Anupam Rasayan IPO: Anupam Rasayan IPO opens on Friday: Should you bid for stock at 80 times PE?
Analysts are mixed on the issue; some suggest the asking valuations exceed the growth prospects. Others say one can subscribe to the issue, as they expect robust growth, market share gain and improved margins for the company going forward. All of them, though, agree that the issue is priced aggressively.
The company on Wednesday raised Rs 225 crore from anchor investors, ahead of its initial share sale. Among the 15 anchor investors were Aditya Birla Sunlife Mutual Fund (MF), Nomura Funds Ireland Public Ltd Company, Fidelity International, Sundaram MF, SBI Life Insurance Co, IIFL Special Opportunities Fund, Malabar Select Fund and Max Life Insurance.
Reliance Securities said the IPO is demanding a P/E of 80 times FY20 earnings and 69 times FY21 annualised earnings, which look aggressive.
“Considering capacity utilisation of 75 per cent in the first nine months of FY21 and likely interest cost savings from debt repayment from IPO proceeds, we believe earnings can potentially grow 35-40 per cent CAGR over FY20-23. After factoring this in, the stock would trade at over 40 times of FY23 earnings, which is expensive compared with its quality peers like SRF and PI Industries. Further, less than 1 time asset turnover ratio over the years and low operating cash flow (OCF) yields raise apprehensions,” Reliance Securities said.
Anand Rathi Financial Services said the issue is aggressively priced compared with its peers.
“However, considering the fancy for life care and specialty chemicals segment linked with future performance trends, the company is expected to do well post listing going forward. Moreover, the company has a strong financial position and has been generating positive cash flow. We are positive on the company’s long-term prospects,” the brokerage said.
Anupam Rasayan manufactures a variety of intermediates and ingredients for insecticides, fungicides and herbicides for agrochemical companies. Besides, it also manufactures anti-bacterial and ultraviolet protection ingredients for FMCG and pharma companies.
The company’s life sciences revenue grew at a CAGR of 26.3 per cent to Rs 504 crore over FY18-20. In the first nine months of FY21, this segment posted 40.7 per cent YoY revenue growth at Rs 506 crore.
Exports contribute over 60 per cent of the company’s total business, while the rest comes from the domestic market. The company operates six manufacturing facilities in Gujarat with an aggregate installed capacity of 23,438 tonnes.
“At the upper end of the price band at Rs 555 per share, the company is valued at 36.1 times FY23 earnings. We have a ‘subscribe’ rating on the issue for listing gains,” said Ventura Securities.
The company plans to utilise part of the net proceeds to repay or prepay certain liabilities and one part for general corporate purposes. The post-issue implied market capitalisation is pegged at Rs 5,527-5,544 crore.
