Heranba is one of the leading domestic producers of pyrethroids with a 19.6 per cent market share. Pyrethroids accounted for 68 per cent of the company’s revenues in FY20.
The Rs 625 crore IPO, shares under which were sold from February 23 to February 25, was subscribed 83.29 times, with the quota for qualified institutional investors getting 67.45 times subscription, and the retail quota attracting 11.84 times subscription. The HNI quota was subscribed a whopping 271.15 times.
Heranba’s revenues have grown at a CAGR of 13 per cent from FY18-FY20, whereas its PAT has increased at a CAGR of 44 per cent. The company has recorded an average return on equity (ROE) and a return on capital employed (ROCE) of 31.3 per cent and 56 per cent, respectively, in the last three years.
The company has been reducing debt on its books, and its shares were issued at a reasonable valuation multiple of 25 times P/E compared with its peers.
The company, however, faces high risk due to shoot up in raw material prices which forms a whopping 70 per cent of its expenses. It also faces high competition risk from peers such as Rallis India, Bharat Rasayan and Sumitomo Chemical. But despite these risks, Heranba continues to capture a dominant position with sound fundamentals and diversification capabilities, analysts said.
ICICI Direct said the company is being benefited from being an integrated pyrethroids manufacturer with a strong product pipeline, geographical expansion coupled with favourable macro factors are likely to drive growth.
“Apart from this, it has one of the strongest return ratios in Industry and a healthy balance sheet,” the brokerage said in its IPO note.
The company has a presence in a wide range of products across the entire value chain of synthetic pyrethroids with a market share of 20 per cent supported by a distribution network of more than 9,600 dealers spread across 16 states and 1 union territory. Exports business contributed to half of the total revenues in FY20. That included exporting technicals and formulations to more than 60 countries. The company 371 technical registrations obtained till November 2020.
Antique Stock Broking said that the company’s management intends to focus on enhancing and streamlining production capacities and operations; entering the highly regulated markets of the US and Europe, developing new products at its R&D facility at Unit III, and enhancing the formulations and technicals business in international markets.
“It is in the entire value chain of synthetic pyrethroids that provides flexibility to shift between products depending on the demand-supply and pricing dynamics. The company also has a strong pending product pipeline in pyrethroids including formulations filed by partners in domestic, export markets. Apart from this, more than half of the global demand for Pyrethroids comes from China. Hence, due to shutdown of chemical plants in China amid pollution, higher volumes of Pyrethroids are expected to be exported out of India,” it said.
