Anupam Rasayan IPO opens today: Should you subscribe?

Anupam Rasayan India IPO opened for subscription on Friday with a price band fixed at Rs 553-555 apiece. The initial public offer (IPO) of the specialty chemical manufacturer plans to raise Rs 760 crore through the public issue and it will close on March 16. Anupam Rasayan has already raised Rs 225 crore from anchor investors on March 10.

Investors can bid for a minimum of 27 equity shares and in multiples of 27 thereafter. The company said it will utilise the net proceeds of the issue for repayment of debt and general corporate purposes.

Ahead of IPO, Anupam Rasayan raises Rs 225 crore from anchor investors

Anupam Rasayan India is engaged in the custom synthesis and manufacturing of specialty chemicals in India.

Axis Capital, Ambit Private, IIFL Securities and JM Financial are the book-running lead managers to the issue.

Most brokerages have assigned a subscribe rating to the issue citing the company's sustained strong financial performance and diversified and customised product portfolio.

“The company has strong and long-term relationships with various multinational corporations, including, Syngenta Asia Pacific Pte. Ltd., Sumitomo Chemical Company Limited and UPL Limited. The company has posted strong revenue growth of 24.3 percent CAGR between FY2018 to FY2020,” said Jyoti Roy—DVP—Equity Strategist, Angel Broking.

Despite the impact of the COVID-19 pandemic, the company has posted revenue growth of 45.0 percent for the nine-month period ending December 2021, Roy noted.

“Given strong revenue growth and long-term relationships with various multinational corporations we assign a “Subscribe” rating to the IPO,” he said.

Highlighting certain investment concerns, Angel Broking said the company has incurred significant debt and an inability to service it could risk business. It further added that experiencing insufficient cash flows to meet required payments on debt and working capital requirements, could adversely impact the operation.

"The company may become involved in claims concerning intellectual property rights, and could suffer significant litigation or related expenses in defending own intellectual property rights or defending claims that we infringed the rights of others," Angel Broking noted.

Motilal Oswal recommends subscribing to the issue given the company's presence in the high growth CSM market, wide product portfolio, strong client relationship and high entry barriers.

The brokerage expects the company to witness strong growth for the next two-three years given its recent completion of major capex and strong sectoral tailwinds.

"The issue is valued at 3.5x FY21 P/BV and 7.7x FY21 EV/Sales on an annualized and post issue basis. Though the valuation appears little on a higher side both on absolute and relative basis, in the current scenario market prefers emerging growth stories. Hence we recommend Subscribe," Motilal Oswal said.

ICICI Direct is of the view that the valuations were on the higher side given that it had been facing constraints towards generating free cash flow owing to a higher working capital cycle, leading to a bloated balance sheet and subdued return ratios.

Choice Broking assigned a ‘subscribe for long term’ rating for the issue considering the sectoral tailwinds and Anupam Rasayan’s diversified product applications.