Laxmi Organics IPO: Grey market premium, other details in 10 points

Laxmi Organic Industries

The IPO of speciality chemicals manufacturer Laxmi Organics Industries, which had opened on Monday, was subscribed 6.05 times at the end of Day 2. The price band has been fixed at ?129-130 per share for the ?600 crore IPO. Traders dealing in unlisted shares say that Laxmi Organics shares are quoting at a grey market premium of ?97 reflecting strong demand from investors.

Here are 10 things to know about Laxmi Organics IPO:

1) “The chemical sector is a current favourite of investors and recently listed chemical stocks have rewarded investors. 25% of revenues of the company comes from exports which may boost going ahead owing to China+1 strategy. Capacity expansion, diversified client base, quality management makes the company attractive. However, the valuations are not cheap. Owing to the positives, this issue may get a very good response from investors,” said Abhay Doshi, who is the founder of UnlistedArena.com, which deals in pre-IPO and unlisted shares.

2) The lot size in Laxmi Organic IPO is 115 shares. Link Intime India Private is the registrar of the issue and will manage allocation and refund. Axis Capital and DAM Capital Advisors are the book running lead managers to the issue.

3) According to brokerages, allotment of shares of Laxmi Organic is likely to be finalised on March 22 while the listing is likely on March 25.

4) 35% of the issue has been reserved for retail investors, 50% for qualified institutional buyers, and the rest for non-institutional bidders.

5) The initial public offer (IPO) comprises fresh issuance of shares aggregating to ?300 crore and an offer for sale worth ?300 crore by the promoter Yellow Stone Trust. Post IPO, the shareholding of promoters and promoter group will fall to 89.5%, from 72.9%.

6) The Mumbai-based Laxmi Organics is focused on two key business segments: acetyl intermediates and speciality intermediates. Its products find application in pharmaceuticals, agrochemicals, dyes and pigments, inks and coatings, paints, printing and packaging, flavours and fragrances, adhesives and other industrial applications.

Laxmi Organics also proposes to diversify into manufacturing of specialty fluorochemicals. It had recently acquired assets including plant and machinery, design and operating paperwork, REACH registrations and patents of Miteni, a manufacturer of organic fluorospecialties and electrochemical fluorination.

7) The company said net proceeds from the issue will be utilised for setting up a manufacturing facility for fluorospecialty chemicals, working capital requirements, purchase of plant and machinery and upgradation of existing units. A part of the proceeds will also be used for prepayment or repayment of all or a portion of certain outstanding, besides general corporate purposes.

8) Laxmi Organics has customers in over 30 countries including China, Netherlands, Russia, Singapore, United Arab Emirates, United Kingdom and the US.

9) “At the upper end of the IPO price band, it is offered at 49.81 times its FY20 earnings, with a market cap of Rs. 3428 crore. The company has strong presence in Acetyl Intermediaries & Specialty Intermediates business; further it is establishing Fluorospecialty chemicals business. The company also plans expand and optimise its capacity and product portfolio. Considering the growth prospects – we give this IPO a “Subscribe (Long Term)” rating,” domestic brokerage Anand Rathi said in a note.

10) Ahead of the IPO, the company had raised ?180 crore from anchor investors, including Nomura India Equity Fund, Abu Dhabi Investment Authority, Goldman Sachs and Kuber India. Many domestic mutual funds including SBI Mutual Fund, ICICI Prudential Mutual Fund and Kotak Mutual Fund had also participated as anchor investors.

News Source:- Livemint

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