Laxmi Organics IPO- Business Review and Fundamental analysis

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Laxmi Organics IPO- Business Review and Fundamental analysis

Laxmi Organics is coming up with its IPO with an offer size of Rs 600 crore on 15th March 2021. The offer consists of a fresh issue of Rs 300 crore and an offer for sale of Rs 300 crore by its promoter Yellow stone Trust. Offer Details follow:

Offer Details
Offer Size Rs 600 crore
of which
Fresh Issue Rs 300 crore
Offer for sale Rs 300 crore
Price Band Rs 129-Rs 130 per share
Offer Period 15-17th Mar 2021
Offer Structure QIBs: 50% of the offer
NIIs: upto 15% of the offer
RIIs : upto 35% of the offer
Market lot 1 lot (115 shares), Rs 14950
13 lots (1495 shares), Rs 194350
Listing on BSE, NSE
BRLM’s Axis Capital Limited, DAM Capital Advisors Ltd.,
Registrar Link Intime

Key Highlights

⇒ Leading manufacturer of Acetyl Intermediates and Specialty Intermediates.

⇒ Global presence and low geographical concentration

⇒ High entry barriers in the sector

⇒ Plans to expand installed capacities to support growth initiatives.

⇒ Proposes to diversify into manufacturing of specialty fluorochemicals chemicals by the year 2022.

⇒ Diversified customer base, in India and abroad.

Business Profile Laxmi Organics IPO Business Review and Fundamental analysis

⇒ Incorporated in the year 1989, Laxmi Organics is a leading manufacturer of Acetyl Intermediates and Specialty Intermediates. The products manufactured find application in various high-growth industries, including pharmaceuticals, agrochemicals, dyes & pigments, inks & coatings, paints, printing & packaging, flavors & fragrances, adhesives, and other industrial applications.

⇒ The products are currently divided into two broad categories,

  1. Acetyl Intermediates Acetyl Intermediates include ethyl acetate, acetaldehyde, fuel-grade ethanol, and other proprietary solvents,
  2. Specialty Intermediates-This category comprises of ketene, diketene derivatives namely esters, acetic anhydride, amides, arylides, and other chemicals.

⇒ The company has a global reach with customers in more than 30 countries including China, Netherlands, Russia, Singapore, United Arab Emirates, the United Kingdom, and the United States of America. Customers in the pharmaceutical segment include marquee names like Alembic Pharmaceuticals Limited, Dr. Reddy’s Laboratories Limited, Hetero Labs Limited, Laurus Labs Limited, Macleods Pharmaceuticals Private Limited, Mylan Laboratories Limited among others.

⇒ The company has two manufacturing facilities in Mahad, Maharashtra with one facility dedicated to Acetyl Intermediates (installed production capacity at 161,320 MTPA) and another dedicated to Specialty Intermediates (installed production capacity at 78,045 MTPA)  which are strategically located in proximity to several ports and each other.

⇒ The company is in the process of setting up the Proposed Facility in Lote Parshuram, Maharashtra for manufacturing floor specialty chemicals which is proposed to commence operations by the fourth quarter of Fiscal 2022. It has recently acquired assets including plant & machinery, design, and operating paperwork, REACH registrations, and patents of Miteni, a manufacturer of organic fluor specialties and electrochemical fluorination.

⇒ The company is considering the acquisition of AHPL (Acetyls Holding Private Limited) and its subsidiary YCPL, having an aggregate installed production capacity of 10,500 MTPA of acetaldehyde and 29,200 MTPA of ethyl acetate as on December 31, 2020. Laxmi organics has two distilleries located in Satara district (Jarandeshwar Distillery) and Kolhapur district in Maharashtra  Panchganga Distillery.

Financial Review 

Laxmi Organics posted total revenues of Rs 814.36 crore for the six months ended 30th Sept 2020 against PAT of Rs 45.48 crore. The revenue for FY20 reduced by 2.27% to Rs 1538.62 crore from Rs 1574.32 crore in FY19 because of a fall in selling prices of the products manufactured. PAT was Rs 70.21 crore for FY20 as compared to Rs 72.39 crore for FY19. Operating and net margins are quite volatile as can be seen from the table below. We have excluded exceptional income (non-recurrent income) in fiscal 2020 to calculate EBITDA margins.

Return on net worth has been decent at 16.45% for FY20. Debt to equity has been low at 0.31 for FY20.

Key Financial Metrics Amount in  INR Crores
 30th Sep 2020 FY 20 FY 19 FY 18
Total revenue 814.36 1538.62 1574.32 1396.08
PAT 45.48 70.21 72.39 75.70
EBITDA Margin 10.60% 7.67% 10.08% 11.06%
Net Margin 5.58% 4.56% 4.60% 5.42%
Return on net worth 9.63% 16.45% 16.09% 19.96%

Valuation and peer comparison

At annualized EPS of 4.04 per share, P/E is 32.18x at the upper price band of Rs 130 per share which indicates that the IPO is fully priced. P/BV comes at 6.19x with NAV at Rs20.99 per share at the upper price band. The average P/E for the sector is 30x.

Valuation Parameters EPS P/E NAV P/BV
4.04 32.18 20.99 6.19

The following table shows the listed peers of Laxmi Organics and their P/E data.

Peers Aarti Industries Atul Limited Fine Organics Industries Navin Fluorine International Rossary Biotech SRF Limited Average P/E
P/E  24.92 17.75 35.46 14.68 70.45 15.7 29.83

Future Outlook and Conclusion

Laxmi Organic is a leading manufacturer of Aceytal Intermediates and Speciality Intermediates. The company has a diversified base of customers and has established its global footprint in over 30 countries. The Company plans to grow by expanding its installed capacity and also by diversifying into the manufacturing of specialty fluorochemicals.

The company has decent financial numbers over the last three fiscals and also proposes to expand its operations. The sector has high entry barriers due to the complexity of products. Global operations demonstrate low geographical concentration. Hence, one may consider subscribing to the IPO for the long term.

 Also, check

IPOs Upcoming in March 2021

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About CA Priyanka Choudhary Jain 69 Articles
Chartered Accountant & an experienced credit analyst. She has worked with CRISIL as a Senior Credit Analyst on rating assignments including business & financial analysis in Corporates as well as the Public Finance Sector. Please mail your queries, feedback, and any suggestions to her on info.financepost@gmail.com

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