Why Rossari Biotech Is Confident Its New Deal Will Pay Off

Technicians at Rossari Biotech Ltd.'s R&D facility. (Source: Company website).

Why Rossari Biotech Is Confident Its New Deal Will Pay Off

Rossari Biotech Ltd. expects growth to accelerate following its acquisition of peer specialty chemical maker Unitop Chemicals Pvt. and the commissioning of a greenfield facility at Dahej, Gujarat.

The acquisition, announced on June 2, will help scale up the company's overseas shipments, given Unitop’s export-faced business, Edward Menez, founder and chief executive officer of Rossari Biotech, told BloombergQuint's Niraj Shah in an interview.

Unitop Chemicals makes surfactants, emulsifiers and specialty chemicals at its three sites with a total capacity of 86,000 metric tonnes per annum and a saleable capacity of 30,000-40,000 MTPA, currently operating at 65-70% utilisation, Menez said. Its products are largely formulations and it makes many of its ingredients in-house for captive consumption, much like Rossari Biotech, which went public last year.

He sees the complementary business models of the two companies building a stronger operating presence. That includes cross-selling opportunities, and Rossari Biotech taking advantage of Unitop’s lower utilisation levels and increasing growth in FY22 itself.

Menez refrained from offering overall guidance for Rossari’s growth in FY22, but said that an organic growth of over 30% and an increase in Unitop's revenue of around Rs 300 crore is possible in the ongoing fiscal itself.

Rossari Biotech’s revenue rose 18% year-on-year to Rs 709 crore in the year ended March, while profit rose by around 25% to Rs 81 crore.

Brokerage View

  • Edelweiss Wealth said Unitop’s expertise in surfactants is in sync with Rossari’s focus areas and the acquisition should see synergies emerge from an expanded product portfolio, cross-selling opportunities, increased technology and market reach.

  • The acquisition, the brokerage said, will be EPS accretive for Rossari.

  • It maintained a ‘Buy’ rating on the company with revised target price of Rs 1,447 apiece, implying an upside of 12.5%.

  • Rich valuations can impact the near-term upside, Edelweiss said.

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