Rossari Biotech IPO Analysis (Subscribe)

Review By Chittorgarh.com Team on Jul 8, 2020

Company Background

  • Rossari Biotech Limited (RBL) was incorporated as a partnership firm on 6th March 2003 as 'Rossari Labtech'. Thereafter in December 2003, the firm name was changed to 'Rossari Biotech' and in August 2009 , the partnership firm was converted to a joint stock company under the name of 'Rossari Biotech Limited'.
  • RBL is in the business of providing home, personal care and performance chemicals; textile specialty chemicals; and animal health and nutrition products.
  • Based on the sales for Fiscal 2019, RBL is one of the leading specialty chemicals manufacturing companies in India providing customized solutions to specific industrial and production requirements primarily in the FMCG, apparel, poultry and animal feed industries.
  • RBL operates in 18 countries including India along with other foreign countries viz. Vietnam, Bangladesh and Mauritius.
  • As per the F&S report as of 30th September 2019, RBL is the largest manufacturer of textile specialty chemicals in India.
  • The majority of products are manufactured in-house at Silvassa in the Union Territory of Dadra & Nagar Haveli with an annual capacity utilization ranging from 74% to 94%. The company is in process of setting up another manufacturing facility at Dahej in Gujarat with a proposed installed capacity of 132,500 MTPA which will enjoy proximity to the deep-water, multi-cargo port of Dahej and is expected to start operations in Fiscal 2021.
  • RBL has two R&D facilities - one within the Silvassa Manufacturing Facility and another one in Mumbai which are recognized and certified by the Department of Scientific and Industrial Research, Government of India and are various other organizations including the Global Organic Textile Standards and the American National Standards Institute.

Speciality Chemical Industry Overview

  • The speciality chemical industry has immense scope of growth globally as well locally. The global speciality chemical industry is expected to growth at a CAGR of 5.3% and the Indian speciality checmial industry is expected to grow at a CAGR of 12%. The Asia Pacific countries are expected to grow in the range of 6-7%.
  • There is major shift towards "green" chemicals that are bio-degradable and environment friendly. The global green chemicals market is expected to grow at a CAGR of 10.5% during 2019-2023.
  • The Indian specialty chemicals industry is driven by both domestic consumption and exports. Further fur to tightening of environmental norms in developed countries, the slowdown of China and the recently launched "Make in India" campaign is expected to add impetus to the emergence of India as a manufacturing hub for the chemicals industry in the medium term.

Company Strengths

  • RBL has a diversified product portfolio with around 2030 range of products that cater to the needs of varied and long-standing customers across FMCG, apparel, and poultry and animal feed industries.
  • As per the F&S Report, RBL is the largest manufacturer of textile specialty chemicals industry in India as on September 30, 2019 providing specialty chemicals for the entire value-chain of the textile industry starting from products for yarn production, production of man-made fibre, thread production, digital printing, fabric processing, dyeing auxiliaries, finishing range, garment finishing to products for printing.
  • RBL has extensive manufacturing and technical capabilities with majority of products being manufactured in-house with flexible manufacturing capabilities. The existing capacity at Silvassa plant of 120,000 MTPA is expected to double at 252,500 by FY21.
  • RBL has strong R&D capabilities with significant emphasis on innovation and sustainability which is considered as a key element of growth.
  • RBL has wide sales and distribution network with 175 dedicated employees in sales and marketing team, over 204 distributors as on May 31, 2020 across India and 29 distributors spread in over 17 countries. The company also has four regional branch offices in Delhi, Ludhiana, Ahmadabad and Surat for marketing of the products to the customers in the North and West India regions.
  • RBL has a strong management team with promoters cumulatively having over 45 years of experience in the chemicals industry. The Key Managerial Personnel too cumulatively have over 80 years of experience in the specialty chemicals industry which has immensely benefited the company grow at a faster pace.
  • RBL has proven track record of robust financial performance from Fiscal 2017 to Fiscal 2019 with revenue increasing at a CAGR of 41.07%, EBIDTA at a CAGR of 79.87% and PAT increased at 78.83%.

Company strategies

  • To expand manufacturing capacity and increase production efficiency to capitalize on the growth opportunities globally and locally in the specialty chemicals industry.
  • To introduce new products to cater to the specific requirements of the customers and expand into new business segments and also focus on green products which is the need of the hour.
  • To continue to focus on innovation and grow business across diverse customer segments.
  • To increase wallet share with existing customers and continued focus to expand customer base by participating in trade shows, road shows and exhibitions. The company intends to continue to leverage the industry standing to enter new markets and establish relationships with new multinational, regional and local customers and expand customer base.
  • To expand international operations to meet the expected growth rate of global speciality chemicals market. To achieve this, the company has set up a separate team for exports with the primary objective of expanding the business operations in international markets, create a distribution network and channel partners across geographies and build capabilities to serve such jurisdictions.
  • To do strategic investment and seek to enter into acquisitions on opportunistic basis to aid inorganic growth.

Rossari Biotech Issue Details

Issue Open Date

13th July 2020

Issue Close Date

15th July 2020

Anchor Investor Date

10th July 2020

Issue Type

Book Building Offer

Price Band

₹423 to ₹425 per share

Minimum Lot Size

35 and in multiples of 35 thereafter

Face Value

₹2 each

Issue Structure

Fresh Issue : 1,176,470 equity shares

Offer for Sale: 10,500,000 equity shares

Book Running Lead Managers

· Axis Capital Limited

· ICICI Securities Limited

Registrar

Link Intime

Book Building Proportion

QIB (50%)

Retail (35%)

NII (15%)


Objects of Issue

Issue comprises of:

  • Offer for sale (OFS): Each selling shareholder will be entitled to respective proportion of proceeds of OFS net of their proportion of offer related expenses.
  • Fresh Issue: Net proceeds from net issue will be utilized towards:
  • Repayment/prepayment of certain portion of the borrowings.
  • To fund incremental the working capital requirement.
  • General corporate purpose.

Rossari Biotech Financial Performance

The company's revenue, earnings before interest and tax and net profits after tax have increased at a faster pace with CAGR of 65%, 56.58% and 60.27% respectively for the Fiscal period 2018-2020. The debt to equity ratio of the company stands at 0.23 as of 31st March 2020 which indicates lower leverage on borrowings. The P/E ratio is around 33.81 which is on slightly on higher side.

Particulars Mar 20 Mar 19 Mar 18

Revenue

6,038.18

5,171.24

3,004.29

EBITDA

1,045.26

776.28

426.34

Net PAT

652.53

456.83

254.03

RoNW

31.79%

43.32%

34.08%

RoCE

24.79%

50.93%

34.68%

EPS

13.42

9.44

5.25

Note: The revenue, EBITDA and Net PAT figures reflect rupees in million.


BRLM Track Records

The merchant bankers associated with the issue have handled 31 issues in the past three financial years, out of which 14 issues closed below the issue price on the listing date.


Rossari Biotech Competition with Listed Peers

RBL being comparatively new in chemical industry space has emerged as the largest manufacturer of textile speciality chemical in India.

Name of the Company Total Revenue (₹ in million) Face Value (₹) P/E EPS (Basic) (₹) Return on Net Worth(%) NAV per share (₹)

Rossari Biotech

6,001

2

33.81

13.42

31.79%

56.48

Aarti Industries

41,863

5

30.93

30.77

18.89%

176.39

Vinati Organics

10,288

1

30.45

32.48

28.65%

124.48

Atul Limited

40,930

10

19.94

224.69

22.70%

1072.58

Galaxy Surfactants

25,963

10

22.02

64.99

23.70%

301.20

Fine Organics

10,380

5

35.24

53.75

29.45%

201.86


Conclusion / Investment Strategy

With immense scope of growth for textile speciality chemical industry in India and globally, RBL has very good prospects to enhance its business empire that is blessed by super experienced management team with the domain knowledge. The company's strong manufacturing capabilities coupled with strong sales force and R&D team will act as key element for company's growth. The company has maintained a robust financial performance over last 3 years and the debt equity ratio too is well within the limits which is a good sign. Thus, the investors should consider to invest in the issue and hold for a longer period to reap the benefits.

Reviewer recommends Subscribing to the issue.

Review By Chittorgarh.com Team on Jul 8, 2020


2 Comments

HK BANSAL
2. HK BANSAL  Jul 14, 2020 10:55 I Like It. | I Don't Like It. | Report Abuse Reply
what is expected price on listing , price in gray market
Aniketiaf
1. Aniketiaf  Jul 9, 2020 19:42 I Like It. | I Don't Like It. | Report Abuse Reply
IPO Guru IPO Guru (1100+ Posts, 6800+ Likes)
A good IPO at fair price band.








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