HERANBA IPO
(ZEE BUSINESS)
|
BASIC DETAILS ABOUT
IPO (23 Feb-25 Feb) |
|
|
Price Band |
626-627 |
|
Bid Lot |
1 (23 shares) |
|
Fresh Issue- AT Upper Band |
60cr |
|
Fresh Issue (Shares) |
9.57 lacs |
|
OFS shares |
90.15 lac |
|
OFS amount |
565.2 |
|
Total issue amount- AT Upper Band |
625 |
|
Post issue Implied Market Cap |
2450 |
|
Post issue (Shares) Cr |
3.90 |
|
Book Runner and Lead Managers: Emkay Global Financial &Batlivala and karani
Securities |
|
|
SHAREHOLDING |
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|
Particular |
Pre-Issue |
Post-Issue |
|
Promoter |
98.85% |
74.15% |
|
Public |
1.15% |
25.85% |
|
Total |
100.0% |
100.0% |
|
Revenue from Operation |
||||
|
Particulars |
30-Sep-20 |
31-Mar-20 |
31-Mar-19 |
31-Mar-18 |
|
Revenue from Operation |
618.3 |
951.4 |
1004.4 |
745.1 |
|
Growth |
23% |
-5% |
35% |
|
|
Bifurcation |
||||
|
Technicals- Domestic |
204 |
301 |
331.5 |
196.4 |
|
% of Revenue |
33.0% |
31.6% |
33.0% |
26.4% |
|
Technicals- Exports |
198.9 |
347.1 |
396.6 |
300.8 |
|
% of Revenue |
32.2% |
36.5% |
39.5% |
40.4% |
|
Formulation Exports |
57.4 |
122.1 |
95.2 |
66.7 |
|
% of Revenue |
9.3% |
12.8% |
9.5% |
9.0% |
|
Branded Formulation |
141 |
120.6 |
145.9 |
167 |
|
% of Revenue |
22.8% |
12.7% |
14.5% |
22.4% |
|
Public Health |
17 |
60.6 |
35.4 |
14.2 |
|
% of Revenue |
2.7% |
6.4% |
3.5% |
1.9% |
|
Total |
100.0% |
100.0% |
100.0% |
100.0% |
|
Technicals |
65.2% |
68.1% |
72.5% |
66.7% |
|
Formulations |
32.1% |
25.5% |
24.0% |
31.4% |
|
Public Health |
2.7% |
6.4% |
3.5% |
1.9% |
|
P&L |
|||||
|
Particulars |
30-Sep-20 |
30-Sep-19 |
31-Mar-20 |
31-Mar-19 |
31-Mar-18 |
|
Revenue from Operation |
618.3 |
501.7 |
951.4 |
1004.4 |
745.1 |
|
% Growth |
23.2% |
|
-5.3% |
34.8% |
|
|
COMC |
451.8 |
337.4 |
639.8 |
708.3 |
497 |
|
% of Revenue |
73.1% |
67.3% |
67.2% |
70.5% |
66.7% |
|
Employee benefit expenses |
22.9 |
22.4 |
46.5 |
38 |
33.2 |
|
% of Revenue |
3.7% |
4.5% |
4.9% |
3.8% |
4.5% |
|
Other Expenses |
76.8 |
76.7 |
138.1 |
137.3 |
116.5 |
|
% of Revenue |
12.4% |
15.3% |
14.5% |
13.7% |
15.6% |
|
PBT |
90 |
68.9 |
128.8 |
122.1 |
76.3 |
|
PBT Margin |
14.6% |
13.7% |
13.5% |
12.2% |
10.2% |
|
PAT |
66.3 |
53.2 |
97.8 |
75.4 |
46.9 |
|
PAT Margin |
10.7% |
10.6% |
10.3% |
7.5% |
6.3% |
|
PAT Margin if assumed Tax rate as 25% from Beginning |
10.9% |
10.3% |
10.2% |
9.1% |
7.7% |
BUSINESS:
·
Agrochemical Industry value chain included Intermediates,
Technicals and Formulations.
·
Intermediate forms the basic raw material to make Technical
and Technical inturn is used to make Formulations and company has products in
all the segment of the value chain.
·
Technical Grade included various range of Pesticides /
insecticides( (Needless to understand Pesticides encompass all chemical pest
control products and hence insecticides (as word suggest targets specifically
insects).So Insecticides is a subset of Pesticides. ))
·
Company’s 65% of revenue comes from technicals and around 32%
comes from Formulations.
PRO’s
·
Company is into the business of crop Protection Chemicals
Manufacturer (Pesticides) with exports in more than 60 countries and has a
network of 9400 dealers/distributors supported by 21 stock depots with 371
registration of Technicals (Active ingredient-Raw material) and Formulation
(End product), Thus Agriculture related business with good network and notable
exports (50% revenue from exports).
·
Based on Peer comparison company have left scope for upside
in IPO thus seems valuation are not costly.
|
PEER Comparision |
PE TTM |
PB TTM |
Pat margin |
Revenue Growth* |
Debt/Equity |
ROE |
|
Rallis India |
24.7 |
3.3 |
11.30% |
25.70% |
0.03 |
12.80% |
|
Sumitomo Chemicals |
47.4 |
10.5 |
13.80% |
26.80% |
0.03 |
22% |
|
Bharat Rasayan |
26.9 |
6.4 |
14.30% |
53.20% |
0.05 |
33% |
|
Punjab Chemicals |
24.8 |
9.1 |
8.30% |
11.60% |
0.5 |
7.20% |
|
Industry |
30.95 |
7.325 |
11.9% |
29.3% |
0.15 |
18.8% |
|
Heranba |
22 |
6.4 |
10.70% |
27.70% |
0.1 |
33.30% |
|
* From FY18-FY20 |
||||||
·
Company’s management has good experience with promoters
(Sadashiv K Shetty&Raghuram K Shetty) having experience of agrochemical industry
for more than 3 decades.
·
Company is a market leader in Pyretheroids for which it holds
19.5% market share in India. Globally market for Pyretheroidsis expected to
rise by CAGR of 6.8% and Indian market is expected to grow with a CAGR of 8.5%
till 2025.
·
Although Companies Revenue showed a small dip in FY20 but
overall company’s revenue had shown a good growth which can also be seen in
1HFY21 results and company is continuously improving its PAT margins (In FY20
although rose significantly because in FY19 company paid around 38% tax in FY20
company paid 24.15, However even if assumed same tax rate or seen PBT quite
visible company is improving its margins regularly.
|
Particulars |
30-Sep-20 |
30-Sep-19 |
31-Mar-20 |
31-Mar-19 |
31-Mar-18 |
|
Revenue from Operation |
618.3 |
501.7 |
951.4 |
1004.4 |
745.1 |
|
% Growth |
23.2% |
|
-5.3% |
34.8% |
|
|
PBT |
90 |
68.9 |
128.8 |
122.1 |
76.3 |
|
PBT
Margin |
14.6% |
13.7% |
13.5% |
12.2% |
10.2% |
|
PAT |
66.3 |
53.2 |
97.8 |
75.4 |
46.9 |
|
PAT Margin |
10.7% |
10.6% |
10.3% |
7.5% |
6.3% |
|
PAT
Margin if assumed Tax rate as 25% from Beginning |
10.9% |
10.3% |
10.2% |
9.1% |
7.7% |
·
Usually 1HFY21 numbers generally company’s try to project
extraordinary but for Heranba results seems can be trusted …the reason behind
is Power and Fuel cost which for manufacturing company is an indicator to checking
its production seems at normal levels also cost of material consumed as % of
Revenue highest in 1HFY21.
|
Particulars |
30-Sep-20 |
30-Sep-19 |
31-Mar-20 |
31-Mar-19 |
31-Mar-18 |
|
Revenue from Operation |
618.3 |
501.7 |
951.4 |
1004.4 |
745.1 |
|
% Growth |
23.2% |
|
-5.3% |
34.8% |
|
|
Power
and Fuel Cost- Part of other expense |
24.9 |
20.9 |
41.7 |
37 |
28 |
|
Power and Fuel cost % of Revenue |
4.0% |
4.2% |
4.4% |
3.7% |
3.8% |
·
Company’s new R&D facility at Unit IIISarigam became
operational from October 2020 which shows company’s commitment to continuously
focus on key parameter of developing new formulations. Also out of total land
at UNIT III of 14.5 acres only 5.5acres is being used currently thus gives
ample opportunity to expand more with comparatively low cost.
·
Company is continuously reducing debt which can be seen by
below table and Company’s FCF for 1HFY21 is more than the debt in the books on
30 September 2020 which is very positive & means company can soon become
debt free also company’s return ratios are also attractive as ROE at 33.3%.
|
Particulars |
30-Sep-20 |
31-Mar-20 |
31-Mar-19 |
31-Mar-18 |
|
Debt |
38 |
43.1 |
49.9 |
75.7 |
|
% Growth |
-11.8% |
-13.6% |
-34.1% |
- |
|
FCF |
44.9 |
6.3 |
49.9 |
23.7 |
|
Debt/FCF |
84.6% |
684.1% |
100.0% |
319.4% |
·
Company’s capacity utilization is increasing continuously
which can be correlated with increasing power and fuel cost , Increasing
capacity utilization also as can be seen formulation capacity was increased
from FY19 to FY20 thus demand for the products is continuously rising so the
growth is not because of rising prices only but also rising volumes.
%
CON’s
·
The
business in which company operates R&D expenditure is eminent , of the
total employees around 616 only 10 people are in R&D /Quality Check department
that is just around 1.6% of its total employees does the work of R&D also R&D
expenditure incurred by company annually could not be found in RHP which
ideally should be highlighted(Need to ask to management).
·
Of
the total revenue export to China accounts for 14.71% in 1HFY21 which was as
high as 23% in FY18 not only company exports to China but also around 13.5% of
raw materials in 1HFY21 was imported from China, so for both sides company have
dependence on China and the concern is
more so as company’s import of raw material from China have been increasing
from just 6% in FY18 to 13.5% in 1HFY21.
|
|
1HFY21 |
FY20 |
FY19 |
FY18 |
|
Export to China |
14.7% |
13.2% |
16.7% |
23.0% |
|
Import from China |
13.50% |
13.30% |
8% |
6% |
·
Amount
raised from Fresh issue 60cr out of which 50cr will be used for working capital
requirement , best use would have been to become debt free or for any other
expansion so the use of fresh issue proceeds is not as ideally should have
been. Rising CCC(cash conversation cycle )from just 45 days in FY19 to around
80 days in 1HFY21 is a concern and hence may be working capital requirement.
·
In
the Agrichemical Industry company is comparatively small as can be seen based
on installed capacity company don’t feature into Top 10 List. Heranba has
current installed capacity of 14024 Tonnes per annum. Thus clearly company
operates in highly competitive market.
ANCHOR
BOOK
|
Anchor Book (Raised
187.5cr) |
|
|
Name |
% Holding |
|
Government Pension Fund Global |
18.7% |
|
HDFC Trustee Company |
12.0% |
|
IIFL Fund |
10.7% |
|
Cohesion Market best Ideas Sub Trust |
8% |
|
Dovetail India Fund |
8% |
|
IDFC Fund |
8% |
|
Mogan Stanley Asia |
4% |
|
Societe General |
4% |
|
Other |
26.6% |
|
TOTAL |
100.0% |
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