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Heranba IPO

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About Heranba Industries
Heranba Industries is a crop-protection, chemical manufacturer, exporter and marketing company formed in the year 1996 based out in Gujarat. They are one of the leading domestic producers of synthetic pyrethroids like cypermethrin, alphacypermethrin, deltamethrin, permitherin, lambda cyhalothrin etc. The Pesticides range includes insecticides, herbicides, fungicides and public health products for pest control.

Business Model
a) Domestic Institutional sales of Technicals: manufacturing and selling of Technicals in bulk to domestic companies.
b) Technicals Exports: Exports of Technicals in bulk to customers outside India.
c) Branded Formulations: Manufacturing and selling of Formulations under their brands through its own distribution network in India.
d) Formulations Exports: Export of Formulations in bulk and customer specified packaging outside India.
e) Public Health: Manufacturing and selling of general insect control chemicals by participating in public health tenders issued by governmental authorities and selling to pest management companies.

Formulation means the final products sold to farmers as Pesticides, Herbicides, and Fungicides for crop protection.

Product profile
a) They have intermediates, Technicals and Formulations and holds registrations for eighteen (18) Technicals for manufacture and sale in India.
b) One hundred and three (103) Technicals & Formulations for manufacture and sale in the export markets.
c) One hundred and sixty nine (169) Formulations registered for manufacturing and sale in India.
d) Applications for registration of fourteen (14) Technicals & Formulations for manufacture & sale in India and seven (7) Technicals and Formulations to manufacture for the export markets have been filed with the CIB&RC and are in the process of evaluation.

Distribution Network
They have an extensive distribution network in India supported by a skilled sales force. They have more than nine thousand four hundred (9,400) dealers having access to twenty-one (21) depots of the Company across sixteen (16) states and one (1) union territory in India supporting the distribution of the products.

Manufacturing unit
They have three (3) manufacturing and packaging facilities in and around the industrial belt of Vapi, Gujarat having one hundred seventy-four (174) reactors with an aggregate manufacturing capacity of 14,024 MTPA.

Objects of the Heranba IPO:

The company is raising 625 Crores from the IPO. 1. OFS (565 Crores) will go the selling shareholders of the company. 2. Fresh Issue (60 Crores) will be utilized to meet business working capital requirements.

DRHP of Heranba IPO

Heranba IPO Details:

Open Date:	Feb 23 2021
Close Date:	Feb 25 2021
Total Shares:	9971937
Face Value:	₹ 10 Per Equity Share
Issue Type:	Book Building
Issue Size:	625 Cr.
Lot Size:	23 Shares
Issue Price:	₹ 625-627 Per Equity Share
Listing At:	NSE,BSE
Listing Date:	Mar 05 2021

Promoters And Management:

(i) Sadashiv K. Shetty, aged 66 years, is the Promoter, Chairman and Executive Director of the Company. He is a resident Indian national. He holds a bachelor’s (physics and chemistry) and master’s (chemistry) degree in science from University of Mysore. He has experience of more than three (3) decades in agrochemicals industry. He has been on our Board since September 29, 1994. He has been and is responsible for the overall supervision, direction and management of the Company. (ii) Raghuram K. Shetty, aged 61 years, is the Promoter and Managing Director of the Company. He is a resident Indian national. He holds a bachelor’s degree in economics from University of Mysore. He has pursued government commercial diploma from the Department of Education, Bureau of Government Examinations, Maharashtra. He has also done diploma in export and import management from the India International Trade Centre, Mumbai. He has experience of more than three (3) decades in agrochemicals industry.

Financials of Heranba IPO:

(Fig. in Crs)

Year	Revenue	EBITDA	OPM	PAT	NPM	Shares	F.V.	EPS	NW	RONW
2018	750	93	12.40%	47	6.27%	0.78	10	12.00	157	29.94%
2019	1000	139	13.74%	75	7.41%	3.91	10	19.31	228	32.89%
2020	968	146	15.08%	98	10.12%	3.91	10	25.03	321	30.53%
6MFY21	619	100	16.16%	66	10.66%	3.91	10	16.98	381	17.32%

IZ View: 1. The revenue has grown at CAGR growth of 13% in the last 3 years. That is inline with peers. 2. The company has excellent EBITDA margins of 15% which has increased from 12.3% in FY20. 3. PAT has grown at a CAGR of 45% in the last 3 years. 4. Annualized EPS of FY21 is 30. On that basis, the P/E is 22x. That is fair valuation as compared to peers. 5. Mcap= 2400 Crores. 6. Company has generated free cash of 113 Crores in the last 3 years.

Comparison With Peers:

Company	Rev (cr)	3Y Rev Growth	3 year PAT Growth	OPM (FY20)	ROE (FY20)	D/E (FY20)	P/E	Mcap (Cr)
Heranba	967	13%	45%	15%	30%	0.13	25x	2500
Rallis	2252	12%	5%	12%	12%	0.05	28x	5000
Sumitomo Chemical	2423	12%	20%	14%	15%	0.04	50x	15000
Bharat Rasayan	1213	23%	27%	20%	25%	0.05	26x	4000

Recommendation on Heranba IPO:

Review and Recommendation of InvestorZone are 6/10 1. The company has very good business model and the sector in which company is doing business i.e. Agriculture is doing well. 2. The asking valuation is reasonable as compared to peers. 3. Free-cash generating company. 4. ROCE of 42% is excellent.