At Rs 215 per share, the company demands price-earnings multiple of 26.5 and 30.7 times annualised earnings based on pre- and post-IPO capital respectively.
ET Intelligence Group: Neogen Chemicals, a manufacturer of specialty chemicals, plans to raise Rs 132 crore through an initial public offering (IPO). The primary offer comprises an offer for sale of existing shares as well as issue of new shares. The IPO proceeds will be used for debt reduction and redemption of preference shares.
Given its presence in the lithiumbased chemicals used in batteries for electric vehicles, the company’s revenue potential is high.
The IPO appears to be richly valued when compared with listed peers. Long-term investors may wait for more reasonable valuation in the secondary market after the company provides sufficient track record of better earnings growth.
BUSINESS MODEL Mumbai-based Neogen Chemicals manufactures bromine and lithiumbased chemicals. The pharma sector is a major demand driver with 82 per cent contribution to revenues.
The other user sectors are agro-chemicals, engineering, speciality polymers and electronics. Its clients include Austin Chemical, CBC, Divi’s Lab, Laurus Lab, Solvay, Thermax and Voltas. The company manufactures 1.30 lakh litres reactor volume of bromine-based chemicals and 12 lakh kg of lithium-based chemicals. Revenues from domestic and export markets was in equal proportion in the nine months of FY19.
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FINANCIAL SNAPSHOT Total revenue rose by 20 per cent to Rs 164 crore and net profit increased by 31 per cent to Rs 10.4 crore in the past four fiscals to FY18 on annual basis. Operating profit grew by 26 per cent to Rs 29.6 crore during the period. In the first nine months of FY19, revenues touched Rs 159.6 crore and net profit Rs 12.2 crore.
RISK FACTORS Given the lack of lithium mines in India, the company is dependent on imports, exposing it to risks of supply disruption and currency fluctuations. Inventory levels are elevated with a turnover at 110 days for the past two fiscal years. Neogen Corporation, a USlisted firm producing animal and food safety products, has filed an intellectual property suit for using the brand ‘Neogen’.
VALUATION
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At Rs 215 per share, the company demands price-earnings multiple of 26.5 and 30.7 times annualised earnings based on pre- and post-IPO capital respectively. The average P/E of peers Aarti Industries, Atul Ltd, Vinati Organics, Navin Fluorine, and Paushak based on trailing earnings was 26.5, as per Capitaline data.
Neogen’s operating margin and scale of operations are lower than some of the peers, which makes the IPO expensive. In the long-term, growth will hinge on success in supplying e-vehicle battery makers.
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Neogen Chemicals IPO set to open: Should you invest?
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The Rs 132 crore initial public offering (IPO) of specialty chemicals firm Neogen Chemicals will hit the market on Wednesday. On the block are fresh issue of shares aggregating up to Rs 70 crore. The issue will close on April 26. Here are the key things about the company one should know before subscribing to the issue
The Rs 132 crore initial public offering (IPO) of specialty chemicals firm Neogen Chemicals will hit the market on Wednesday. On the block are fresh issue of shares aggregating up to Rs 70 crore. Th..
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Neogen makes organic chemical compounds – Bromine compounds and other organic compounds containing chlorine, fluorine and iodine-based and combination – used in application industries such as pharmaceutical, agrochemical, flavour and fragrance and electronic chemicals. Besides, it makes inorganic chemicals primarily comprising Lithium compounds. These compounds are used in vapour absorption machines (VAM) and in heating ventilation and air-conditioning (HVAC) and refrigeration, construction chemicals, pharmaceutical and specialty polymer. Organic chemicals account for 60-70 per cent of the company’s revenues while the rest comes in from inorganic chemicals.
Neogen makes organic chemical compounds – Bromine compounds and other organic compounds containing chlorine, fluorine and iodine-based and combination – used in application industries such as pharmac..
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The IPO consists of a fresh issue aggregating up to Rs 70 crore by the company and an offer for sale of up to 16,99,600 equity shares by Haridas Thakarshi Kanani and up to 12,00,400 shares by Beena Haridas Kanani (promoters). The issue price band is fixed at Rs 212-215 per share. Bids can be made for a minimum lot of 65 equity shares and in multiples of 65 equity shares thereafter. The anchor investor offer period will be one working day prior to the issue opening date, that is April 23. The company has aimed to raise Rs 131.48 crore at the lower end of price band and Rs 132.35 crore at the upper end.
The IPO consists of a fresh issue aggregating up to Rs 70 crore by the company and an offer for sale of up to 16,99,600 equity shares by Haridas Thakarshi Kanani and up to 12,00,400 shares by Beena H..
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* Expanding production capacities
* Increasing contract manufacturing portfolio
* Augmenting growth in domestic and global markets
* Improving financial performance through focus on operational efficiencies and functional excellence
* Focus on advanced specialty intermediates which offer higher value addition
* Expanding production capacities
* Increasing contract manufacturing portfolio
* Augmenting growth in domestic and global markets
* Improving financial performance through focus on operational e..
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The company said its standalone total income and profit grew at a compounded annual growth rate (CAGR) of 19.66 per cent and 30.61 per cent, respectively, in FY14-18. On a consolidated basis, total income and profit after tax rose 19.69 per cent and 30.29 per cent, respectively, during this period.
The company said its standalone total income and profit grew at a compounded annual growth rate (CAGR) of 19.66 per cent and 30.61 per cent, respectively, in FY14-18. On a consolidated basis, total i..
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* Experienced promoters with domain knowledge
* Large and diverse array of products
* Diversified and stable customer base
* Growth led by continuous investment in R&D
* Management expertise
* Specialised business model with high entry barriers
* Established and stable relationship with suppliers
By: HDFC securities Limited
* Experienced promoters with domain knowledge
* Large and diverse array of products
* Diversified and stable customer base
* Growth led by continuous investment in R&D
* Management expertise
* ..
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* Neogen Corporation has filed a commercial intellectual property suit against NCL which if determined against NCL may have an adverse effect on this Offer, its business and results of operations.
* Absence of any firm commitment long-term agreements with customers
* Significant reliance on certain select customers and customers in application industries, in particular customers in the sectors such as- pharmaceutical, agro-chemicals, refrigeration and construction chemicals
* Failure to identify and understand evolving industry trends and preferences and to develop new products to meet customers' demands
* Changes in the value of the Indian rupee and other currencies
* Inability to accurately forecast demand for products, and accordingly manage inventory or plan capacity increases
* Indebtedness and the conditions and restrictions imposed on NCL by its financing agreements
* Increased costs on account of compliance with various law and regulations
* Neogen Corporation has filed a commercial intellectual property suit against NCL which if determined against NCL may have an adverse effect on this Offer, its business and results of operations.
*..
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The maker of organic and inorganic chemicals has many listed peers, including Aarti Industries, Atul, Navin Fluorine International, Vinati Organics and Paushak. These stocks have had a good run in last three years. At the upper end of the issue price of Rs 215, the IPO is demanding a PE of 40.56 (At FY18 EPS of Rs 5.3). Aarti Industries and Atul Industries trade at FY18 multiples of 39-40, while Vinati Organics, Paushak and Navin Flourine trade at 20-58 times.
The maker of organic and inorganic chemicals has many listed peers, including Aarti Industries, Atul, Navin Fluorine International, Vinati Organics and Paushak. These stocks have had a good run in la..
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By 2022, the global specialty chemicals market is expected to grow at 5.47 per cent CAGR to $970.55 billion. The steady growth is because of sustained demand in end-user industries. In India, the industry is highly fragmented, with small and medium enterprises comprising 70-75 per cent market share. Analysts say growth opportunities are immense in this space.
By 2022, the global specialty chemicals market is expected to grow at 5.47 per cent CAGR to $970.55 billion. The steady growth is because of sustained demand in end-user industries. In India, the ind..
