"Subscribe with Caution" to Laxmi Organic Industries Ltd - Aggressively priced, only positive is sectoral tailwinds - Moneycontrol
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“Subscribe with Caution” to Laxmi Organic Industries Ltd. Aggressively priced, only positive is sectoral tailwinds
13th Mar. 2021
Salient features of the IPO: Recommendation Subscribe with Caution
• Laxmi Organic Industries Ltd. (Laxmi Organic), a specialty chemical Price band Rs. 129 - 130 per share
company is planning to raise up to Rs. 6,000mn through an IPO, which Face value Rs. 2
opens on 15th Mar. and closes on 17th Mar. 2021. The price band is Rs. Shares for fresh issue 23.08 - 23.26mn shares
129 - 130 per share. Shares for OFS 23.08 - 23.26mn shares
• On 27th Feb. 2021 and 1st Mar. 2021, the company undertook a pre- Fresh issue size Rs. 3,000mn
OFS issue size Rs. 3,000mn
IPO placement of 15.5mn equity shares at Rs. 129 each, aggregating
46.15 - 46.51mn shares
to Rs. 2,000mn. Total issue size
(Rs. 6,000mn)
• The issue is a combination of fresh issue and OFS. Of the net proceeds Bidding date 15th Mar. - 17th Mar. 2021
from the fresh issue and pre-IPO placement, around Rs. 604mn and MCAP at higher
Rs. 34,276mn
Rs. 377mn will be utilized to part-finance the capex requirement and price band
to fund the working capital requirements, respectively, at its wholly Enterprise value at
Rs. 30,796mn
owned subsidiary; Rs. 911mn and Rs. 126mn will be utilized to fund higher price band
Book running lead Axis Capital Ltd. and
the capex requirement and purchase of plant & machineries, manager DAM Capital Advisors Ltd.
respectively, for its proposed SI facility expansion; Rs. 1,793mn to be Registrar Link Intime India Pvt. Ltd.
used for the repayment/prepayment of certain debt and Rs. 352mn Sector/Industry Chemicals
will be utilized to fund the working capital requirement of the Yellow Stone Trust and Mr.
Promoters
company. Residual funds will be used for general corporate purposes. Ravi Goenka
Issue breakup
Key competitive strengths: Percent of
Category Number of shares (mn)
issue (%)
• Leading manufacturer of ethyl acetate with significant market share
QIB portion 50% 23.08 - 23.26mn shares
• Only Indian manufacturer of diketene derivatives with a significant Non institutional
market share and one of the largest portfolios of diketene products 15% 6.92 - 6.98mn shares
portion
• Diversified customer base across high growth industries and long- Retail portion 35% 16.15 - 16.28mn shares
standing relationships with marquee customers Indicative IPO process time line
• Strategically located manufacturing facilities, vertical integration and Finalization of basis of
22nd Mar. 2021
supply chain efficiencies allotment
Unblocking of
• In-house research and development capabilities and consistent track ASBA account
23rd Mar. 2021
record of technology absorption Credit to demat accounts 24th Mar. 2021
• Global presence and low geographical concentration Commencement of trading 25th Mar. 2021
• Differentiated business model, asset base, product mix and Pre and post - issue shareholding pattern
experience in handling complex chemistries create high entry barriers Pre-issue Post-issue
• Experienced promoter, board of directors and key managerial Promoter & promoter
89.51% 72.92%
personnel group
Public 10.49% 27.08%
Total 100.00% 100.00%
Risk and concerns: Retail application money at higher cut-off price per lot
• Subdued macro economic environment Number of shares per lot 115
• Delay in the proposed expansions Application money Rs. 14,950 per Lot
• Unfavorable raw material prices Analyst
• Unfavorable forex movements Rajnath Yadav
• Intense competition Research Analyst (022 - 6707 9999; Ext: 912)
Email: rajnath.yadav@choiceindia.com
Peer comparison and valuation: At higher price band of Rs. 130, the company is demanding a P/E valuation of 77.2x (to its
restated FY20 EPS of Rs. 1.7), which is at a significant premium to the peer average of 43.4x. However, if we annualize the H1
FY21 EPS, the demanded valuation P/E comes out to be 37.7x. Considering the historical performance, the issue seems to be
aggressively priced.
Below are a few key observations of the issue: (continued in next page)
• The domestic acetyl market is valued at USD 1.5bn in 2019. With increased demand from the end use applications, it is
projected to grow at 6.6% CAGR over the next five years to reach at USD 2.1bn in 2024. Currently 70% of the acetyl
application is concentrated in high growth areas like flexible packaging, pharmaceuticals, printing inks, coatings, adhesives,
sealants, elastomers and agrochemicals. Laxmi Organic is a leading manufacturer of Acetyl Intermediates (AI) with around
30% share in the domestic ethyl acetate market. It has been the largest exporter of ethyl acetate during FY18-20 and for
the H1 FY21; and one of the largest exporters of ethyl acetate to Europe since 2012. As of 30th Sept. 2020, the AI comprise
of 13 products including ethyl acetate, acetaldehyde and fuel- grade ethanol.
1
Peer comparison and valuation (Contd…):
Stock return (%) FY20 FY20
Face FY20 FY20
CMP MCAP EV operating FY20 PAT PAT
Company name value EBITDA EBITDA
(Rs.) (Rs. mn) (Rs. mn) 1M 3M 6M 1Y revenue (Rs. mn) margin
(Rs.) (Rs. mn) margin (%)
(Rs. mn) (%)
Laxmi Organic Industries Ltd. 2 130 34,276 30,796 15,341 1,135 444 7.4% 2.9%
Atul Ltd. 10 6,785 201,242 195,341 -1.0% 11.1% 7.9% 48.3% 40,931 9,020 6,665 22.0% 16.3%
Fine Organic Industries Ltd. 5 2,382 73,029 71,839 -1.6% -4.4% -16.2% 16.8% 10,381 2,405 1,648 23.2% 15.9%
Navin Fluorine International Ltd. 2 2,691 133,174 129,675 1.6% 5.3% 36.6% 99.9% 10,616 2,635 4,086 24.8% 38.5%
Aarti Industries Ltd. 5 1,277 222,515 238,147 5.9% 5.4% 25.5% 51.9% 41,863 9,773 5,361 23.3% 12.8%
Rossari Biotech Ltd. 2 989 51,340 50,540 8.3% 21.2% 26.6% 6,001 1,047 653 17.5% 10.9%
SRF Ltd. 10 5,661 335,411 364,842 -0.4% 6.2% 33.1% 66.3% 74,187 13,752 10,191 18.5% 13.7%
Average 21.6% 18.0%
3Y capital 3Y average3Y average
3Y top-line 3Y EBITDA 3Y PAT 3Y average 3Y average 3Y CFO 3Y 3Y
employed working total asset
Company name growth growth growth EBITDA PAT margin growth average average
growth capital turnover
(CAGR, %) (CAGR, %) (CAGR, %) margin (%) (%) (CAGR, %) RoE (%) RoIC (%)
(CAGR, %) cycle (x)
Laxmi Organic Industries Ltd. 4.9% -13.4% -23.4% 9.3% 4.3% 48.8% 37.9 1.4 13.6% 12.8%
Atul Ltd. 11.4% 33.6% 55.3% 18.8% 11.8% 18.3% 57.4% 60.1 1.0 16.5% 17.6%
Fine Organic Industries Ltd. 10.1% 23.2% 31.5% 21.2% 13.3% 34.9% 83.1% 57.2 1.5 26.0% 26.1%
Navin Fluorine International Ltd. 7.8% 10.7% 50.8% 23.4% 24.4% 21.3% -3.8% 64.1 0.6 20.4% 21.1%
Aarti Industries Ltd. 4.9% 18.2% 26.9% 21.6% 11.1% 25.5% 81.4% 84.3 0.7 19.3% 17.3%
Rossari Biotech Ltd. 43.4% 53.1% 50.0% 15.9% 9.9% 90.5% 52.5% 27.3 1.6 30.1% 31.5%
SRF Ltd. 15.2% 23.2% 48.6% 17.4% 10.1% 13.8% 38.7% 30.8 0.7 16.4% 11.1%
Average 15.5% 27.0% 43.8% 19.7% 13.4% 34.1% 51.5% 53.9 1.0 21.4% 20.8%
Debt Total asset
EPS BVPS DPS RoE RoCE P/E P/B EV / Sales EV / EBITDA MCAP / Earning
Company Name equity turnover
(Rs.) (Rs.) (Rs.) (%) (%) (x) (x) (x) (x) Sales (x) yield (%)
ratio ratio
Laxmi Organic Industries Ltd. 1.7 35.2 0.1 0.2 1.0 4.8% 6.0% 77.2 3.7 2.0 27.1 2.2 1.3%
Atul Ltd. 224.7 1,063.6 50.7 0.0 0.9 21.1% 22.6% 30.2 6.4 4.8 21.7 4.9 3.3%
Fine Organic Industries Ltd. 53.7 201.9 13.3 0.1 1.2 26.6% 28.9% 44.3 11.8 6.9 29.9 7.0 2.3%
Navin Fluorine International Ltd. 82.5 285.3 14.4 0.0 0.5 28.9% 12.4% 32.6 9.4 12.2 49.2 12.5 3.1%
Aarti Industries Ltd. 30.8 171.0 6.1 0.6 0.7 18.0% 17.9% 41.5 7.5 5.7 24.4 5.3 2.4%
Rossari Biotech Ltd. 12.6 55.2 0.5 0.2 1.1 22.8% 24.7% 78.7 17.9 8.4 48.3 8.6 1.3%
SRF Ltd. 172.0 832.7 13.6 0.7 0.7 20.7% 13.1% 32.9 6.8 4.9 26.5 4.5 3.0%
Average 16.4 0.3 0.9 23.0% 20.0% 43.4 10.0 7.2 33.3 7.1 2.6%
Source: Choice Broking Research
• The domestic diketene derivatives market was valued at USD 150-170mn in 2019, which is projected to be at USD 200mn
by 2024. Currently 40% of the demand is catered by imports. Through the acquisition of Clariant’s diketene business in
2010, the company has presence in the Specialty Intermediates (SI) segment. Laxmi Organic is the only manufacturer of
diketene derivatives in India with a market share of approximately 55%. It also has one of the largest portfolios of diketene
products with more than 34 products. Over the last three fiscal, business from new product contributed around 45% of SI
revenues.
• Its global footprint is spread across 30 countries including China, Netherlands, Russia, Singapore, United Arab Emirates,
United Kingdom and United States of America. Laxmi Organic also has arrangements with third parties for usage of storage
tanks in Mumbai, Rotterdam (Netherlands), Antwerp (Belgium) and Genoa (Italy) for storage of raw materials & finished
goods, which enables it to deliver products on short notice.
• It has established long-standing relationships with marquee players including Syngenta Asia Pacific, Alembic
Pharmaceuticals, Covestro (India), Dr. Reddy’s Laboratories, Granules India, Hetero Labs, Huhtamaki India, Laurus Labs,
Macleods Pharmaceuticals, Mylan Laboratories, Parikh Packaging, Suven Pharmaceuticals, UPL and others.
• The company currently has two integrated manufacturing facilities in Maharashtra, with one facility dedicated to AI and
another dedicated to SI. As at 31st Dec. 2020, the aggregate installed production capacity at the AI and SI facility was
0.16mn tonnes and 0.08mn tonnes, respectively. It also has two distilleries located in Satara district and Kolhapur district in
Maharashtra for the manufacturing of ethanol or specially denatured spirit. The ethanol manufactured at the distilleries
are primarily consumed at the AI and SI manufacturing facility for the manufacturing of fuel-grade ethanol, ethyl acetate
and certain SI including several downstream products. The company has power generation capacity of around 12MW
across renewables, hydro and co-generation. It meets more than 50% of the power requirement in-house.
© CHOICE INSTITUTIONAL RESEARCH
Peer comparison and valuation (Contd…):
• Laxmi Organic is in the process of expanding the AI by acquiring a promoter group company and also expanding the SI
facilities. It is planning to diversify into the manufacturing of specialty fluorochemicals for which, it has recently acquired
various assets and patents of Miteni (a manufacturer of organic fluorospecialties and electrochemical fluorination) in
2019. Through this acquisition, the company is well placed to enter into the high margin specialty fluorochemicals space.
• The company in its short financial history reported a modest business growth but with declining profitability margins.
Over FY18-20, Laxmi Organic has reported a modest growth of 4.9% CAGR in consolidated top-line to Rs. 15,341.2mn in
FY20. Total operating expenditure increased by 7% CAGR (relatively higher than the top-line), thereby leading to a 13.4%
CAGR de-growth in consolidated EBITDA to Rs. 1,135.5mn in FY20. EBITDA margin contracted from 10.9% in FY18 to 7.4%
in FY20. Depreciation charge increased by 25% CAGR, while finance cost increased by 19.5% CAGR over FY18-20. Other
income increased by 22.4% CAGR, mainly due to higher interest income. In FY20, the company reported an exceptional
gain of Rs. 256.6mn, on account of electricity duty refund and VAT refund. As a result, over FY18-20 adjusted PAT
declined by 23.4% CAGR to at Rs. 444.1mn in FY20. Adjusted PAT margin contracted by 254bps to stand at Rs. 2.9% in
FY20.
• Baring FY18, the company reported a positive cash flow from operating activities in next two years, with an average
operating cash flow of around Rs. 1,918mn. Average RoIC and RoE stood at 14.2% and 15.5%, respectively, over FY18-20.
• For H1 FY21, Laxmi Organic reported a top-line of Rs. 8,134.1mn. With Covid-19 induced cost reduction, EBITDA and PAT
margin stood at 10.5% and 5.6%, respectively. Based on our quick estimate, we are forecasting a top-line growth of 6.6%
CAGR over FY20-23E to Rs. 18,584mn in FY23E. EBITDA and PAT margin are expected to expand by 237bps and 209bps,
respectively, to be at 9.8% and 5% in FY23E.
At higher price band of Rs. 130, the company is demanding a P/E valuation of 77.2x (to its restated FY20 EPS of Rs. 1.7),
which is at a significant premium to the peer average of 43.4x. However, if we annualize the H1 FY21 EPS, the demanded
valuation P/E comes out to be 37.7x. Considering the sectoral tailwinds and demanded aggressive valuation, we assign a
“Subscribe with Caution” rating for the issue.
© CHOICE INSTITUTIONAL RESEARCHAbout the issue:
• Laxmi Organic is coming up with an initial public offering (IPO) with 46.15 - 46.51mn shares (fresh issue: 23.08 - 23.26mn
shares; OFS shares: 23.08 - 23.26mn shares) in offering. The offer represents around 17.50% of its post issue paid-up
equity shares of the company. Total IPO size is Rs. 6,000mn.
• The issue will open on 15th Mar. 2021 and close on 17th Mar. 2021.
• The issue is through book building process with a price band of Rs. 129 - 130 per share.
• On 27th Feb. 2021 and 1st Mar. 2021, the company undertook a pre-IPO placement of 15.5mn equity shares at Rs. 129
each, aggregating to Rs. 2,000mn.
• The issue is a combination of fresh issue and OFS. Of the net proceeds from the fresh issue and pre-IPO placement,
around Rs. 604mn and Rs. 377mn will be utilized to part-finance the capex requirement and to fund the working capital
requirements, respectively, at its wholly owned subsidiary; Rs. 911mn and Rs. 126mn will be utilized to fund the capex
requirement and purchase of plant & machineries, respectively, for its proposed SI facility expansion; Rs. 1,793mn to be
used for the repayment/prepayment of certain debt and Rs. 352mn will be utilized to fund the working capital
requirement of the company. Residual funds will be used for general corporate purposes.
• 50% of the net issue shall be allocated on a proportionate basis to qualified institutional buyers, while rest 15% and 35%
is reserved for non-institutional bidders and retail investors, respectively.
• Promoter holds 89.51% stake in the company and post-IPO this will come down to 72.92%. Public holding will increase
from current 10.49% to 27.08%.
Pre and post issue shareholding pattern (%)
Pre Issue Post Issue (at higher price band)
Promoter & Promoter Group (%) 89.51% 72.92%
Public (%) 10.49% 27.08%
Source: Choice Equity Broking
Indicative IPO process time line:
Unblocking of
Offer closes on
ASBA account
17-Mar-2021
23-Mar-2021
Offer opens on Finalization of Commencement
15-Mar-2021 basis of allotment Credit to demat of trading
22-Mar-2021 accounts 25-Mar-2021
24-Mar-2021Company introduction: Laxmi Organic is a leading manufacturer of AI and SI with almost three decades of experience in large scale manufacturing of chemicals. Since its inception in 1989, the company has been on a journey of transformation. It initially started manufacturing acetaldehyde and acetic acid in 1992, and soon thereafter moved on to manufacturing of ethyl acetate in 1996. Currently, the company is among the largest manufacturers of ethyl acetate in India with a market share of approximately 30% of the Indian ethyl acetate market (Source: RHP). Further, post completion of the Yellowstone Chemicals Pvt. Ltd. (YCPL; currently 100% owned by promoter group companies) acquisition, its market share in the ethyl acetate market will be further enhanced. In FY10, Laxmi Organic commenced manufacturing the SI by acquiring Clariant’s diketene business. According to the company, its diversified product portfolio in various chemistries in SI has enabled it to create a niche for itself. Laxmi Organic is the only manufacturer of diketene derivatives in India with a market share of approximately 55% of the Indian diketene derivatives market (in terms of FY20 revenue) and one of the largest portfolios of diketene products. Its products are currently divided into two broad categories, namely the AI and the SI. The AI include ethyl acetate, acetaldehyde, fuel-grade ethanol and other proprietary solvents, while the SI comprises of ketene, diketene derivatives namely esters, acetic anhydride, amides, arylides and other chemicals. The company’s products find application in various high-growth industries, including pharmaceuticals, agrochemicals, dyes & pigments, inks & coatings, paints, printing & packaging, flavours & fragrances, adhesives and other industrial applications. Laxmi Organic also proposes to diversify into manufacturing of specialty fluorochemicals for which, it has recently acquired assets including plant & machinery, design & operating paperwork, REACH registrations and patents of Miteni, a manufacturer of organic fluorospecialties and electrochemical fluorination. Through this acquisition, the company is well placed to enter into the high margin specialty fluorochemicals space. Over the years, Laxmi Organic significantly expanded its scale of operations and global footprint with customers in over 30 countries including China, Netherlands, Russia, Singapore, United Arab Emirates, United Kingdom and United States of America. It has established long-standing relationships with marquee players including Syngenta Asia Pacific Pte. Ltd., Alembic Pharmaceuticals Ltd., Covestro (India) Pvt. Ltd., Dr. Reddy’s Laboratories Ltd., Flint Group India Pvt. Ltd., Granules India Ltd., Hetero Labs Ltd., Heubach Colour Pvt. Ltd., Hubergroup India Pvt. Ltd., Huhtamaki India Ltd., Laurus Labs Ltd., Macleods Pharmaceuticals Pvt. Ltd., Mylan Laboratories Ltd., Neuland Laboratories Ltd., Parikh Packaging Pvt. Ltd., Suven Pharmaceuticals Ltd., Colourtex Industries Pvt. Ltd. and UPL Ltd. The company has offices in Leiden (Netherlands), Shanghai (China) and Sharjah (United Arab Emirates) which enables it to assess international demand and increase customer outreach thereby bolstering its product development initiatives. Laxmi Organic also has arrangements with third parties for usage of storage tanks in inter alia Mumbai for storage of raw materials & finished goods and Rotterdam (Netherlands), Antwerp (Belgium) and Genoa (Italy) for storage of finished products, which enables it to deliver products on short notice. Laxmi Organic has been the largest exporter of ethyl acetate during FY18-20 and for the H1 FY21, and one of the largest exporters of ethyl acetate to Europe since 2012. During FY18-20 and H1 FY21, exports contributed around 25% to the revenue from operations on a standalone basis. Moreover, exports revenue has grown by 5.9% CAGR between FY18 and H1 FY20 (annualized). The company currently has two manufacturing facilities in Mahad, Maharashtra, with one facility dedicated to AI and another dedicated to SI. The facilities are strategically located in proximity to several ports and each other. As at 31st Dec. 2020, the aggregate installed production capacity at the AI facility was 0.16mn tonnes, while the aggregate installed production capacity at the SI facility was 0.08mn tonnes. Moreover Laxmi Organic is in the process of acquiring YCPL having an aggregate installed production capacity of 0.01mn tonnes of acetaldehyde and 0.03mn tonnes of ethyl acetate. It also has two distilleries located in Satara district and Kolhapur district in Maharashtra for the manufacturing of ethanol or specially denatured spirit. As of 31st Dec. 2020, the Satara distillery had an installed production capacity of 8,100 kilo liter, while the Kolhapur distillery had an installed production capacity of 9,112 kilo liter per annum. The ethanol manufactured at the distilleries are primarily consumed at the AI and SI manufacturing facility for the manufacturing of fuel-grade ethanol, ethyl acetate and certain SI including several downstream products. Further, Laxmi Organic is in the process of setting up a manufacturing facility at Lote Parshuram, Maharashtra for manufacturing fluorospecialty chemicals. It also has two DSIR, recognized R&D facilities, with state-of-the-art infrastructure to synthesize specialty molecules and advanced intermediates. Competitors: Laxmi Organic competes with different companies depending on the market and type of products. It competes with large multinational pharmaceutical companies and smaller regionally based competitors.
Financial performance:
Performance over FY17-20: The company in its short financial history reported a modest business growth but with declining
profitability margins. Over FY18-20, Laxmi Organic has reported a modest growth of 4.9% CAGR in consolidated top-line to
Rs. 15,341.2mn in FY20. For H1 FY21, it reported a top-line of Rs. 8,134.1mn.
Total operating expenditure increased by 7% CAGR (relatively higher than the top-line), thereby leading to a 13.4% CAGR de-
growth in consolidated EBITDA to Rs. 1,135.5mn in FY20. EBITDA margin contracted from 10.9% in FY18 to 7.4% in FY20.
During H1 FY21, EBITDA stood at Rs. 853.9mn with a margin of 10.5%.
Depreciation charge increased by 25% CAGR, while finance cost increased by 19.5% CAGR over FY18-20. Other income
increased by 22.4% CAGR, mainly due to higher interest income. In FY20, the company reported an exceptional gain of Rs.
256.6mn, on account of electricity duty refund and VAT refund. As a result, over FY18-20 adjusted PAT declined by 23.4%
CAGR to at Rs. 444.1mn in FY20. Adjusted PAT margin contracted by 254bps to stand at Rs. 2.9% in FY20. In H1 FY21,
adjusted PAT stood at Rs. 454.8mn with a margin of 5.6%.
Baring FY18, the company reported a positive cash flow from operating activities in next two years, with an average
operating cash flow of around Rs. 1,918mn. Average RoIC and RoE stood at 14.2% and 15.5%, respectively, over FY18-20.
Y-o-Y
Consolidated financial snapshot (Rs. mn) FY18 FY19 FY20 H1 FY21 CAGR (%)
(%, Annual)
Revenue from the products sales 13,822.1 15,527.7 15,217.1 8,060.2 4.9% -2.0%
Revenue from the services 26.8 66.3 52.3 35.4 39.6% -21.1%
Other operating revenues 81.9 91.3 71.8 38.4 -6.3% -21.3%
Total revenue 13,930.7 15,685.2 15,341.2 8,134.1 4.9% -2.2%
EBITDA 1,513.9 1,532.9 1,135.5 853.9 -13.4% -25.9%
Adjusted PAT 757.0 723.9 444.1 454.8 -23.4% -38.6%
Restated adjusted EPS 2.9 2.7 1.7 1.7 -23.4% -38.6%
Cash flow from operating activities (67.5) 1,876.5 1,960.0 354.7 4.4%
NOPLAT 876.0 822.0 519.0 495.7 -23.0% -36.9%
FCF (238.8) 706.8
RoIC (%) 20.1% 15.2% 9.9% 8.8% (1,018) bps (524) bps
Revenue growth rate (%) 12.6% -2.2%
EBITDA growth rate (%) 1.3% -25.9%
EBITDA margin (%) 10.9% 9.8% 7.4% 10.5% (347) bps (237) bps
EBIT growth rate (%) -9.1% -40.8%
EBIT margin (%) 8.6% 7.0% 4.2% 7.7% (441) bps (275) bps
Restated adjusted PAT growth rate (%) -4.4% -38.6%
Restated adjusted PAT margin (%) 5.4% 4.6% 2.9% 5.6% (254) bps (172) bps
Inventory days 55.0 52.7 53.7 39.6 -1.2% 1.8%
Debtor days 84.9 75.7 81.6 74.0 -2.0% 7.8%
Payable days (80.7) (88.2) (121.0) (97.1) 22.5% 37.2%
Cash conversion cycle 59.2 40.2 14.2 16.5 -51.0% -64.6%
Fixed asset turnover ratio (x) 4.3 4.2 3.8 2.0 -6.3% -9.0%
Total asset turnover ratio (x) 1.6 1.5 1.4 0.8 -4.1% -7.3%
Working capital turnover ratio (x) 12.4 11.3 10.8 5.1 -6.5% -4.2%
Current ratio (x) 1.3 1.4 1.2 1.4 -1.5% -10.0%
Debt to equity (x) 0.7 0.5 0.5 0.5 -17.7% -3.4%
Net debt to EBITDA (x) 1.7 1.1 1.3 1.6 -10.5% 22.2%
RoE (%) 20.0% 16.1% 10.4% 9.6% (955) bps (569) bps
RoA (%) 8.5% 7.1% 4.1% 4.4% (431) bps (299) bps
RoCE (%) 25.9% 19.7% 11.9% 10.7% (1,399) bps (776) bps
Source: Choice Equity BrokingCompetitive strengths:
• Leading manufacturer of ethyl acetate with significant market share
• Only Indian manufacturer of diketene derivatives with a significant market
share and one of the largest portfolios of diketene products
• Diversified customer base across high growth industries and long-standing
relationships with marquee customers
• Strategically located manufacturing facilities, vertical integration and supply
chain efficiencies
• In-house research and development capabilities and consistent track record
of technology absorption
• Global presence and low geographical concentration
• Differentiated business model, asset base, product mix and experience in
handling complex chemistries create high entry barriers
• Experienced promoter, board of directors and key managerial personnel
Business strategy:
• Volume maximization by expanding installed capacities to support the
growth initiatives
• Expanding and optimizing the product portfolio
• Increase global footprint and augment growth in current geographies
• Establish fluorospecialty chemicals business
• Continuing focus on innovation and leveraging chemistries and technology
absorption
Risk and concerns:
• Subdued macro economic environment
• Delay in the proposed expansions
• Unfavorable raw material prices
• Unfavorable forex movements
• Intense competition
© CHOICE INSTITUTIONAL RESEARCHFinancial statements:
Consolidated profit and loss statement (Rs. mn)
CAGR over Annual growth over
FY18 FY19 FY20 H1 FY21
FY18 - 20 (%) FY19 (%)
Total revenue 13,930.7 15,685.2 15,341.2 8,134.1 4.9% -2.2%
Cost of materials consumed (6,558.2) (8,884.2) (7,809.6) (3,518.6) 9.1% -12.1%
Purchase of stock in trade (3,213.0) (2,496.0) (2,870.7) (2,093.4) -5.5% 15.0%
Changes in inventories of finished goods, work-
87.3 423.8 (285.5) (124.7) -167.4%
in-progress and stock-in-trade
Excise duty (175.5)
Employee benefits expense (526.0) (645.3) (685.6) (357.3) 14.2% 6.2%
Other expenses (2,031.4) (2,550.7) (2,554.4) (1,186.1) 12.1% 0.1%
EBITDA 1,513.9 1,532.9 1,135.5 853.9 -13.4% -25.9%
Depreciation & amortization (312.9) (440.6) (488.9) (227.0) 25.0% 11.0%
EBIT 1,201.1 1,092.3 646.6 626.9 -26.6% -40.8%
Finance cost (98.1) (169.7) (140.2) (74.4) 19.5% -17.4%
Other income 30.0 58.0 45.0 9.5 22.4% -22.5%
Share of profit/(loss) of a joint venture 0.2 (4.7) -100.0% -100.0%
Exceptional items 256.6
PBT 1,133.1 975.9 808.0 562.0 -15.6% -17.2%
Tax expenses (376.2) (252.0) (105.9) (107.2) -46.9% -58.0%
Profit before minority interest 757.0 723.9 702.1 454.8 -3.7% -3.0%
Minority interest (1.4)
Reported PAT 757.0 723.9 700.8 454.8 -3.8% -3.2%
Adjusted PAT 757.0 723.9 444.1 454.8 -23.4% -38.6%
Consolidated balance sheet statement (Rs. mn)
CAGR over Annual growth over
FY18 FY19 FY20 H1 FY21
FY18 - 20 (%) FY19 (%)
Equity share capital 100.1 500.5 450.2 450.2 112.1% -10.0%
Other equity 3,693.1 3,998.0 3,819.0 4,273.9 1.7% -4.5%
Minority interest 2.1 3.5 3.9 3.4
Non current borrowings 762.3 1,086.7 1,252.0 1,288.8 28.2% 15.2%
Non current lease liabilities 123.0 107.5 83.6 66.9
Non current provisions 18.5 22.0 28.4 30.8
Non current net deferred tax liabilities 159.7 170.7 132.7 124.7 -8.9% -22.3%
Other non current liabilities 6.0
Current borrowings 1,388.3 666.5 336.5 633.0 -50.8% -49.5%
Current lease liabilities 18.7 21.3 23.9 28.7
Current financial liabilities 287.1 263.3 270.6 145.3
Trade payables 2,141.3 3,155.7 4,116.3 3,093.5 38.6% 30.4%
Current provisions 73.5 86.1 117.7 123.1 26.6% 36.8%
Current net tax liabilities 101.9 27.7 9.7 14.7 -69.2% -65.1%
Other current liabilities 71.9 35.5 62.1 94.6 -7.0% 74.8%
Total liabilities 8,947.3 10,144.9 10,706.3 10,371.3 9.4% 5.5%
Property, plant and equipment 2,770.9 3,305.9 3,255.1 3,209.3 8.4% -1.5%
Intangible assets 2.5 10.4 7.8 6.4 75.7% -25.0%
Capital work-in-progress 299.5 314.8 674.9 744.0 50.1% 114.4%
Right of use asset 159.9 140.5 113.7 100.4 -15.7% -19.1%
Non current loans and advances 29.9 40.5 82.5 83.4 66.1% 103.6%
Other non current financial assets 58.9 6.3 10.7 17.5 -57.4% 69.1%
Non current net deferred tax assets 12.6 15.0
Other non current assets 186.5 77.9 79.8 75.4 -34.6% 2.4%
Inventories 1,458.3 1,707.5 1,518.9 1,262.1 2.1% -11.0%
Trade receivables 3,241.8 3,261.8 3,593.7 3,343.0 5.3% 10.2%
Cash and cash balances 52.4 467.4 447.1 815.8 192.2% -4.3%
Current loans and advances 10.4 2.0 2.0 1.9 -56.5% -0.5%
Other current financial assets 8.4 9.2 403.1 331.1 591.9% 4267.4%
Other current assets 596.2 800.7 504.5 366.1 -8.0% -37.0%
Assets held-for-sale 71.8
Total assets 8,947.3 10,144.9 10,706.3 10,371.3 9.4% 5.5%
Source: Choice Equity Broking
© CHOICE INSTITUTIONAL RESEARCHFinancial statements:
Consolidated cash flow statement (Rs. mn)
CAGR over Annual growth over
Particulars (Rs. mn) FY18 FY19 FY20 H1 FY21
FY18 - 20 (%) FY19 (%)
Cash flow before working capital changes 1,535.2 1,585.7 1,109.1 863.6 -15.0% -30.1%
Change in working capital (1,329.0) 566.7 1,006.0 (400.8) 77.5%
Cash flow from operating activities (67.5) 1,876.5 1,960.0 354.7 4.4%
Purchase of property , plant & equipment (884.9) (974.9) (770.8) (235.6) -6.7% -20.9%
Cash flow from investing activities (850.3) (1,225.5) (557.6) (577.6) -19.0% -54.5%
Cash flow from financing activities 847.2 (627.0) (1,237.8) 247.8 97.4%
Net cash flow (70.5) 24.1 164.7 25.0 583.5%
Opening balance of cash and bank balances 122.9 52.4 76.5 241.1 -21.1% 46.0%
Closing balance of cash and bank balances 52.4 76.5 241.1 266.1 114.6% 215.3%
Consolidated financial ratios
Particulars (Rs. mn) FY18 FY19 FY20 H1 FY21
Revenue growth rate (%) 12.6% -2.2%
EBITDA growth rate (%) 1.3% -25.9%
EBITDA margin (%) 10.9% 9.8% 7.4% 10.5%
EBIT growth rate (%) -9.1% -40.8%
EBIT margin (%) 8.6% 7.0% 4.2% 7.7%
PAT growth rate (%) -4.4% -38.6%
PAT margin (%) 5.4% 4.6% 2.9% 5.6%
Turnover ratios
Inventories turnover ratio (x) 9.6 9.9 9.5 6.4
Trade receivable turnover ratio (x) 4.3 4.8 4.5 2.4
Accounts payable turnover ratio (x) 6.5 5.9 4.2 2.6
Fixed asset turnover ratio (x) 4.3 4.2 3.8 2.0
Total asset turnover ratio (x) 1.6 1.5 1.4 0.8
Return ratios
RoE (%) 20.0% 16.1% 10.4% 9.6%
RoA (%) 8.5% 7.1% 4.1% 4.4%
RoCE (%) 25.9% 19.7% 11.9% 10.7%
Per share data
Restated reported EPS (Rs.) 2.9 2.7 1.7 1.7
Restated DPS (Rs.) 0.0 0.1 0.1 0.0
Restated BVPS (Rs.) 14.4 17.1 16.2 17.9
Restated operating cash flow per share (Rs.) (0.3) 7.1 7.4 1.3
Restated free cash flow per share (Rs.) (0.9) 2.7 0.0
Dividend payout ratio 1.6% 2.1% 3.9% 0.0%
Note: Ratios calculated on pre-issue data; Source: Choice Equity Broking
© CHOICE INSTITUTIONAL RESEARCHDisclaimer
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