IPO

Laxmi Organic IPO 2021 : Objectives and Key Highlights

Laxmi Organics is a chemical manufacturer with specialisation into Acetylene intermediaries and other special intermediaries. It has its manufacturing facilities in Satara, Kolhapur and Mahad. The firm has its storage facilities in many cities across the world. They are located at Rotterdam, Antwerp, Genoa and Mumbai. The offices are situated at Leiden, China, UAE, Mumbai and Pune. The company started functioning in 1989 and is covering more than 30% of Indian markets in the field of Ethyl acetate. The company also has an R&D innovation centre at Mumbai in India.

The major customers of the company are :

Alembic Pharma
Huhtamaki Industries
Hetero labs
Granules India
Suven Pharma
Macleods Pharma
Laurus labs
Heubach Colour Pvt. Ltd. and others

The company has its business across 30 countries and it is also planning to start a new manufacturing unit in Maharashtra.

IPO Details

The Laxmi Organic IPO is set to hit the Dalal Street on 25th March, 2021. The IPO is getting open for subscription on 15th March, 2021. The Subscription ends on 17th March, 2021. The issue is a book built issue and the Face Value per share is 2 Rs. The IPO price band is set at 129 to 130 Rs per share. The minimum size of shares for subscription is set at 115. Hence the minimum order quantity would be 115 shares. Also the maximum shares that one can opt for are 1495 shares amounting to Rs. 194350 Rs.

The issue is set to raise Rs. 600 Crore Rs. The Issue includes both Fresh shares and Offer for sale. The fresh Issue is amounted to Rs. 300 Crore Rs. The offer for sale includes shares worth 300 Crore Rs. The IPO will be listed at both NSE and BSE. The registrar for the company is Link Intime India Private Limited.

IPO Highlights in Tabular Formatting

IPO OPENING DATE	15th march, 2021
IPO CLOSING DATE	17th march, 2021
ISSUE TYPE	Book built issue
Face Value per share	Rs. 2 per share
IPO price band	129 – 130 Rs per share
LOT SIZE	115 shares
ISSUE SIZE	600 Crore Rs.
OFFER FOR SALE	300 Crore Rs.
FRESH ISSUE	300 Crore Rs.
LISTING AT	NSE, BSE
LISTING DATE	25th March, 2021

Important Dates

IPO OPENING DATE	15th March, 2021
IPO CLOSING DATE	17th March, 2021
IPO ALLOTMENT DATE	22nd March, 2021
REFUNDS	23rd March, 2021
DEMAT A/C CREDITED ON	24th March, 2021
IPO LISTING DATE	25th March, 2021

IPO will be launched on 15th March, 2021. The subscription would conclude on 17th March, 2021. The allotment would be processed by 22nd March, 2021. The DEMAT A/C of shareholders would get credited on 23rd March, 2021 with shares. The Refunds would be initiated on 24th March, 2021. The share would hit the Dalal street on 25th March, 2021.

Promoter and Lead Managers

The promoters of the company are Ravi Goenka and YellowStone Trust. The promoter holding Pre-IPO launch will be 89.51% and post IPO launch will be 72.92%.

The lead managers for the IPO are :

Axis Capital Limited
DAM Capital Advisors Limited (IDFC Securities)

Objectives for the IPO

There are multiple objectives stated behind the IPO launch :

The major objective is to invest the money into Yellowstone (YFCPL). The investment is subject to opening a new manufacturing facility. The company also says that the investments are subject to finance the working capital requirements of YFCPL.
The manufacturing facility for Specialty chemicals manufacturing needs additional financing. The company also plans to buy the machinery and equipment for specialty chemicals manufacturing facilities from this money. Hence from this it clearly seems that the company wants to set up a manufacturing unit and is utilizing this money to do that.
The company plans to pay the borrowings of its creditors from this amount.
The money can also be used to meet some general corporate purposes.

Company Financials

Particulars (in Million Rs.)	2019-20	2018-19	2017-18
ASSETS	10706	10144	8947
REVENUE	15386	15743	13960
NET PROFIT	702	723	757

The assets for the company in the year 2017-18 were 8947 million rs and they have increased to 10144 Rs. this is a very good jump as the revenue have also increased with the asset base. The revenues that were close to 14000 million Rs in 2017-18 are now close to 16000 in 2018-19. But the point to note from this is the net profits. The company’s net profits have not increased in any year though the assets and net profits have increased. This means that the company has high payments due for interest year on year. Also the company may have a huge pile of debtors pending or at the end it is not able to monetize from the revenues earned and the margin of the company is not sufficient to cover up the asset costing and interest payments.

In the year 2020 Sept the company has reduced the asset base to 10370 million Rs. Also the revenue has been in line with the regular proportion. It is close to 8000 Million Rs. The net profits are also close to 450 Million Rs. This means that the company is reducing old assets and trying to set up new facilities and expand its manufacturing and networking facilities. Hence it is important to look at the company’s balance sheet and performance after the new facility is established and starts its functioning. This is important for taking long term investing decisions in the company.

Product Line

Acetylene Intermediaries

Acetaldehyde
Ethyl Acetate
Fuel grade ethanol

Speciality Intermediaries

Ketene
Esters
Amides
Other Diketene Derivative Chemicals

Pros

The company has more than 30% share in ethyl acetate product in India
The company has its storages and offices in many countries abroad for maintaining the networking constantly.
Laxmi Organic is one of the leading manufacturers in the field of chemicals serving many publicly listed clients for a long time.
The company has many pharmaceutical companies in its client portfolio. Hence it had continuous business while COVID situation as well.

Cons

The company has high competition in chemical segments other than Diketene Derivatives and ethyl acetate.
The company has storage facilities scattered across the globe with all domestic manufacturing facilities. Hence sometimes it has high transportation and maintenance costs.
The company did not do very well in the F.Y. 19-20 and its assets also shrunk in the following year. It was not able to generate adequate revenue from increase in revenue. The company is trying to build a new manufacturing facility and it has low liquidity for it as well.
The manufacturing for plastic and other industries was closed during lockdown and the company suffered losses during that time. However it has managed to stay afloat post COVID effects.