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Fine Organics IPO: Here’s All You Need To Know

Fine Organics Industries Ltd., a supplier of additives used in food and plastic, will launch its three-day initial public offer today as promoters look to pare a part of their stake.

After the share sale, the promoter holding will decline to 75 percent from 100 percent now. The company is valued at Rs 2,400 crore at the upper end of the price band.

Business & Financials

Fine Organics makes oleo chemical-based additives used in plastic, cosmetics, paint, ink and coatings, among others. As on Dec. 31, it had a range of 387 different products which it sells under the ‘Fine Organics’ brand.

Raw material costs form the bulk of its total expenses. The cost of raw materials as a percentage of net sales was 64 percent for the nine months ended Dec. 31. The company procures raw materials from domestic and international sources, therefore any significant change in price or an adverse movement in the exchange rate can impact its operating margin.

  • The company has 603 direct consumers or end users, including multinational, regional and local fast-moving consumer goods makers such as Hindustan Unilever Ltd. and Parle Products Ltd.
  • It has 127 distributors across 67 countries and more than 5,000 customers.
  • Fine Organics has three manufacturing facilities near Mumbai (around 65 kilometres from the port), having a combined installed capacity of around 64,300 tonnes per annum.
  • The specialty additive maker’s revenue has grown at an annualised rate of 9.4 percent in five years to March 2017. Net profit increased 30 percent during the period.
  • Its revenue and net profit stood at Rs 581 crore and Rs 61 crore, respectively, for the nine months ended December 2017.

The company has paid a dividend of Rs 30 a share in the year ended March 2016 and Rs 45 a share for the nine months ended Dec. 31, 2017. Fine Organics has no direct listed peers—the closest one is Galaxy Surfactants Ltd.

Brokerage View

Angel Broking

  • Has a ‘Neutral’ view on the issue.
  • Lack of immediate triggers in revenue growth owing to 100 percent utilisation of current capacity.
  • No major capacity additions in the near future.

ICICI Direct

  • Recommends ‘Subscribe’ from a long-term perspective.
  • Expects the company to sustain these growth levels on capital expansion plans and robust product demand.
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