Heranba Industries Ltd. will launch its Rs 625-crore share sale on Tuesday, more than two years after the agrochemicals maker filed for its public float.
The Gujarat-based company’s initial public offer comprises a fresh issue of Rs 60 crore and an offer-for-sale of a cumulative 90.15 lakh equity shares by its promoters Sadashiv K Shetty, Raghuram K Shetty, Babu K Shetty and Vittala K Bhandary, according to its red herring prospectus. The price band has been fixed at Rs 626-627 apiece.
Issue opens on: Feb. 23
Issue closes on: Feb. 25
Issue type: book-building
Face : Rs 10 apiece
Minimum bid size: 50 shares
Promoter holding as a percent of total share capital as on Feb. 10 2021: 98.85%
Listing on: National Stock Exchange and BSE
IPO listing date: By March 5, 2021
The company, according to the prospectus, aims to use the net proceeds from the fresh issue to fund working capital requirements worth Rs 50 crore and expenditures towards general corporate purposes. Emkay Global Financial Services, Batlivala & Karani Securities India Pvt. are the book-running lead managers of the issue.
Heranba is the eighth company to go public so far in calendar year 2021 when participation of retail investors in the equity markets in India and around the world has increased following the pandemic-induced lockdowns. The benchmark indices, too, are scaling new records.
The company had originally filed for its IPO in September 2018. It received the market regulator’s approval in February 2019 but failed to launch the issue owing to unfavourable market conditions and volatility on account of general elections.
Business
The Gujarat-based company manufacturers, exports and markets crop protection chemicals. It domestically produces pyrethroids—synthetic chemical compounds procured from Chrysanths flowers—such as cypermethrin, alphacypermethrin, deltamethrin, permitherin and lambda cyhalothrin, among others, used to control pests in farms, homes, communities, restaurants, hospitals and schools. It also makes herbicides, fungicides and public health products for pest control.
Heranba has fully integrated and modern manufacturing facilities with an in-house research and development unit. All its facilities are situated in the industrial belt of Vapi, Gujarat—180 km from Mumbai.
The company has three independent manufacturing units — two involved in production of various intermediates, while the third is purely a formulation and packing facility.
It has more than 9,400 dealers with access to 21 depots across 16 states and one union territory for distribution of products. It exports to more than 60 nations in Latin America, Commonwealth of Independent States, Middle East, Africa, Asia and South East Asia in the fiscal ended March 2020.
Financials
Heranba’s revenue fell 5.3% in the fiscal ended March 2020, but earnings before interest, tax, depreciation and amortisation rose 1.6%, keeping margin stable above 13.5%.
Exports account for 40% of the company’s overall revenue, with China being its biggest market.
“A surge in Covid-19 cases in China mainly impacted the company’s top line in FY20. But it expects Ebitda margin to grow 1-2% every financial year due to increasing exposure to international markets, especially Brazil, Argentina and the U.S. where the company has lined up a couple of product registrations,” Raghuram Shetty, managing director at Heranba, told BloombergQuint in an interview.
Watch BloombergQuint’s conversation with Raghuram Shetty here:
Peers
At the upper price band, Heranba’s price-to-earnings is in line with Rallis India Ltd. and Bharat Rasayan Ltd. The company is also commanding the highest return on net worth compared to peers.
Risks
The company has neither entered into long-term agreements with customers for purchasing products nor with suppliers for raw materials. Hence, it’s subject to uncertainties in demand. Raw materials constitute nearly 70% of the company’s total income.
Some of the group companies have incurred losses in the past and entities such as Insunt Trading Pvt., Herana Agro Science and Shakti Bio Science had negative net worth that may hurt reputation and business. Heranba Agro Science and Insunt Trading’s net worth was positive in FY19.
The company has in the past entered into related-party transactions with promoters and promoter group entities and may continue to do so in the future. Shetty, however, said until now the company was unlisted but with it will ensure stricter checks with related-party transactions.
There can be no assurance that business will not be impacted by international sanctions.
Heranba’s top five institutional clients constituted 14.89% of its revenue in the first half of financial year ending March 2021. It does not have long-term agreements with institutional customers.
The company has failed to comply on various sections of the Companies Act in the past leading to regulatory actions and monetary penalties imposed by the regulatory authorities.
Its promoters received statutory warnings from SEBI in 2011 as part of administrative warnings issued to 780 entities in trading activity of Crazy Infotech Ltd. in 2007-2008. The promoters and directors, however, were not charged by the market regulator but advised to be more careful.
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