Rossari Biotech Limited IPO

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Rossari Biotech is one of the leading specialty chemical manufacturing companies in India based on sales for Fiscal 2019. They provide customized solutions to specific industrial and production requirements of its customers primarily in the FMCG, apparel, poultry, and Animal feed industries. The business is organized into three main product categories –

(a) Home, Personal care, and Performance chemicals.

They are the leading manufacturer of acrylic polymers in India (Source: F&S Report). As on 31.01.2020, the company manufacture over 300 products in the soaps and detergent, paints, inks and coatings, ceramics and tiles, water treatment chemicals, and pulp and paper industries. They also manufacture institutional cleaning chemical formulations for hospitality, facility management, airports, corporates, food service, commercial laundry, malls, multiplexes, educational sectors, places of worship, etc. They are in advanced stages of expanding to home, personal care and performance product portfolio to water treatment formulations, specialty formulation for breweries as well as dairies.

(b) Textile specialty chemicals.

They provide specialty chemicals for the entire value-chain of the textile industry starting from fiber, yarn to fabric, wet processing, and garment processing. As on January 31, 2020, manufactures and sales approximately 1,524 products for its customers in this product category.

(c) Animal health and nutrition products.

They currently supply poultry feed supplements and additives, pet grooming, and pet treat including for weaning, infants, and adult pets. They currently manufacture over 100 products for its customers in this category. They forayed into the pet grooming sub-category pursuant to its acquisition of the ‘Lozalo’ brand in Fiscal 2019. As on January 31, 2020, they have a range of 1,960 different products sold across the three product categories.

Countries of Operation

It operates operation in India as well as in 17 foreign countries including Vietnam, Bangladesh, and Mauritius.

Revenue contribution from different business:

(a) Home, Personal care, and Performance chemicals = 37.81%

(b) Textile specialty chemicals = 52.18%

(c) Animal health and nutrition products = 10%

Manufacturing units and R&D Units:

They manufacture the majority of the products in-house from its manufacturing facility at Silvassa in the Union Territory of Dadra & Nagar Haveli. The Silvassa Manufacturing Facility has an installed capacity of 100,000 MTPA with an additional capacity of 20,000 MTPA in the process of being installed by March 2021. The Silvassa Manufacturing Facility has flexible manufacturing capabilities for powders, granules, and liquids. Further, they can interchange capacities across home, personal care, and performance chemicals; textile specialty chemicals; and animal health and nutrition products categories, which ensures that they can manufacture any of these products at any point in time depending on the specific requirements of customers.

They have two R&D facilities – one within the Silvassa Manufacturing Facility and another one in Mumbai.

Objects of the Rossari Biotech Limited IPO:

Offer for Sale: The object of the Offer for Sale is to allow the Selling Shareholders to sell an aggregate of up to 10,500,000 Equity Shares held by them. Our Company will not receive any proceeds from the Offer for Sale. Fresh Issue ( 50 crores ) The net proceeds of the Fresh Issue, i.e. Gross proceeds of the Fresh Issue less the Offer Expenses apportioned to our Company (“Net Proceeds”) are proposed to be utilized in the following manner: 1. Repayment/prepayment of certain indebtedness. 2. Funding working capital requirements. 3. General corporate purposes.

Rossari Biotech Limited IPO Details:

Open Date: Jul 13 2020
Close Date: Jul 15 2020
Total Shares: 11,682,033
Face Value: ₹ 10 Per Equity Share
Issue Type: Book Building
Issue Size: 496 Cr.
Lot Size: 35 Shares
Issue Price: ₹ 423-425 Per Equity Share
Listing At: NSE,BSE
Listing Date: Jul 23 2020

Promoters And Management:

The Promoters, Mr. Edward Menezes, and Mr. Sunil Chari commenced the specialty chemicals business in 2003, as a partnership firm in the name of ‘Rossari Labtech’ which was subsequently changed to ‘Rossari Biotech’ in 2009 as Company. The promoters are technocrats cumulatively having over 45 years of experience in the specialty chemicals industry.

Financials of Rossari Biotech Limited IPO:

( Figures in lakhs )
Year Revenue EBITDA OPM PAT NPM Shares F.V. EPS
2016 17,851.63 1,273.49 7% 341.77 2% 44 10 7.77
2017 23,439.84 2,524.43 11% 1,571.80 7% 44 10 35.72
2018 29,273.04 4,551.97 16% 2,892.41 10% 44 10 65.74
2019 51,715.49 7,990.62 15% 4,546.13 9% 44 10 103.32
2020 60,380.00 10,860.00 18% 6,520.00 11% 505.255 2 12.90
Year Long-Term Debt Short-Term Debt Total Debt NW Debt/NW RONW
2016 652.47 1,544.14 2,196.61 4,525.97 0.49 8%
2017 242.63 1,953.74 2,196.37 6,058.88 0.36 26%
2018 128.72 1,962.60 2,091.32 8,951.28 0.23 32%
2019 67.28 512.63 579.91 12,448.03 0.05 37%
2020 3390 2700 6090 28,660.00 0.21 23%
Year Current Assets Current Liabilities Current Ratio Receivable Days CFO Capital Exp. FCF
2016 5,923.14 5,203.12 1.14 59 2,323.91 465.25 1,858
2017 7,556.18 5,875.96 1.29 104 771.98 554.64 217.34
2018 10,027.34 6,609.66 1.52 75 2,180.47 1,408.35 772.12
2019 16,013.07 12,091.34 1.32 61 7,290.85 4,394.68 2,896
2020 32,630.00 14,870.00 2.19 56 5,480.00 7,590.00 -2,110
InvestorZone Review 1. The company has shown excellent growth in the last 5 years. The revenue has gone up from 178 cr to 603 cr. 2. In the last 5 years, the margins have improved from 7% to 18% which is fabulous. 3. PAT has improved from 3 cr to 65 cr in the last 5 years. 4. The balance sheet of Rossari Biotech is very strong. Current Ratio is above 2. It indicates company will not face any liquidity issue in short term. D/E is also less than 1, which is excellent. 5. Rossari Biotech has invested close to ~131 Cr in the last 3 years in Plant, Property, and Equipment. The result of which is clearly seen in the revenue growth. Valuation As on 08.07.2020, Rossari Biotech has 5,07,54,096 outstanding shares in the balance sheet. PAT of FY 20 = 65 cr EPS = 12.80 P/E = 33 The IPO looks fully priced as compared to listed peers.
Name of the company 5-year Revenue Growth 5 year PAT Growth EBITDA Margin (FY20) ROE  (FY20) P/E
Rossari Biotech 35% 115% 18% 23% 33
Fine Organics 11% 21% 23% 30% 35
Galaxy Surfactants 7% 14% 16% 23% 30
Vinati Organics 12% 26% 40% 30% 31
Atul Limited 12% 24% 22% 17% 21
Aarti Industries 10% 20% 22% 23% 30
 

Comparison With Peers:

As per DRHP, the peers are Galaxy Surfactants, Fine Organics, Vinati organics, Atul Limited, and Aarti Industries. Currently, Fine Organics is trading at P/E of 35, Galaxy Surfactants is trading at P/E of 32, Vinati Organics at P/E of 31, Atul Limited at 20, and Aarti Industries at P/E of 30. Click here to check the comparison of peers.

Recommendation on Rossari Biotech Limited IPO:

Review and Recommendation of InvestorZone are 5/10. Rossari Biotech has shown excellent growth in the last 5 years as compared to its peers. However, at P/E of 33, the IPO looks fully priced in. 43% of Rossari Biotech revenue comes from Textile chemicals. Due to the COVID-19 pandemic, there has been a temporary reduction in demand for textiles in India. However, during COVID-19 the company has entered into the business of sanitizers and disinfectant which has seen tremendous demand.

Lead Manager of Rossari Biotech Limited IPO:

  1. Axis Capital Limited
  2. ICICI Securities Limited

Registrar of Rossari Biotech Limited IPO:

  1. Bigshare Services Private Limited

Discussion on Rossari Biotech Limited IPO:

    Wish allottees a wonderful listing at 9:45 am.

    GMP is around 170. Expect a bumper listing

    What likely to be Cut Off price of Yes Bank FPO? Whether it will be Rs 12 or more ?

    rossary biotech applied for total 2L ,not even single lot not allotted.even sbi cards i got 1 lot.

      When the issue is over subscribed you are entitled for only 1 lot that too on lottery basis.

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    Jul 15, 2020 at 4:55 PM

    QIB – 85.26x

    HNI – 239.83x

    Retail – 7.21x

    Total – 79.36x

    Jul 15, 2020 at 4:00 PM

    QIB – 85.26x

    HNI – 239.83x

    Retail – 7.09x

    Total – 79.30x

    Jul 15, 2020 at 3:30 PM

    QIB – 64.05x

    HNI – 224.62x

    Retail – 6.86x

    Total – 69.86x

    Jul 15, 2020 at 2:41 PM

    QIB – 37.26x

    HNI – 131.65x

    Retail – 5.74x

    Total – 41.73x

    Jul 15, 2020 at 2:03 PM

    QIB – 20.33x

    HNI – 112.67x

    Retail – 5.04x

    Total – 32.47x

    Jul 15, 2020 at 1:34 PM

    QIB – 9.54x

    HNI – 104.53x

    Retail – 4.64x

    Total – 27.45x

      Only apply , if you have 2-3 years of horizon. Don’t apply for short term gain. You will be disappointed

    Jul 15, 2020 at 1:00 PM

    QIB – 9.10x

    HNI – 84.25x

    Retail – 4.36x

    Total – 22.84x

    Jul 15, 2020 at 12:53

    QIB – 7.18x

    HNI – 84.24x

    Retail – 4.33x

    Total – 22.27x

    Jul 15, 2020 at 12:30

    QIB – 7.09x

    HNI – 79.84x

    Retail – 4.21x

    Total – 21.24x

    Jul 15, 2020 at 11:53

    QIB – 6.35x

    HNI – 35.66x

    Retail – 3.54x

    Total – 11.23x

    What is face value. It is shown as Rd.10/- whereas it is shown as Rs. 2/- as per chittorgarh.com website needs to be ascertained.

    Rossari Biotech IPO

    GMP 125 +/- 2
    Kostak 500 +/- 25

    Jul 13, 2020 17:00

    Qib-0.41x

    HNI- 0.11x

    Retail- 0.92x

    Total -0.60x

    *IPO of Rossari Biotech Limited*

    Issue Size: *₹496 cr* (at upper end of price band)

    Price Band: *₹423 – ₹425*

    _*Apply for 35 equity shares @ ₹425/-*_

    _*IPO closes on Wednesday, 15th July, 2020*_

    *Anchor Book (₹149 cr)* had participation from key Marquee Foreign and Domestic Institutional Investors.

    Anchor allocations are as below:

    *₹14 cr* each to : SBI MF, ICICI Prudential MF, HDFC MF, Nippon India MF, White Oak and Malabar

    *₹8.3 cr* each to : Abu Dhabi Investment Authority, Goldman Sachs AM, HSBC Global, Axis MF, HDFC Life, Kotak Mahindra International

    *₹5 cr* each to : Mirae MF, Sundaram MF and IIFL AIF

    *Good investment opportunity!*

    *Lead Manager: Axis Capital*

    💡 *Rossari Biotech IPO – Schedule (Tentative)*

    08th July – Announcement of Price Band
    10th July – Anchor Investors Allotment

    *13th July – Offer Opens*
    *15th July – Offer Closes*

    20th July – Finalisation of Basis of Allotment

    21st July – Unblocking of ASBA Accounts

    22nd July – Credit of Equity Shares to Depository Accounts

    *23rd July – Commencement of Trading on NSE/BSE*

    °°°°°°°°°°°°°°°°°°°°°°°°°°°°°°°°°°°

    💡 *Rossari Biotech IPO – Issue Information (Tentative)*

    Issue Opens on: 13 July 2020
    Issue Closes on: 15 July 2020

    Issue Type: Book Built Issue IPO

    Issue Size: 1,16,76,470 Shares

    Face Value: Rs.2/- per Share

    *Issue Price: Rs.400 – Rs.425 per Share*

    *Market Lot: 35 Shares*

    Listing At: NSE, BSE

    *IPO of Rossari Biotech Limited*:

    Price band –

    8th July (Wednesday)

    Webinars for Press, Broker & Analysts –

    8th July (Wednesday) & 9th July (Thursday)

    Anchor book – 10th July (Friday)

    IPO opens – 13th July (Monday)

    IPO closes – 15th July (Wednesday)

    Listing – On or around 23rd July
    (Thursday)

    Share Capital History:

    1. As on 31.03.2019, Rossari Biotech has total 44 lakh Shares at Fv=10

    2. On 25 Nov 2019, Rossari Biotech has split the shares from FV=10 to FV =2

    Therefore, the number of shares have gone up from 44 lakh to 2.20 cr.

    3. On 12.12.2019, they have issued bonus shares in 6:5. Means 6 shares for every 5 shares held.

    Total new shares issued = 2.20 *6/5 = 2.64 Cr

    Therefore, total shares outstanding as on DRHP filing is = 2.64+2.2 = 4.84cr.

    Fy18-19 profit is 45 cr.

    EPS = 45/4.84 = 9.35.

    IPO detail:

    OFS of 1.05 cr shares

    Fress issue of 50 Cr

    At 425 Upper band. The size of IPO us 496 Cr.

    HNI is 15%

    Retail is 35%

    Rossari IPO
    A New Kid In Special Chemical Space.

    Have Big clients like HUL IFB etc.

    Revenue stood at 440 Cr For 9 Months Ended 2020…
    Profit Expected to be 65 Cr as on FY 20

    At 425 Price Band Company is valued at 2100 Cr MC
    Which is 30X Valuation on Pat basis.

    It’s a Good Company with good Cagr..and have better ROI.

    Expecting 2022 PAT to be 90 Cr Hence at 2100 MC it’s coming ata PE of 26 X.

    Peers like Aarti Vinita And Galaxy are Trading at 30X and Atul at 20X…

    Hence If U want to Enter in chemical space into a New Company this look at good Players at a Good Growth in Revenue, exporting to Many Countries .

    Pre ipo was done to axis icici IIFL and Sundaram group at 425 Rs.

    The business of the company:

    In FY18-19,

    a) 50% of Rossari Biotech sales are coming from the Textile Specialty Chemicals(TSC) used in the Textile Sector.

    b) 40% of Rossari Biotech sales are coming from Home Care Products chemicals (HPPC).

    The home care ingredients comprise of ingredients which are used in the manufacturing of home care products such as floor cleaners, detergents, toiletries, etc. that have applications in home and industries.

    Conclusion:

    90% of the sales are coming from two Industry chemicals i.e TSC and HPPC. 50% of sales are dependent on specialty chemicals to Indian textile manufacturers and export of the specialty chemicals to textile manufacturers in Bangladesh, Vietnam, and other global markets.

    We all know the Indian textile sector is going through a tough phase. The big listed textile players like Welspun, Raymond, Trident, KPR Millss, and Vardhman Textiles have shown mere 6-10% CAGR growth in their revenues in the last 3 years.

    As per DRHP, the peers are Galaxy Surfactants and Fine Organics. Currently, Fine Organics is trading at P/E of 35, and Galaxy Surfactants is trading at P/E of 32.

    So if we get IPO at P/E of 25, then it can give good listing gain.

    The company is really good.