Ami Organics IPO: All You Need To Know
Vials of a colored organic light-emitting diode ink stand in the Merck KGaA research center in Darmstadt, Germany. (Photographer: Krisztian Bocsi/Bloomberg)

Ami Organics IPO: All You Need To Know

Ami Organics Ltd. will launch its Rs 570-crore initial public offering on Wednesday as it aims to pare debt, and promoter and existing shareholders look to partly exit the specialty chemicals maker.

The company will sell shares at Rs 603-610 apiece, seeking a market value of Rs 1,934.8 crore at the upper end of the price band.

The maiden float, according to Ami Organics’ red herring prospectus, comprises a fresh issue of Rs 200 crore and offer-for-sale of Rs 370 crore by promoter Parul Chetankumar Vagasia and other existing shareholders.

The company made a pre-IPO preferential issue of Rs 101 crore to private equity players Platus Wealth Management, IIFL Opportunities Fund, and Malabar India Fund at Rs 603 apiece.

The promoter shareholding will fall to 41.2%% after the IPO from 47.2%, while the rest will be held by the public.

Issue Details

  • Issue Opens On: Sept. 1.

  • Issue Closes On: Sept. 3.

  • Face Value: Rs 10 apiece.

  • Lot Size: 24 shares and multiples.

  • Listing: BSE and NSE.

  • Merchant Bankers: Intensive Fiscal Services, Ambit, Axis Capital.

Objective

The company plans to use Rs 140 crore to reduce debt and Rs 90 crore to augment working capital requirement. The proceeds from the offer-for-sale won’t come to the company.

Ami Organics had total borrowings worth Rs 136.6 crore as of March 2021.

Business

Ami Organics is a research and development-driven maker of specialty chemicals that’s used in manufacturing pharma intermediates for regulated and generic APIs and new chemical entities. It also produces key starting materials for agrochemicals and fine chemicals.

The company has developed and commercialised more than 450 pharma intermediaries for APIs across 17 key therapeutic areas.

More than half of its revenue come from global markets. Exports accounted for 51.5% of its revenues in the fiscal ended March 2021. Its exports have grown at an annualised rate of 21.8% between fiscals 2019 and 2021.

  • The company supplies to more than 25 countries, and has over 150 customers in India.

  • The top three therapeutic areas for the company — anti depressants, anti-retrovirals and anti-coagulants — comprise nearly 56% of its revenue.

  • Its top five customers account for 44.6% of revenue, while the top 10 form 60.9%.

Ami Organics has completed a slump-sale acquisition of two plants — Ankleshwar and Jhagadia — of Gujarat Organics Ltd. on March 31 for Rs 93 crore. After this, it has three plants with a total capacity of 6060 million tonnes per annum.

The company plans to put up an additional line at the U.S. FDA-approved Sachin plant, and a brownfield expansion at the Jhagadia plant in the near future.

Financials

Ami Organics reported a total comprehensive income of Rs 53.9 crore in the fiscal ended March 2021, according to the prospectus. The financials for 2020-21 doesn’t include revenue from the acquisition of the two plants.

Peers

Ami Organics’ listed peers are Aarti Industries Ltd., Hikal Ltd., Valiant Organics Ltd., Vinati Organics Ltd., Neuland Laboratories Ltd. and Atul Ltd.

Risks

  • Any manufacturing or quality control problems may subject the company to regulatory action, damage its reputation and have an adverse effect on its business, results of operations, financial condition and cashflows.

  • The company derives a significant portion of its revenue from sale of products in certain therapeutic areas and any reduction in demand for these products, or if such products become obsolete due to a breakthrough in the development of alternative drugs, could have an adverse effect on its business.

  • Its inability to meet its obligations, including financial and other covenants under its debt financing arrangements, could adversely affect its business, results of operations and cashflows.

  • Its operations are dependent on continuous R&D to develop and commercialise new products, and its inability to identify and understand evolving industry trends, technological advancements, customer preferences and develop new products to meet its customers’ demands may adversely affect its business.

  • The company’s business is working capital-intensive. If it experiences insufficient cashflows from its operations or is unable to borrow to meet working capital requirements, it may materially and adversely affect its business and results of operations.

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