Decent debut: Laxmi Organics trades at 21.58% premium, what should be the strategy now?
Market experts believe that the premium listing of 21% have made the valuations expensive for Laxmi Organics Industries and investors should look at booking listing gains.
Shares of speciality chemical manufacturer Laxmi Organic Industries made a decent market debut on Thursday. The stock opened for trading at Rs 155.50 on the National Stock Exchange, compared to the issue price of Rs 130, marking a premium of 19.62%. On the BSE, Laxmi Organics Industries opened at Rs 156.20, at a premium of 20.15%.
In afternoon trades, the share was quoting at Rs 158.05 gaining 21.58% up by Rs 28.55. It made an intraday high of Rs 164.60 and a low of Rs 143, on the BSE.
Commenting on the decent listing Jyoti Roy, DVP Equity Strategist at Angel Broking said, “At current levels, the stock is trading at a P/E multiple of 51.3xFY20 EPS which is on the higher side as compared to peers. Hence, we would recommend book profits at current levels.”
Mumbai-based Laxmi Organic Industries is the leading manufacturer of acetyl & specialty intermediates and the largest manufacturers of ethyl acetate in India with a market share of approximately 30%. The company is the only manufacturer of diketene derivatives in India and has long-standing relationships with marquee customers like Alembic Pharmaceuticals, Dr Reddy’s Laboratories, Laurus Labs, Neuland Laboratories, Suven Pharmaceuticals, UPL amongst others.
“Considering FY20 adjusted EPS of 2.66 on a post-issue basis, the company is going to list at a P/E of 48.82X with the market cap of Rs.3,427.6 crore. The peers of the company namely Aarti Industries is at P/E of 24.92X and Fine Organics Industries is at 35.46X. IPO has opened with a meaningful listing gain, this makes the valuation more expensive, limiting the upside potential. Hence the Investor should position themselves to book profit on the day of listing in case of strong listing,” said Saurabh Joshi- Research Analyst at Marwadi Shares and Finance
The Rs 600-crore initial public offer of the company got subscribed 106 times on the last day of the offer. The issue received bids for 3,46,29,37,270 shares as against 3,25,58,138 shares on offer, as per data available with the NSE. The category meant for qualified institutional buyers (QIBs) was subscribed over 120 times, non-institutional investors 120 times and retail individual investors (RIIs) by over 20 times.
The IPO comprised an OFS of Rs 300 crore from promoter group Yellowstone Trust and a fresh issue of Rs 300 crore by issuing 2,30,76,923 shares of Rs 2 face value.
Proceeds from the fresh issue will be used for setting up a manufacturing facility for floor specialty chemicals, requirements of working capital, purchase of plant and machinery, and prepayment or repayment of all or a portion of outstanding debt.
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