The issue received 8,51,55,315 bids as of 10.45 am, against a total offer of 3,25,58,138 shares.
The issue is priced in the range of Rs 129-130 per share. Dealers of unlisted shares said the stock is trading at Rs 232-235 range in the grey market, meaning a premium of 81 per cent over the upper limit of the band price.
“At Rs 130, the stock is available at 48.8 times FY20 EPS. We believe valuations are on the higher side given it is a commodity business. We also believe that upcoming incremental opportunity from fluoro specialties division for three/four years forward is also largely discounted in the price and thus leaves limited opportunity on the table,” said Mitesh Shah and Dhavan Shah of ICICI Securities.
Many of its peers are available at cheaper valuations. Aarti Industries is trading at a PE of 24.92 times and Fine Organics Industries is at 35.46 times. However, investors are unfazed.
Laxmi Organic is among the largest manufacturers of ethyl acetate in India with a market share of nearly 30 per cent of the Indian ethyl acetate market. Post completion of the Yellowstone Chemicals acquisition, its market share in the ethyl acetate market is seen expanding further.
The company’s products find application in end user industries such as pharmaceuticals, agrochemicals, dyes, inks, coatings, paints, printing, packaging, flavors, fragrances and adhesives.
While the company will not be receiving any of the proceeds from the offer for sale it will use the proceeds of the fresh issue for expanding its specialty intermediaries manufacturing capacities and also for venturing into the manufacturing of fluorochemicals compounds.
Not all analysts are sceptical and some advise to subscribe to the issue.
“We believe (the price) is reasonable. The company is the only manufacturer of diketene derivatives in India with a diversified customer base. Looking at the competitive advantage and strong growth potential we are assigning a ‘subscribe’ recommendation to the issue,” said Jyoti Roy – DVP- Equity Strategist, Angel Broking.
The company on Friday said it raised Rs 180 crore from 15 anchor investors which include Nomura India Equity Fund, Abu Dhabi Investment Authority, Goldman Sachs, Kuber India (Plutus), Theleme India Master Fund, Malabar India Fund, Ashoka India Opportunities Fund, India Acorn Fund, SBI Mutual Fund, ICICI Prudential Mutual Fund and Aditya Birla Mutual Fund.
Saurabh Joshi and Sagar Shah of Marwadi Financial Services, also have ‘subscribe’ rating on the issue. They said long term prospects of this stock look promising with healthy demand from end user industry driving revenues for this company.
