Laxmi Organic IPO Review 2021: The Laxmi Organic Industries Ltd IPO opens on 15th March and closes on 17th March 2021. In this article, we cover the Laxmi Organic Industries Ltd IPO Review and look into important IPO information and find out the possible prospects of the company. Let’s get started.
Table of Contents
Laxmi Organic IPO Review – About the Company
Founded in 1989, Laxmi Organic Industries Ltd is a specialty chemical manufacturer. The company is the flagship company of the Goenka Group and the Indian market leader for the production of Acetyl Intermediates (AI) and Specialty Intermediates (SI).
Its products are used in industries like pharmaceuticals, agrochemicals, inks & coatings, dyes & pigments, paints, printing & packaging, flavours & fragrances, adhesives and other industries.
The company currently has 2 manufacturing facilities and distilleries in Mahad, Maharashtra for the manufacturing of AI and SI products. Their locations are in close proximity to ports. This facilitates the company’s export business.
The company is also in plans of setting up one more. It also has set up two research and development facilities with state-of-the-art research and development infrastructure to synthesize specialty molecules and advanced intermediates. These have been recognized by the Department of Scientific and Industrial Research (DSIR), Government of India.
The company is among the largest manufacturers in the country with a market share of 30% for ethyl acetate. The company also had acquired Yellowstone Fine Chemicals Private Limited (YFCPL) which will further enhance its market share. At the same time, it boasts a market share of 55% in terms of revenue in the manufacture of diketene derivatives. It is also the only manufacturer of diketene derivatives in the country.
Global Presence of Laxmi Organic Industries
The company also has a strong domestic and international presence. Its customer base spans 30 countries which include the likes of China, the Netherlands, Russia, Singapore, United Arab Emirates, the United Kingdom and the United States.
The company has specifically set up its own marketing offices in key global markets. This gives it an edge over its competitors. They have set up their subsidiaries i.e. Laxmi Organic (Europe) B.V and Laxmi Petrochem Middle East FZE in the Leiden, Netherlands and Sharjah, UAE. The exports from the company form nearly a quarter of its revenue.
Its domestic clients include:
- Syngenta Asia Pacific
- Alembic Pharmaceuticals
- Covestro (India)
- Dr Reddy’s Laboratories
- Flint Group India
- Granules India
- Hetero Labs
- Laurus Labs
- Macleods Pharmaceuticals
- Mylan Laboratories
- Neuland Laboratories
- Parikh Packaging
- Suven Pharmaceuticals
- Colourtex Industries
- UPL
Laxmi Organic IPO Review – IPO Key Information
The promoters of the IPO are Ravi Goenka and Yellow Stone Trust. Ravi Goenka has around 3 decades of experience in the chemicals and paper industries. They currently represent 83.10 of the paid-up capital of the company. The IPO will also include an Offer for Sale for Rs. 300 cr from its promoter Yellow Stone Trust.
| Particular | Details |
|---|---|
| IPO Size | ₹600.00 Cr |
| Fresh Issue | ₹300.00 Cr |
| Offer For Sale(OFS) | ₹300.00 Cr |
| Opening Date | Mar 15, 2021 |
| Closing Date | Mar 17, 2021 |
| Face Value | ₹2 per equity share |
| Price Band | ₹129 to ₹130 per equity share |
| Lot Size | 115 Shares |
| Minimum Lot Size | 1 |
| Maximum Lot Size | 13 |
| Listing Date | Mar 25, 2021 |
They have appointed Axis Capital Ltd. and DAM Capital Advisors Ltd. as the lead managers to the issue. Link Intime India Pvt. Ltd. has been appointed as the registrar to the issue.
Grey Market Premium of the IPO
The shares of Laxmi Organic Industries traded at Rs.224 as of 13th March in the grey market implying a premium of Rs 94 or 72.3 per cent over the IPO price.
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Laxmi Organic IPO Review – Purpose of the IPO
The net proceeds from the IPO will be used for the following purposes:
- Investment into its wholly-owned subsidiary Yellowstone Fine Chemicals Private Limited (Rs. 98.14 cr.)
- Capital Expenditure for the expansion of its SI manufacturing unit (Rs. 103.63 cr.)
- Prepayment or repayment of borrowings availed by the company and subsidiary, Viva Lifesciences Pvt Ltd (VLPL). (Rs. 179.31 cr.)
- To finance working capital requirements. (Rs. 35.18 cr.)
- Offer for sale (Rs. 300 cr)
- To meet other general corporate purposes.
Closing Thoughts
The Laxmi Organic IPO opens on 15th March and closes on 17th Mar 2021. On the bright side, traders can also take a cue from 2 recent IPO of specialty chemical companies. Before investing prospective investors must carefully consider both the future prospects and the risks associated with the company. Rossari Biotech and Chemcon Specialty Chemicals —were subscribed almost 80 times and 149 times respectively.
There are a few risks associated with the company. The first being the company’s dependence on imports for acetic acid, one of the raw materials for ethyl acetate. The raw material makes up 46-52 per cent of the total expenses and due to the global prices being volatile it may further affect the company’s operating margins.
Another concern has been the location of both its manufacturing facilities in Mahad, Maharashtra. Any local disruptions in Maharashtra could have an impact on production.
That’s all for this post. Do let us know what you think of Laxmi Organic Industries IPO Review. Are you planning to apply for this IPO or not? Comment below. Cheers!
Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.
