Heranba Industries IPO opens tomorrow should you subscribe?

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Gujarat-based agrochemical player, Heranba Industries Rs 625-crore initial public offering (IPO) will open for subscription between Tuesday, February 23, 2021, to Thursday, February 25, 2021.

 

About the issue

Heranba offer comprises of 9,56,938 fresh issue of shares worth Rs 60 crore and an offer for sale of 90,15,000 shares by the promoters. The quota for retail investors has been fixed at 35%, while qualified institutional buyers can bid for 50%, and NIIs 15%.

 

The price band for the IPO has been fixed at Rs 626-627 per share or shares having a face value of Rs 10. The market lot size is 23 shares. A retail-individual investor can apply for up to 13 lots totalling to Rs 1,87, 473.

 

The funds raised through the fresh issue of shares will be utilised to finance the company’s working capital requirements and general corporate purposes.

 

Brokerage view

Hem Securities – Subscribe

‘Company is bringing the issue at p/e multiple of approx 25x at the higher end of price band of Rs 626-627/share on FY20 PAT basis. The company is one of the leading domestic producers of synthetic pyrethroids has shown strong financial performance. With its in-house R&D team for product development and improvisation, the company is in process of developing two products of Fungicides, two products of Herbicides and one product of Insecticides for exclusive sale to the European markets. Therefore, looking after all above we find that company with its current strong fundamentals has bright future prospects. Hence, we recommend investor to subscribe the issue for the short & long term,’ said the brokerage firm in a report.

Anand Rathi Shares and Stockbrokers – Subscribe

‘At the upper end of the IPO price band, it is offered at 22.67x its TTM EPS earnings, with a market cap of Rs 2,509 crore. Considering the company’s dominant position in pyrethroids market, strong balance sheet, high return on net worth of 30.47% as per FY20 financial statements, strong management and reasonable valuations; we give this IPO a ‘Subscribe’ rating,” the brokerage said.

SMC Global – Neutral

‘Considering the P/E valuation, on the upper end of the price band of Rs. 627, the stock is priced at pre issue P/E of 18.46x on its estimated annualised FY21 EPS of Rs. 33.96. Post issue, the stock is priced at a P/E of 18.92x on its EPS of Rs. 33.14. Looking at the P/B ratio at Rs. 627the stock is priced at P/B ratio of 6.42x on the pre issue book value of Rs.97.62 and on the post issue book value of Rs. 126.85 the P/B comes out to 4.94x,’ said the report.

Marwardi Shares and Finance – Subscribe

‘Considering FY 20 adjusted EPS of 24.43 on a post-issue basis, the upper price band implies a P/E ratio of 25.67x. Seeing the future prospects of the company, sustainable and growing financial statements of the past years, we see the company’s price band is at a reasonable valuation,’ Marwardi Shares and Finance said in a note.

Grey market chatter

Ahead of the public issue, Heranba Industries shares were seen volatile on the grey market as premium halved from Rs 200 to Rs 105. Abhay Doshi, Founder of Unlisted Arena who tracks grey markets said, ‘grey market premium is a bit volatile, earlier it was around 160 rupees to 200 rupees, but due to market volatility it is down to around 105 rupees today. The issues look good as of now because the valuations compared to other peers are reasonable. If we talk about the company, they don’t have a very concentrated client base so clients are diversified and that looks positive in the short term.’ Even at Rs 105, the shares are quoting at an almost 17% premium in the grey market.

The issue is likely to finalize the basis of allotment by March 2, and the initialization of funds will take place by March 3. Agrichemicals manufacturer is expected to make its stock market debut on March 5, 2021.

About Heranba Industries

Heranba Industries is into manufacturing, exporting & marketing of crop protection chemical. Company is located in Vapi, Gujarat & manufacture Intermediates, Technicals and Formulations. The company is one of the leading domestic producers of synthetic pyrethroids like cypermethrin, alphacypermethrin, deltamethrin, permitherin, lambda-cyhalothrin etc. The company’s Pesticides range includes insecticides, herbicides, fungicides and public health products for pest control.

(Disclaimer: The recommendations in this story are by the respective research and brokerage firm. Money9 & its management do not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)