Neogen Chemicals Hits Upper Limit, Closes 5% Higher In Market Debut
Shares of Neogen Chemicals Ltd. shot up in market trading, closing 5 percent higher at its daily upper-price limit of Rs 263.55. The stock opened at a 16.7 percent premium to its issue price and traded 22.6 percent higher through the course of the day.
The maker of bromine and lithium-based derivatives maker's Rs 132.35 crore IPO was oversubscribed 41 times. The reserved category for qualified institutional buyers was subscribed 30.49 times and non-institutional investors 113.88 times. The retail portion was oversubscribed 16.06 times.
The IPO comprised of a fresh issue of up to Rs 70 crore and an offer-for-sale of up to 29 lakh equity shares. The promoters’ shareholding fell to 70 percent from 95.8 percent after the listing. The rest is now held by public.
The company said it would use the proceeds from the fresh issue to prepay or repay of all or part of certain borrowings, early redemption of 9.8 percent fully redeemable cumulative preference shares, long-term working capital and general corporate purposes.
Neogen Chemicals is working on adding more capacity to meet the rising customer demand and in keeping its debts at a reasonable price, its Joint Managing Director Harin Kanani told BloombergQuint in an interaction post the market launch.
“We believe the funds that we have raised should be sufficient enough, [along] with the cash and internal accruals,...to continue growth for the next four to five years with a very comfortable debt equity ratio,” he said.
Commencing operations in 1991 at Mahape, Navi Mumbai with a few bromine-based compounds and lithium salts, Neogen Chemicals now has a range of 198 products in pharmaceutical and agrochemical intermediates and engineering fluids, among others.
Neogen seeks about half of its business from the international market, Kanani said, adding that it is now seeing a growing demand from both its domestic and international clients.
The company operates in two key segments—organic chemicals contributes nearly 70 percent to its revenue and the rest comes from inorganic chemicals. It manufactures and sells its products in the domestic and global markets, particularly the U.S., Europe and Japan. The domestic and global markets each contribute 50 percent to its revenue (including 16 percent deemed exports where the company supplies its products to customers who will eventually export the end-product).
Neogen Chemicals expects to ramp up the utilisation of its Baroda capacity, Kanani said. This, along with a better product mix, would help drive the company’s operating profit and margin. He also expects lower interest rates to improve its bottom-line.
Watch the full interview here: