Ambani Organics Limited IPO

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(i) Ambani Organics Limited was founded in 1991 and has grown steadily from last 25 years. Ambani organics believes in sustainable development and thus, manufactures cost-effective, efficient, eco-friendly and high-performance specialty chemicals. Their water-based emulsions serve diversified markets of Textiles, Paints, Paper, Adhesives, Construction and Chemical Industries.

(ii)  Over the years they have developed good standing with their customers from various industries to whom they have supplied speciality chemicals such as Textile Auxiliaries, Acrylic Polymers, Binders and Paint Dryers.

(iii)The Company has 2 (two) manufacturing facilities in Maharashtra located adjacent to each other at MIDC, Tarapur Boisar, Thane, Maharashtra.

(iv) The Company has a dedicated in-house Research & Development and Quality Assurance/Quality Control Team which undertakes rigorous testing and quality management.


Objects of the Ambani Organics Limited IPO:

Objective of

Ambani Organics Limited IPO

are: The issue comprises of OFS of 1,00,000 and Fresh Shares of 12,68,000 Equity Shares The Fresh Issue will be utilized for (a) Funding Long Term Working Capital Requirement (b) Funding expenditure for General Corporate Purposes

Ambani Organics Limited IPO Details:

Open Date: Jul 06 2018
Close Date: Jul 10 2018
Total Shares: 1,368,000
Face Value: ₹ 10 Per Equity Share
Issue Type: Fixed Price Issue IPO
Issue Size: 9.0288 Cr.
Lot Size: 2000 Shares
Issue Price: ₹ 66 Per Equity Share
Listing At: NSE Emerge
Listing Date: Jul 18 2018

Promoters And Management:

Promoters of Ambani Organics Limited Company are: (i) Mr. Rakesh Shah, aged 48 years, is the Promoter and Managing Director of the  Company. He is an undergraduate. He joined the Board of Directors of the Company in the year 1996 and has since been instrumental in the growth of the Company. (ii) Mrs. Apooni Shah, aged 49 years, is the Promoter, Chairman and Whole Time Director of the Company. She completed her Bachelor of Commerce in the year 1989 from the Mumbai University.

Company Business:

Let us understand the business of the company:  1. They procure various raw materials required for the manufacturing of specialty chemicals from various companies in the domestic and international market. 2. Then they manufacture 100 different specialty Chemicals from it which is used in Textiles, Paints, Paper, Adhesives, Construction and Chemical Industries with the help of two manufacturing plants at Tarapur MIDC, MH. 3. Then they export these Speciality Chemicals in the domestic as well as overseas market. Let us understand the risk in the business 1. As on 31st March 2018, the Company has significant debt of 16 Cr on standalone basis. Any increase in debt further may have direct impact on bottom-line due to increase expenditure on interest cost. 2. The cost of raw materials constitute around 90% of total expense in FY18 which is quite significant and any increase in prices of such raw materials may have significant affect in bottom-line. Though company in the past has passed on the increase raw material price to the customers but still we believe it may pose issue in future ,as the % cost of raw material is quite significant. 3.  They do not own the manufacturing plants. The Plants are taken on lease from its subsidiaries which is renewed on annual basis. Any issue with lease agreement may have significant affect on business in future. 4. The Company has installed capacity of 2000 MT as on FY18 but its utilization stands at only 47% which we believe is highly under utilized. 5. The two subsidiaries of the company has posed losses in last three financials years i.e FY16, FY17, and FY18, though we believe the losses are not significant but if this continues in future it may affect their consolidated performance. 6. The product segment in which the company operates is highly competitive in India, as a number of large manufacturers compete for customer acceptance. So company has very less moat.

Capital Structure:

(i) Authorized Share Capital 70,00,000  shares at FV@10) 7 Cr
(ii) Issued, Subscribed,& Paid-up Share Capital Before Issue (38,10,659 Shares at FV@10) 3.810 Cr
(iii) Present Issue ( 13,68,000 Equity Shares at @FV@10) 1.368 Cr
(iv) Fresh Issue of 12,68,000 Equity Shares @FV=10. 1.268 Cr
(v) OFS of 1,00,000 Equity Shares @FV=10 10 Lacs
(vi) Reservation for Market Maker [72,000] Shares at FV@10) 7.2 Lacs
(vii) Reservation for QIB & HNI[648000] Shares at FV@10) 50%
(viii) Reservation for Retail  [648000] Shares at FV@10) 50%
(viii) Paid Up Share Capital after the issue 5.078 Cr

Financials of Ambani Organics Limited IPO as per DRHP:

1. Assets and Liabilities Key Parameters
Year Asset(lacs) Liabilities(lacs) Net Worth(lacs) Book Value D/E [<1.5] RONW Receiveable days
FY14 2,531.88 2,062.12 469.76 17.08 4.4 7% 115
FY15 1,902.19 1,617.65 284.54 9.30 5.7 -86% 75
FY16 3,004.24 2,670.42 333.82 8.76 8.0 -12% 134
FY17 3,830.50 3,416.16 414.34 10.87 8.2 20% 112
FY18 4,777.78 4,181.14 596.64 15.66 7.0 31% 102
Post Issue 1433.52 28 2.9 12%
2. Profit n Loss Key Parameters
Year Revenue(lacs) PAT(lacs) EBITDA Margins Profit Margins Outstanding Shares(lacs EPS
FY14 3419.69 32.35 7% 1% 27.501 1.18
FY15 3765.77 -243.99 -5% -6% 30.607 -7.97
FY16 3291.4 -38.89 6% -1% 38.107 -1.02
FY17 5289.85 83.17 7% 2% 38.107 2.18
FY18 6558.15 182.3 8% 3% 38.107 4.78
Post issue 50.787 3.59
3. Cash Flow Statement(all figures in lacs)
Particulars FY18 FY17 FY16 FY15 FY14
(i) Net Cash Generated from Operation 90.97 401.47 -157.91 43.17 215.76
(ii) Net Cash Generated from Investment -133.45 -198.2 -623.44 179.29 -58.55
(iii) Net Cash Generated from Financing Activity 43.54 -242.28 869.68 -217.09 -157.41
(iv) Total[ (i)+(ii)+(iii) ] 1.06 -39.01 88.33 5.37 -0.20
(v) Cash and Cash Equivalents at the Beginning of the Year 74.15 113.17 24.84 19.47 19.68
(vi) Cash and Cash Equivalents at the end of the Year 75.21 74.15 113.17 24.84 19.47
Key Notes: a) The Revenue is growing at CAGR of 17.68% from FY14 to FY18. b) The PAT is growing at CAGR of 54.01% from FY14 to FY18. c) The Annualized EPS for FY17-18 would be 3.58 d) P/E(post issue)= 18.38( reasonably priced) at Cutoff price of 66. e) P/B(post issue)= 2.33 at cutoff price of 66. f) The company has Short term debt of 12 Cr and Long Term Debt of 2.8 Cr as on FY18. The company has total debt of 14.8 Cr against 6 Cr equity. So D/E>2- Red Flag g) Mcap/Sales(ideally <2)= 0.5 on FY18 sales- Green Flag. h) The Company is facing challenges to improve the EBITDA Margins which are reeling around 8% in last 5 years. Apart form this,the Profit Margin of the company is also very low at around 3%. For any business to grow the margins has to improve otherwise the excellent growth in revenue gets overshadowed.So going forward improving the margins would have been a big challenge for the company. i) The Company has inconsistency in maintaining a positive cash flows in last 5 years- Red Flag j) The company suffered losses in FY15 and FY16 but that is due to major fire broke out at one of their manufacturing plant. k) High Receivables days in the last 5 years is another negative point for the business.- Red Flag

Comparison With Peers:

Name of the Company FV Mcap(cr) EPS P/E RONW Mcap/sales
Nikhil Adhesives Limited 10 78 6.58 25 8.00% 0.78
Ambani Organics Limited IPO 10 33 3.59 18 12% 0.5

Recommendation on Ambani Organics Limited IPO:

Ambani Organics Limited IPO Rating by InvestorZone team =4/10; 1-5: Fair 5-7: Good 7-10: Excellent We believe stagnant Profit & EBITDA margins and high D/E may impose problems in future.

Lead Manager of Ambani Organics Limited IPO:

  1. Aryaman Financial Services Limited

Registrar of Ambani Organics Limited IPO:

  1. Universal Capital Securities Private Limited

Company Address:

Ambani Organics Limited 801, 8th Floor, 351 ICON, Next to Nataraj Rustomjee, Western Express Highway, Andheri (East), Mumbai – 400 069, Maharashtra. Phone No. +91 22 2683 3778 Fax No. +91 22 2683 3778 Email Website

Bid Details of Ambani Organics Limited IPO as on
10-Jul-2018 17:00:00 IST

Category No.of shares offered No. of shares bid
648,000 1,236,000
648,000 626,000
72,000 72,000
1,368,000 1,934,000
QIBs+HNIs Subscription 1.91X
Retail Subscription 0.97X
Total Subscription 1.36X

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