chemicals; textile speciality chemicals; and animal health and nutritional products. According to the F&S Report (as on September 30, 2019), Rossari Biotech is the largest manufacturer of textile speciality chemicals in India.

Mr Edward Menezes and Mr Sunil Chari are the promoters of the company. The textile speciality chemicals and home, personal & performance products are the major contributor to the company’s revenue. The company manufacturers most of its products in-house from its facility at Silvassa, Union Territory of Dadra and Nagar Haveli.

The company’s operating profit and net profit grew at a compounded annual rate of 32%, 63%, and 67% respectively through financial years ended March 2017 to 2020. During the same period, the EBITDA margin expanded to 17.4% from 9.2%. The company has shown significant growth amongst its peers such as Aarti Industries Ltd, Atul Ltd, and Fine Organics Industries Ltd, and Vinati Organics Ltd.

Return Ratios (in per cent)

Companies RoE RoCE
Rossari Biotech 32 25
Aarti Industries 19.2 16.2
Atul 17.4 27.3
Fine Organics 29.5 34.1
Vinati Organics 28.6 36.4

Peer Comparison (in per cent)

Companies Revenue EBITDA Net Profit
Rossari Biotech 32 63 67
Aarti Industries 13 14.5 20
Atul 13 20 28
Fine Organics 10 18 28
Vinati Organics 16 23 35

Things to Consider Before Investing in Rossari Biotech IPO

The company has shown significant growth in its revenue, EBITDA, RoE and RoCE in the last three years and emerged as the leading the largest manufacturer of textile speciality chemicals in India. Undoubtedly, the company is performing well amongst its peers but investors should be prudent before investing in Rossari Biotech  IPO.

Below we’ve mentioned some key points or factors that you must consider before applying for Rossari Biotech IPO:

  • Rossari Biotech is reliant on the demand from the significant portion and has textile speciality chemicals and home, personal & performance products as major contributors. Also, the company generate a significant portion of revenue from a few major institutional customers such as TSC and HPPC product categories. Any downturn in the textile industry or demand could have an adverse impact on the company’s business, operations, and cash flows.
  • The Silvassa manufacturing facility is very critical for their business. Any downturn or shutdown could have an adverse impact on financial operations.
  • The revenue model of the company can largely be affected by the increase in the cost of raw material which could further affect the financial conditions of the company.

Apart from this, any delay in payment from distributors or customers could result in a reduction of the company’s. profits. If we consider what we mentioned above, the Rossari Biotech has shown relatively remarkable growth in its peer and growing consistently. However, the IPO price seems a bit overpriced. Nevertheless, the investors must be prudent while considering investing in Rossari Biotech IPO. For more details, the investors should go through the red herring prospectus of the Rossari Biotech to get in more details.

769
2

One Reply to “Rossari Biotech’s IPO Opens on July 13, 2020 – Should You Invest or not?”

  1. Despite all odds, the promoters are going ahead shows their confidence and resolve for achieving their envisaged goals. The chemical sector has been performing exceptionally well during the pandemic conditions and Rossari is no exception. Valuation appears to be Ok and it’s a buy

Leave a Reply

Your email address will not be published. Required fields are marked *