Anupam Rasayan IPO: All You Need To Know

Anupam Rasayan Ltd. will launch its Rs 760-crore initial public offering on Friday as the specialty chemicals maker looks to pare debt.

The company will sell 1.37 crore shares in a fresh issue, amounting to about 16% of the paid-up equity, through the IPO—the eleventh so far in calendar year 2021—at Rs 553-555 apiece, according to its red herring prospectus. At the upper price band, Anupam Rasayan will be valued at Rs 5,545 crore. Promoter shareholding after the maiden issue will fall to 65.40% from 75.80%.

Key details:

• Issue open on: March 12, 2021.
• Issue closes on: March 16.
• Face value: Rs 10 apiece.
• Shares on offer: 1.37 crore.
• Minimum bid size: 27 shares.
• Listing on: BSE and NSE.
• Book running lead managers: Axis Capital, Ambit, IIFL Securities, JM Financial.

This comes at a time participation of retail investors in the equity markets in India and around the world has increased following the pandemic-induced lockdowns, extending the IPO rush into 2021 as well.

Purpose

Proceeds from the issue will be primarily used to pay off Rs 563.70 crore in debt, including accrued interest. As on Jan. 31, 2021, Anupam Rasayan had total debt worth Rs 843.5 crore.

Business

Surat-based Anupam Rasayan commenced business as a partnership in 1984 to manufacture and sell chemicals. It was converted into a public limited company in September 2003. Over the years, it expanded to undertake custom synthesis and manufacturing of life science-related and other specialty chemicals.

The company derives 68% of its revenue from exports—the key regions being Europe (35.97%), Singapore (17.23%), Japan (5.83%) and the U.S. (3.69%). India accounts for 31.95% of its revenue.

Its custom synthesis and manufacturing agreements are long-term pacts of two and five years, with certain contracts automatically renewed for a year at a time.

Anupam Rasayan has developed long-term relationships with various multinational corporations, including Syngenta Asia Pacific Pte., Sumitomo Chemical Co. and UPL Ltd. The company has been manufacturing products for certain customers for more than 10 years.

It has six multi-purpose manufacturing facilities in Gujarat, with four located in industrial estate at Sachin, close to Adani's Hazira Port. Two units are located in the industrial estate at Jhagadia. The facilities have a combined aggregate installed capacity of 23,396 metric tonnes, of which 6,726 metric tonnes was added in March last year.

Competition

Anupam Rasayan doesn’t specifically compete with any particular Indian company for the range of chemistries, scope of services, and applications and technologies it caters to.

But financial resources, technology, R&D capability, greater market penetration, operations in diversified geographies and product portfolios are some of the factors investors should watch out for in specialty chemical makers.

Among recent IPOs in the chemicals space are Rossari Biotech Ltd. (July 2020), Chemcon Specialty Chemicals Ltd. (October 2020) and Heranba Industries Ltd. (March 2021). Also, Laxmi Organics Ltd. is set to hit the primary market on March 15.

Financials

Anupam Rasayan’s revenue grew at an annualised rate of 24.29% in FY18-FY20, while Ebitda reported a CAGR of 34.6% during the period. That caused the Ebitda margin to expand from 21.8% in FY18 to 25.5% in FY20. Profit after tax grew at a compounded annual rate of 13.2% over FY18-20.

And since the company’s life science-related specialty chemicals operations were classified as essential, it was permitted to resume operations in a phased manner once the coronavirus lockdown started to lift. By April 15, 2020, all its facilities restarted, subject to certain adjustments in working patterns and limited workforce. Despite the Covid-19 impact, the company recorded a 45.03% increase in revenue in the nine months ended December 2020. Its operating income rose 28.2% over the year earlier during this period.

Besides, the company hopes that the successful completion of the IPO will help deleverage its balance sheet and allow it to pursue acquisitions.

Risks

The company has incurred significant indebtedness, and an inability to comply with repayment and other covenants in their financing agreements could adversely affect their business, financial condition, cashflows and credit rating.

It has had negative cashflows from operating activities in the past and a consequent net decrease in cash and cash equivalents in some of the recent years.

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