Rosseri Biotech Limited IPO : Investors may apply with 2 to 3 years of investment horizon

Rosseri Biotech Limited:  Issue opens : 13-7-2020   closes on 15-7-2020

Face Value: Rs 2Price Band : Rs 423-425

Minimum Lots size: 35

 Rosseri Biotech Ltd , is a leading supplier of enzymes and specialty chemicals to the Textile, Paper, Pharma, Animal Health and Nutrition and Construction Chemicals industries. RBL export to over 12 countries, having offices in Bangladesh and China. With a wide distribution network in India comprising of over 70 distributors and 200 employees, RBL today is among the top three suppliers to the textile industry. It plans to venture into the construction chemicals market and water treatment formulations market.

Business is categorized mainly in 4 categories consisting 2030 products.

1. Home, Personal Care & performance chemicals

2. Textile specialty chemicals

3. Animal Health & Nutrition products (Poultry nutrition)

4. Pet care products through recent acquisition of pet grooming brand- Lozalo international

RBL majority of products in house from its manufacturing facility at Silvasa which has installed capacity of 120,000 MTA. A new state-of-the-art plant at Dahej, Gujarat well equipped with advanced technologies will be commissioned in fiscal 2021 which will enable RBL to process and produce significantly larger quantities of Specialty Chemicals. 

Apart from specialty chemicals they are into pet care products too, through  acquisition of a reputed Indian pet grooming brand - Lozalo International in 2019. The product range includes natural pet shampoos, powders, deodorants, sprays, creams, and floor washing liquid. They also have a whole new range of pet treats brand, Hunger Fills. Though pet care industry is in nascent stage but holds a very promising future as pet adaptation is on rise especially  in urban cities.

Financial Performance: 

                                                  FY-19-20      FY 18-19

                                Revenue       603.72        517.18

                                   PBT            88.10          63.45

                          Net Profit            65.52         45.79

                                EPS                13.48           9.46

IPO Price valuations:

RBL is offering shares of Rs 2 face value at premium of 421-423 through the IPO opening on 13th July 20. Mutual funds such as HDFC, SBI, Mirae, Axis, Sundaram  have already invested in pre IPO placement at Rs 425 per share . NP Margins are around 11% & at current EPS of 13.48 shares are being offered at PE multiple of 31-32 which is very high as compared to peers. But since company is in expansion mode and IPO proceedings will help to reduce its debt liability, Revenue & profit margin could increase in next 2 years the EPS may see decent jump from current levels considering very strong CAGR achieved in last few years by the company. if we consider expected EPS of 18 to 20 for FY20-21  then stock   appears reasonably priced at 1 year forward PE multiple of 21-23 with respect to peers . Market sentiments towards specialty chemical sectors & RBL financial performance would be key driver for offering any higher multiple in next one year. Currently specialty chemical sector is buzzing on expectation of additional growth arising due to global interest shift from China which makes Indian specialty sector more attractive for exports and most of the stocks have started attracting lots of interest from fund managers & investors. RBL promoters too are getting opportunistic to cash the sentiment by offering huge premium at IPO price.

RBL is in promising business and long term prospects looks good but expensive at IPO price. Long term investors with 2-3 years investment horizon may invest in IPO .It might offer some immediate listing gains based on current sentiment.

Note: I have shared my point of view based on information available in public domain. Please consult your financial advisor before investing