Neogen Chemicals IPO subscribed 27% on Day 1

NEW DELHI: The initial public offering (IPO) by Neogen Chemicals got 27 per cent subscription on Day 1 of the bidding process on Wednesday.

Till 5 pm, the Rs 132-crore IPO received bids for 11,67,595 shares against the issue size of 43,29,038 units.

The company had on Tuesday raised Rs 39.70 crore from seven anchor investors at Rs 215 per share.


At this price, the issue is commanding a P/E valuation of 40.95 times on a FY18 EPS of Rs 5.25, which is at a premium to its peer average of 38.8 times. Given its presence in lithium-based chemicals used in batteries for electric vehicles, the company’s revenue potential is high.

But analysts say valuations are mostly pricing in earning prospects, leaving little room for short-term gains. One may subscribe to this IPO with a long-term horizon or give it a miss, multiple analysts said.

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 used in vapour absorption machines (VAM) and 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.

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, during FY14-18. On a consolidated basis, total income and profit after tax rose 19.69 per cent and 30.29 per cent, respectively.