Rossari Biotech IPO: Here’s All You Need To Know

Rossari Biotech Ltd. will next week launch its three-day initial public offering, India's first since the Covid-19 pandemic disrupted the economy, as it plans to repay debt and promoters look to pare holding.

The textile and specialty chemical maker plans to raise Rs 496.25 crore by selling 1.16 crore shares at Rs 423-425 apiece, according to its red herring prospectus. The IPO consists of a fresh issue and an offer-for-sale by two promoters—Edward Menezes and Sunil Chari, each selling 52.5 lakh shares.

• Issue opens on: July 13, 2020

• Issue closes on: July 15, 2020

• Face value: Rs 2 apiece

• Fresh issue: 11.76 lakh

• Offer for sale: 1.05 crore

• Listing on: NSE, BSE

The IPO values the company at Rs 2,207 crore at the upper end of the price band, according to BloombergQuint’s calculations. Menezes and Chari hold 42.10% and 42.05% in the company. After the share sale, the total promoter shareholding will fall to 73% from 95%. The rest will be held by public.

The company said it would use the net proceeds from the fresh issue to prepay or repay certain indebtedness, including accrued interest, fund working capital requirements and for general corporate purposes.

Axis Capital Ltd. and ICICI Securities Ltd. are the book running lead managers to the issue.

This is the first IPO since SBI Cards and Payment Services Ltd.’s billion-dollar float on March 2-5. Weeks later, India went under the world’s strictest lockdown to contain spread of the Covid-19 pandemic. While Ashok Soota-founded Happiest Minds Technologies Ltd. filed its preliminary prospectus last month, Rossari was the first to announce the launch date.

The specialty chemical maker first attempted to launch its IPO in March but had to put it on hold as the equity market tumbled after the novel virus outbreak stalled activities. Burger King India Ltd. also postponed its plan to launch a share sale.

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Here’s a review of Rossari Biotech before its IPO:

Business

Incorporated in 2009, Rossari focuses on home and personal care, performance chemicals, textile specialty chemicals, and animal health and nutrition products. As on May 31, it had a range of 2,030 different products, which it sells across its three main product categories.

Over the years, Rossari has established a customer base of about 750 with operations in India as well as in 17 foreign countries, including Vietnam, Bangladesh and Mauritius.

The company manufactures most of its products in-house from its facility at Silvassa, union territory of Dadra and Nagar Haveli, which has a total capacity of 120,000 million tonnes per annum. The company is also setting up another manufacturing unit at Dahej, Gujarat with a proposed capacity of 132,500 MTPA.

Financials

Rossari’s revenue, operating profit and net profit grew at a compounded annual rate of 32%, 63% and 67%, respectively, through financial years ended March 2017 to 2020.

Its Ebitda margin expanded to 17.4% from 9.2% during the same period.

Peers & Valuations

Aarti Industries Ltd., Atul Ltd, Fine Organics Industries Ltd. and Vinati Organics Ltd. are the closest peers of Rossari. In the three years through March 2020, Rossari has reported higher growth than peers.

Key Risks

• The continuing effect of the Covid-19 pandemic on business and operations is highly uncertain and cannot be predicted.
• Any downturn in the textile industry or an inability to increase or effectively manage sales could have an adverse impact on the company’s business.
• Any disturbance, slowdown or shutdown of its Silvassa manufacturing facility may have an adverse impact.
• The company has high working capital requirements and may require additional financing to meet those requirements.
• Any delay or default in payments from distributors or customers could result in the reduction of the company’s profits.

(The risks have been compiled from the company’s red herring prospectus.)