Please refer to important disclosures at the end of this report
1
Laxmi Organic Industries Ltd. is a leading manufacturer of Acetyl
Intermediates and Specialty Intermediates with almost three decades of
experience in large scale manufacturing of chemicals. Company started
its business in 1989, with initially manufacturing acetaldehyde and acetic
acid in 1992, and soon thereafter moved on to manufacturing of ethyl
acetate in 1996; currently among the largest manufacturers of ethyl
acetate in India with a market share of approximately 30% of the Indian
ethyl acetate market.
Positives: (a) Leading manufacturer of ethyl acetate with significant
market share (b) Only Indian manufacturer of diketene derivatives with a
significant market share and one of the largest portfolios of diketene
products (c) Diversified customer base across high growth industries and
long-standing relationships with marquee customers (d) Strategically
located manufacturing facilities, vertical integration and supply chain
efficiencies.
Investment concerns: (a) The continuing impact of the outbreak of the
COVID-19 could have a significant effect on operations, and could
negatively impact business, revenues, financial condition and results of
operations. (b) A large part of the manufacturing facilities is located in one
geographic, and therefore, any localized social unrest, natural disaster or
breakdown of services could have material adverse effect on operations.
(c) Due to foreign client base, it is exposed to foreign currency exchange
risks which may adversely impact our results of operations.
Outlook & Valuation: Based on FY2020 earnings the IPO is priced at a PE of
42x at the upper end of the price band along with a good ROE of 16.4%.
The company is the largest manufacturer of ethyl acetate with over 30%
market share in the Indian ethyl acetate market and the only
manufacturer of diketene derivatives in India with a diversified customer
base. Looking at the competitive advantage and strong growth potential
we are assigning a “SUBSCRIBE” recommendation to the issue.
Key Financials
Y/E March (` cr)
FY2018
FY2019
FY2020
Net Sales
1,393
1,569
1,534
% chg
-
12.6
-2.2
Net Profit
76
72
70
% chg
-
-4.4
-3.0
EBITDA (%)
10.9
9.8
7.4
EPS (Rs)*
3.0
2.9
3.1
P/E (x)
43.0
44.9
41.7
P/BV (x)
8.6
7.2
6.9
ROE (%)
20.0
16.1
16.4
ROCE (%)
19.9
17.6
11.2
EV/EBITDA
20.6
20.0
26.7
EV/Sales
2.2
2.0
2.0
Source: Company, Angel Research.
Note: Valuation ratios at upper price band., * FY2018 EPS is adjusted for bonus issue
SUBSCRIBE
Issue Open: March 15, 2021
Issue Close: March 17, 2021
Offer for Sale: Rs. 300cr
QIBs 50% of issue
Non-Institutional 15% of issue
Retail 35% of issue
Promoters 72.9%
Others 27.1%
Fresh issue: Rs. 300 cr.
Issue Details
Face Value: Rs 2
Present Eq. Paid up Capital: Rs 240.6 cr
Post Issue Shareholding Pattern
Post Eq. Paid up Capital: Rs 263.7cr
Issue size (amount): Rs 600 cr
Price Band: Rs 129-130
Lot Size: 115 shares and in multiple thereafter
Post-issue mkt. cap: *Rs 3401 cr - **Rs 3428 cr
Promoters holding Pre-Issue: 89.5%
Promoters holding Post-Issue: 72.9%
*Calculated on lower price band
** Calculated on upper price band
Book Building
Laxmi Organic Industries Limited
f
IPO Note
March 12, 2021
Laxmi Organics Industry Ltd | IPO Note
March12, 2021
2
Company background
Company was incorporated as Laxmi Organic Industries Limited at
Mumbai, Maharashtra on dated May 15, 1989. Its business includes
manufacturers and dealing in chemicals, chemical compounds organic
and inorganic) in all forms, and chemical products. In Fiscal 2010, it
commenced manufacturing the Specialty Intermediates by acquiring
Clariant’s diketene business. Company 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 revenue in Fiscal 2020
and one of the largest portfolios of diketene products.
Issue details
The issue comprises of fresh issues of up to Rs. 600 crore in the price band
of `129-`130 per share.
Pre and post IPO shareholding pattern
No of shares
(Pre-issue)
%
(Post-issue)
%
Promoter
215,339,729
89.5
192,262,806
72.9
Public
25,246,121
10.5
71,399,967
27.1
Total
240,585,850
100.0
263,662,773
100.0
Source: Company, Angel Research & RHP.
Objectives of the Offer
◼ The proceeds of the Offer for Sale shall be received by the
Promoter Selling Shareholder.
◼ Investment in wholly owned Subsidiary, Yellowstone Fine Chemicals
Private Limited (“YFCPL”) for part-financing its capital expenditure
requirements.
◼ Funding capital expenditure requirements for expansion of the
company’s SI Manufacturing.
◼ Funding working capital requirements of the Company.
Key Management Personnel
Ravi Goenka, aged 59 years, is the Chairman and Managing Director of
the Company. He holds a bachelors’ degree in chemical engineering
from Bangalore University. He has been associated with the company
since inception, and has approximately 30 years of experience in the
chemicals and paper industries, 16 years of experience in the education
industry, and 21 years in the power industry.
Satej Nabar, aged 57 years, is an Executive Director and Chief Executive
Officer of our Company. He holds a bachelors’ degree in mechanical
engineering from the University of Bombay, a masters’ degree in plastic
engineering from the University of Bombay, and is a chartered engineer
registered with the Institution of Engineers (India). He has around 31 years
of experience in the chemicals industry and has handled numerous
functions including, sales and marketing, corporate strategy, innovation
and manufacturing.
Laxmi Organics Industry Ltd | IPO Note
March12, 2021
4
Exhibit 1: Consolidated Profit & Loss Statement
Y/E March (` cr)
FY2018
FY2019
FY2020
6MFY2021
Total operating income
1,393.1
1,568.5
1,534.1
813.4
% chg
-
12.6
-2.2
-
Total Expenditure
1,241.7
1,415.2
1,420.6
728.0
Cost of raw materials consumed
655.8
888.4
781.0
351.9
Purchase of stock in trade
321.3
249.6
287.1
209.3
Stock in Trade
-8.7
-42.4
28.5
12.5
Excise Duty
17.6
-
-
-
Employee benefits expense
52.6
64.5
68.6
35.7
Other expenses
203.1
255.1
255.4
118.6
EBITDA
151.4
153.3
113.5
85.4
% chg
-
1.3
-25.9
-24.8
(% of Net Sales)
10.9
9.8
7.4
10.5
Depreciation& Amortization
31.3
44.1
48.9
22.7
EBIT
120.1
109.2
64.7
62.7
% chg
-
-9.1
-40.8
-
(% of Net Sales)
8.6
7.0
4.2
7.7
Finance costs
9.8
17.0
14.0
7.4
Other income(with income from associate)
3.0
5.3
4.5
0.9
(% of Sales)
0.2
0.3
0.3
0.1
Recurring PBT
113.3
97.6
55.1
56.2
% chg
-
-13.9
-43.5
1.9
Exceptional item
-
-
25.7
-
Tax
37.6
25.2
10.6
10.7
PAT (reported)
75.7
72.4
70.2
45.5
% chg
-
-4.4
-3.0
-35.2
(% of Net Sales)
5.4
4.6
4.6
5.6
Basic & Fully Diluted EPS (Rs)*
3.0
2.9
3.1
2.0
Source: Company, Angel Research, * FY2018 EPS is adjusted for bonus issue
Laxmi Organics Industry Ltd | IPO Note
March12, 2021
5
Consolidated Balance Sheet
Y/E March (` cr)
FY2018
FY2019
FY2020
6MFY2021
SOURCES OF FUNDS
Equity Share Capital
10.0
50.0
45.0
45.0
Other equity (Retained Earning)
369.3
399.8
381.9
427.4
Shareholders’ Funds
379.3
449.8
426.9
472.4
Total Loans
192.1
141.6
124.2
153.9
Other liabilities
30.7
30.0
24.5
22.2
Total Liabilities
602.2
621.5
575.6
648.5
APPLICATION OF FUNDS
Property, plant and equipment
277.1
330.6
325.5
320.9
Capital work-in-progress
30.0
31.5
67.5
74.4
Intangible assets
0.3
1.0
0.8
0.6
Right of use assets
16.0
14.1
11.4
10.0
Current Assets
543.9
624.9
646.9
612.0
Inventories
145.8
170.7
151.9
126.2
Trade receivables
324.2
326.2
359.4
334.3
Cash and cash equivalents
5.2
7.6
24.1
26.6
Other Bank Balance
-
39.1
20.6
55.0
Loans and Advances
1.0
0.2
0.2
0.2
Others
0.8
0.9
40.3
33.1
Other current assets
59.6
80.1
50.5
36.6
Assets held-for-sale
7.2
-
-
-
Current Liability
292.6
393.0
495.1
388.6
Net Current Assets
251.4
231.8
151.9
223.4
Other Non Current Asset
27.5
12.5
18.6
19.1
Total Assets
602.2
621.5
575.6
648.5
Source: Company, Angel Research
Laxmi Organics Industry Ltd | IPO Note
March12, 2021
6
Consolidated Cash flow
Y/E March (‘cr)
FY18
FY19
FY20
6MFY21
Operating profit before working capital changes
153.5
158.6
110.9
86.4
Net changes in working capital
-132.9
56.7
100.6
-40.1
Cash generated from operations
20.6
215.2
211.5
46.3
Direct taxes paid (net of refunds)
-27.4
-27.6
-15.5
-10.8
Net cash flow (used in)/from operating activities (A)
-6.7
187.7
196.0
35.5
Capital expenditure on Property Plant and Equipment
-88.5
-97.5
-77.1
-23.6
Movement in Other Bank Balances
5.1
-33.8
18.0
-35.1
Others
-1.6
8.7
3.4
0.9
Cash Flow from Investing (B)
-85.0
-122.5
-55.8
-57.8
Proceeds from Long term borrowings
40.0
56.4
50.0
25.0
Repayment of Long term borrowings
-29.0
-26.5
-34.1
-21.3
Net Proceeds from Short term borrowings
86.3
-72.2
-33.0
29.7
Non Controlling interest
0.1
0.1
-0.1
-0.1
Interest paid
-9.0
-15.9
-11.4
-7.0
Others
-3.6
-4.7
-95.2
-1.5
Cash Flow from Financing
84.7
-62.7
-123.8
24.8
Inc./(Dec.) in Cash
-7.1
2.4
16.5
2.5
Opening Cash balances
12.3
5.2
7.6
24.1
Closing Cash balances
5.2
7.6
24.1
26.6
Source: Company, Angel Research
Key Ratios
Y/E March
FY2018
FY2019
FY2020
Valuation Ratio (x)
P/E (on FDEPS)
43.0
44.9
41.7
P/CEPS
6.1
27.9
24.6
P/BV
8.6
7.2
6.9
EV/Sales
20.6
20.0
26.7
EV/EBITDA
2.2
2.0
2.0
Per Share Data (Rs)
EPS (Basic)*
3.0
2.9
3.1
EPS (fully diluted)*
3.0
2.9
3.1
Cash EPS
4.3
4.7
5.3
Book Value
15.2
18.0
19.0
Returns (%)
ROE
20.0
16.1
16.4
ROCE
19.9
17.6
11.2
Turnover ratios (x)
Receivables (days)
84.9
75.9
85.5
Inventory (days)
38.2
39.7
36.1
Payables (days)
76.7
91.5
117.8
Working capital cycle (days)
46.5
24.2
3.9
Source: Company, Angel Research,* FY2018 EPS is adjusted for bonus issue
Laxmi Organics Industry Ltd | IPO Note
March12, 2021
7
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