Laxmi Organic Industries Limited IPO

It's raining heavily in Dalal Street. Companies willing to raise cheap money are all out, leveraging investors' craze for the IPO frenzy and giving big listing gains in return. A win-win, you see?

The stock market, which saw a huge number of entrants by way of IPO last year amidst Covid, is having the same trend projected this year as well. Laxmi Organics is next in the line and will open for subscription on Mar 15 2021. 

Hence, it becomes essential that you get a heads up regarding the various facts and details of the IPO. Only then will you be able to make an informed choice.

Laxmi organic IPO – Details 

The IPO, which will hit the stock market in a couple of days, will be having Mar 17 2021, as its last date of subscription. The company, which started as early as 1989, is a specialty chemical manufacturing company. Laxmi organic will be coming up with the IPO in order to raise funds to invest in its subsidiary unit, Yellowstone Fine Chemicals Private Limited. It also aims to utilize the funds for establishing a new manufacturing unit. 

Apart from all that, money raised via the IPO will be targeted in fulfilling the working capital needs, for expansion of the SI manufacturing unit and for purchase of machinery for its manufacturing units. Meeting the debt repayment obligations and addressing the general corporate Issue will also form a part of the list of priorities to be targeted with the amount raised via the offer. The company will be raising approximately 600 crores through the IPO. 

Laxmi organic industries limited will be issuing the share at face value of Rs. 2 per equity share. Further, the price at which an individual can subscribe for the shares has been fixed at Rs. 129 – 130 each equity share. The promoter holding, which is currently at 89.51%, will fall down to 72.92% post the Issue. 

Investors can subscribe for a minimum of 1 lot containing 115 shares. This will amount to Rs. 14,950. The maximum limit for the same is fixed as 13 such lots, which will contain a total of 1495 shares and will cost a total of Rs. 194,350. 

The Issue will be a book building IPO. The stocks will be listed on the stock exchanges on the 25th of this month. The stocks will go live on both the houses of the stock exchange, that is, the NSE and the BSE. You can expect the allotment to be made by Mar 22 2021. Axis Capital Limited and DAM Capital Advisors Ltd will act as the lead managers of the Issue. 

Key details of the Issue 

Company details and financials 

Laxmi Organic Industries operates in two key segments namely Acetyl Intermediates (AI) and Speciality Intermediates (SI). Also, it is one of the country's leading producers in terms of ethyl acetate, with about 30% of the market segment under its control. In addition to that, the company is manufacturing a number of other chemicals like esters, acetic anhydride, arylides, etc., which are utilized in sectors such as inks and coating, dyes and pigments, and the pharmaceutical industry, to name a few. Diketene happens to be another key product of the company wherein the company has about 50% of the market share under its spell. 

The company has a well-diversified consumer base with its customers hailing from 30 different countries like the USA, UK, UAE, etc. Yellowstone Trust and Ravi Goenka are the chief promoters of the company. 

Having looked into the company details, you will want to know about the numbers relating to the company. Because at the end of the day, it is the financials and figures that matter a lot to an investor while choosing his or her investment avenue. 

Take a glance through the table below:

Financials of Laxmi Organic Industries limited (in millions)

The company has been doing a good job as far as its balance sheets are concerned. The CAGR of the total income of the company grew by 8.27%. 

Should you buy it?

Now, as we have a brief idea of the company, let us weigh all the pros and cons to help you evaluate your decision.

The company has been showing good progress in its balance sheet despite a short downfall which was seen owing to the pandemic and floods, reducing its operations in the year 2020. The customer base is also diversified with a lot of key customers in its hold, such as Dr Reddy's, Hetero Lab, Laurus Labs, etc. Future growth prospects for the company also look good. It has a lot of expansion plans on its radar. Moreover, its entry into the Fluoro speciality chemicals will bring in a lot of good fortune to the company. 

However, the company's dominant dependence upon acetic acid for a majority of manufacturing happens to be a red signal. The prices of this particular raw material have been highly volatile lately and thus might affect the company's bottom line going ahead. Also, the company's manufacturing unit, which is confined to Maharashtra, comes as a reason of worry, as too much concentration of production activities in a single location, can cause trouble in case of any future disruptions. Apart from that, everything about the company is a big thumbs up. 

To sum up 

Being undervalued when compared to its listed peers, good growth prospects, and listing gains are some of the key pointers to be noted, keeping aside the risk associated.

Now the ball is in your court, and the decision is yours to make. What is it going to be? In or out? Tell us in the comments below.