The benchmark indices ended lower for the fourth straight day on Friday amid slowing global economic growth and inflation fears. At close, the Nifty50 index was down 86 points at 17,532 while the BSE Sensex ended with a loss of 361 points at 58,765. The broader markets, however, ended the day in the positive territory with the BSE Midcap and Smallcap indices rising 0.5 per cent each.
Sectorally, buying was seen in pharma, metal, PSU Bank and energy sectors whereas selling was witnessed in realty, banking and IT space.
Shares of ZEEL fell 3% as Zee board rejected Invesco’s demand to hold EGM. Taking a confrontational stand against its largest shareholder, the Zee board on Friday rejected its demand to hold an extraordinary general meeting to remove current MD and CEO, Punit Goenka and induct its nominees.
Shares of Tata Power Company continued to climb higher, hitting a new 13-year high at Rs 165, up 4 per cent on the BSE in Friday’s intra-day trade, on improved outlook. The stock of Tata Group electric utilities company was trading higher for the fourth straight day and has rallied 19 per cent during the period. The previous record high was Rs 158 recorded on January 4, 2008.
India’s IPO market is again turning busy with Aditya Birla Sun Life AMC IPO schedule to open on 29 September for subscription. The offer, priced in the range of INR695 – 712 per share, aims to mobilize as much as INR2,768.26 crore by selling 38,880,000 shares. All the shares will be offered by existing shareholders, valuing the firm at nearly INR20,505.6 crore at the upper end of the price band. Following the successful listings of HDFC AMC and Reliance Nippon AMC, investors will be surely looking positively to this IPO as well. This is also visible in the strong grey market premium the offer is commanding. Through Aditya Birla AMC IPO review, we try to find out if the company’s valuation leaves something on the table for investors.
The Indian benchmark indices erased early gains partially but were still trading positively in the afternoon. The S&P BSE Sensex held the 60,000-mark, up 220 points at 60,106 while the Nifty was below the 17,900-level at 17,865.
The top gaining sectors were Nifty Realty and Nifty IT, up 1 per cent each, while the laggards were the metals, public sector banks, FMCG and media stocks. The broader indices were trading mixed. The Nifty Midcap 50 fell over a per cent, while the Smallcap 50 rose 0.2 per cent.
Shares of information technology (IT) companies were on roll with most of the frontline stocks trading at fresh all-time highs on the bourses on strong revenue guidance by global IT firm Accenture for the financial year 2021-22 (FY22). Accenture forecasted 12-15 per cent revenue growth for FY22, on top of the $50.5 billion revenue it achieved in the current fiscal.
Paras Defence and Space Technologies (Paras Defence) is a defence and space-based company and is engaged in designing, developing, manufacturing, and testing defence and space engineering products and solutions. The company is launching its maiden offer on 21 September. Through Paras Defence IPO review, we aim to dive deeper into its operations. The company has sustained business growth of 40 years and operates in the following business verticals:
Defence & Space Optics – Infrared lenses for thermal imaging systems and night vision cameras, Diffractive gratings for space cameras, Large size optics for space imaging systems, Optical domes for missile systems
Defence Electronics – Control systems for land and naval defence applications, Naval and shelter mounted command and control systems, Displays for land and naval defence applications, Panel personal computers for land, naval and avionic defence applications, Communication systems for land and naval defence applications, Consoles and wired cabinets for land and naval defence applications, Non-contact proximity sensor for naval applications
Heavy Engineering – Flow formed tubes for rocket and missile applications, Vacuum brazed cold plates for radar applications Remotely controlled border defence system for land defence application, Titanium structures and assemblies for naval applications,
Electromagnetic Pulse Protection (EMP) Solutions – EMP shielding of a site or control rooms or data centers or command centers, EMP racks and cabinets, High performance EMP filters for power and data, Onsite installation, commissioning and testing.
Niche Technologies – Large deployable antennas for space applications, Carbon fiber reinforced polymer (CFRP) structures for space applications, Avionic suites for commercial and military avionic applications, Capsule size drones for defence and HLS applications.
In a volatile session on Dalal Street, the benchmark indices tumbled from record high levels to snap their three-day winning run amid losses in RIL, IT stocks and select banking counters. Despite a firm global market sentiment, the Indian indices settled in the red as profit taking ensued following a steep rally in the indices which saw them hitting significant landmarks.
After touching a record high of 59,737, the BSE barometer Sensex plunged 721 points from the high to end at 59,016, down 125 points. At the same time, its NSE counterpart Nifty50 settled the day 44 points down at 17,585. The 50-pack index had touched record peak of 17,793 in morning session. However, on the weekly basis, the benchmark indices gained, thus taking their winning run to the fourth straight week.
The fall was more pronounced in the broader markets. The BSE Midcap index sank 1.14 per cent and BSE Smallcap index 1.06 per cent, thus, underperforming benchmark Sensex. Overall, the advance-decline ratio on BSE stood at nearly 1:2, indicating that for every one share that rose, two declined.
Sectorally, PSU Bank index tanked the most among all sectors, reversing strong gains that were seen on Thursday amid expectations that FM Nirmala Sitharaman would announce National Asset Reconstruction Company Ltd (NARCL) that would acquire bad loans in an attempt to resolve them. While the announcement did come, investors preffered to take profits off the table, pushing the index 2.96 per cent lower.
It was closely trailed by Nifty Media & Realty that shed 2.38 per cent and 2.35 per cent, respectively. On the other hand, Nifty Media, Nifty Financial Services, Nifty Bank and Nifty Private Bank were the gainers. Nifty Auto setlled the day unchanged.
Originally SEL lined up its secondary offer in 2018, but finally enters the market now.
Dilution in promoter’s stake remains a major concern.
The issue is by way of offer for sale, no fresh equity is being raised.
Based on its financial data, the issue appears reasonably priced.
Preface: The company originally filed its offer documents for the same number of shares as OFS in August 2018 to mobilize around Rs. 1400 cr. and also received SEBI node, but it skipped the issue amidst uncertainties prevailed in the markets as claimed. At that time there were five BRLMs for fundraising exercises. It refiled offer documents in June 2021 and is now finally entering the capital market with its secondary offer with three BRLMs (Credit Suisse and BNP Paribas are not on the list). If we weigh both DRHPs, then the company has posted consistent growth in its top line but the bottom line marked inconsistency. However, based on financial data since FY16, the company remained cash-rich and did not want any fresh funding. The major concern that remains is the diminishing promoter’s holding which will come down to 36.56% from 43.91% post this issue. It’s worthwhile to note that while the secondary market was in a sluggish mood, this IPO mulled a collection of Rs. 1400 cr. and now when the secondary market is in pink of its health, they are planning mobilization of Rs. 1283 cr. i.e. they have reduced the valuation and kept something on the table for new investors.
About Company:
Sansera Engineering Ltd. (SEL) is an engineering-led integrated manufacturer of complex and critical precision engineered components across automotive and non-automotive sectors. Within the automotive sector, it manufactures and supplies a range of precision forged and machined components and assemblies that are critical for engine, transmission, suspension, braking, chassis and other systems for the two-wheeler, passenger vehicle and commercial vehicle verticals. Within the non-automotive sector, the company manufactures and supplies a range of precision components for the aerospace, off-road, agriculture and other segments, including engineering and capital goods. SEL supplies most of its products directly to OEMs in finished condition, resulting in significant value addition by it.
SEL is one of the top 10 global suppliers of connecting rods within the light vehicle segment (passenger vehicles with a gross vehicle weight of 3.5 tonnes or less, “Light Vehicle”) and one of the top 10 global suppliers of connecting rods within the commercial vehicle (“CV”) segment for CY 2020. (Source: The Ricardo Report).
Last minute buying helped benchmark indices eke out gains and close in the green one a gap of two days, with Airtel, Nestle India, TCS and ITC contributing the most to gains. Meanwhile, privtae banks, RIL and Infosys were among the top drags.
The BSE Sensex settled the volatile session on the day of weekly F&O expiry at 58,305, up 55 points while Nifty closed 4 points higher at 17,357. In the 50-pack index, 30 stocks closed in the green and 20 in the red.
Buying momentum remained high in midcap and smallcap stocks as the BSE Midcap ended up 0.56 per cent and the BSE smallcap 0.52 per cent. Both indices also hit their respective all-time highs in today’s session.
In sectoral space, Nifty Realty followed by Financial Services, Pharma and Bank were the top losers. On the other hand, Nifty Media, with a gain of 2.97 per cent was the best performing index. Nearly 20 per cent rally in Dish TV helped the media index put up a strong show. Other sectoral gainers were Metal, FMCG, IT and PSU Bank.
Market behemoth Reliance Industries kept the benchmark indices afloat on Friday overpowering selling pressure in HDFC Bank, HDFC, HUL, and Bharti Airtel. The Mukesh Ambani-led company’s shares hit fresh record high of Rs 2,394 apiece after they surged over 4 per cent on the BSE.
Overall, the BSE barometer of 30-shares closed above the 58,000-mark for the first time at 58,130 levels, up 277 points or 0.48 per cent. It’s 50-share counterpart, meanwhile, marched 89 points higher, or 0.52 per cent, to settle above 17,300 at 17,324. In the intra-day deals, the Sensex hit a new lifetime high of 58,195 while the Nifty50 index touched 17,340.
Besides, the BSE MidCap index closed 0.35 per cent higher after hitting a new peak of 24,454 in the intra-day deals while the BSE SmallCap index gained 0.41 per cent after touching a new high of 27,388.
Market breadth was marginally in favour of buyers with shares of over 1,700 companies advancing as against shares of 1,400 companies that fell on the bourses.
AOL is manufacturing speciality chemicals and critical APIs.
Robust performance in pre-IPO year raises concern.
Based on financial parameters, IPO is fully priced.
Risk seekers/cash surplus investors may consider the investment.
ABOUT COMPANY:
Ami Organics Ltd. (AOL) is a research and development (“R&D”) driven manufacturer of speciality chemicals with varied end usage, focused on the development and manufacturing of advanced pharmaceutical intermediates (“Pharma Intermediates”) for regulated and generic active pharmaceutical ingredients (“APIs”) and New Chemical Entities (“NCE”) and key starting material for agrochemical and fine chemicals, especially from its recent acquisition of the business of Gujarat Organics Limited (“GOL”)(“Acquisition”). As per the F&S Report, it is one of the major manufacturers of Pharma Intermediates for certain key APIs, including Dolutegravir, Trazodone, Entacapone, Nintedanib and Rivaroxaban. The Pharma Intermediates which the company manufactures, find application in certain high-growth therapeutic areas including anti-retroviral, anti-inflammatory, anti-psychotic, anti-cancer, anti-Parkinson, anti-depressant and anti-coagulant, commanding significant market share globally.
It has developed and commercialized over 450 Pharma Intermediates for APIs across 17 key therapeutic areas since inception and NCE, with a strong focus on R&D across select high-growth high margin therapeutic areas such as anti-retroviral, anti-inflammatory, anti-psychotic, anti-cancer, anti-Parkinson, anti-depressant and anticoagulant, for use across the global pharmaceutical market. AOL’s Pharma Intermediates used for manufacturing of APIs and NCEs portfolio has expanded from over 425 products as of March 31, 2019, to over 450 products as of March 31, 2021.
It recently completed the acquisition of two additional manufacturing facilities operated by GOL which has added preservatives (parabens and parabens formulations which have end usage in cosmetics, animal food and personal care industries) and other speciality chemicals (with end usage in inter alia the cosmetics, dyes polymers and agrochemicals industries) in the existing product portfolio, which command significant market share globally in the supply of certain paraben derivatives, as per the F&S Report). The Acquisition is in line with its inorganic growth strategy of foraying further into the speciality chemicals sector and believes that it will enable it to significantly diversify its existing product portfolio, with an objective of attaining inorganic expansion of business.
As of the date of this RHP, it has eight process patent applications (in respect of intermediates used in the manufacture of Apixaban, Rivaroxaban, Nintedanib, Vortioxetine, Selexipag, Pimavanserin, Efinaconazole and Eliglustat). It currently supplies its products to well-known 150 plus Indian customers and in 25 overseas countries. It has three manufacturing facilities in the state of Gujarat.
ISSUE DETAILS / CAPITAL HISTORY:
To part finance its needs for repayment/prepayment of certain borrowings (Rs. 140 cr.), working capital (Rs. 90 cr.) and general corpus fund, AOL is coming out with a maiden IPO comprising fresh equity issue worth Rs. 200 cr. (approx. 3278688 shares at the upper cap) and an offer for sale of 6059600 equity shares of Rs. 10 each (Rs. 369.64 cr. at the upper cap). Thus overall the company will be raising approx. Rs. 569.64 cr. at the upper price band. The issue opens for subscription on September 01, 2021, and will close on September 03, 2021. The company has fixed a price band of Rs. 603 – Rs. 610 per share. Minimum application is to be made for 24 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 25.63% of the post issue paid-up equity capital of the company. The company has raised Rs. 100 cr. as pre-IPO placement in August 2021 by the issue of 1658374 equity shares at Rs. 603 per share to few institutional investors. AOL has allocated the issue as 50% for QIBs, 15% for HNIs and 35% for Retail investors.
Book Running Lead Managers to this issue are Intensive Fiscal Services Pvt. Ltd., Ambit Pvt. Ltd. and Axis Capital Ltd. while Link Intime India Pvt. Ltd. is the registrar to the issue.
Having issued initial equity at par, AOL raised further equity at Rs. 603.00 per share in August 2021. It has also issued bonus shares in the ratio of 6 for 1 in April 2018 and in the ratio of 2 for 1 in March 2021.
The average cost of acquisition of shares by the promoters/selling stake holders is Rs. 0.48, Rs. 0.56, Rs. 23.49 /Rs. 0.48, Rs. 20.67, Rs. 25.53, Rs. 30.02, Rs. 31.04, Rs. 31.85, Rs. 32.07, Rs. 33.85, Rs. 33.91, Rs. 39.45, Rs. 40.19, Rs. 41.70, Rs. 47.44, Rs. 48.29 and Rs. 58.18 per share.
Post issue, AOL’s current paid-up equity capital of Rs. 33.16 cr. (33158374 shares) will stand enhanced to Rs. 36.44 cr. (approx. 36437062 shares based on upper cap). At the upper price band, the company is looking for a market cap of Rs. 2222.66 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, on a consolidated basis, AOL has posted turnover/net profits of Rs. 238.90 cr. / Rs. 23.30 cr. (FY19), Rs. 242.49 cr. / Rs. 27.47 cr. (FY20) and Rs. 341.99 cr. / Rs. 54.00 cr. (FY21). A sudden jump in the top and bottom lines in a pre-IPO year with a pandemic is a bit surprising.
For the last three years, on a consolidated basis, AOL has reported an average EPS of Rs. 12.71 and an average RoNW of 29.09%. The issue is priced at a P/BV of 11.51 based on its NAV of Rs. 52.99 as of March 31, 2021, and at a P/BV of 4.76 based on its post-issue NAV of Rs. 128.15 per share (at the upper cap).
If we attribute FY21 earnings on post IPO fully diluted equity, then the asking price is at a P/E of around 41.16, making it a fully priced offer (at the upper cap).
COMPARISON WITH LISTED PEERS:
As per offer documents, AOL has shown Aarti Ind., Hikal Ltd., Valiant Organics, Vinati Organics, Neuland Labs and Atul Ltd., as its listed peers. They are currently trading at a P/E of 56.49, 47.32, 29.98, 66.14, 28.97 and 39.67 (as of August 27, 2021). However, they are not truly comparable on an apple to apple basis.
DIVIDEND POLICY: AOL has not declared any dividend for the last three years to date. However, it will follow a prudent dividend policy post listing based on its financial performance and future prospects.
MERCHANT BANKER’S TRACK RECORDS:
The three BRLMs associated with this issue have handled 27 public issues in the last three years out of which 12 issues closed below the offer price on the listing dates.
CONCLUSION / INVESTMENT STRATEGY Based on super financial performance for FY21, the issue is fully priced. The sustainability of such higher margins going forward is a major concern. Many options at cheaper valuations are available in secondary markets. On financial parameters, AOL is no way near to its listed peers. Greedy pricing is perhaps on account of the current fancy for chemical counters. Hence risk seeker/cash surplus investors may take a call of investment with a long term perspective.
The original review has been authored by Dilip Davda, appears on chittorgarh.com and is available here.
Benchmark indices closed at fresh record closing highs in trade, led by gains in select index heavyweights, namely L&T, TCS and HDFC. Further, a positive global market sentiment also lent support to the indices.
BSE Sensex ended the day at 56,125, up 176 points or 0.31 per cent. It is for the first time that the index has settled above the 56,000 mark. Meanwhile, NSE Nifty after hitting a new record peak in intra-day session closed 68 points or 0.41 per cent higher at 16,705. It touched a new peak of 16,722.05 in trade earlier.
The broader markets, meanwhile, outperformed, rising for the fourth straight session. The BSE Midcap index added 1.04 per cent and BSE Smallcap rose 0.93 per cent.
The sectoral space was a sea of green as all indices gained on the NSE. Nifty Metal followed by Nifty Pharma were the top gainers, up over 1 per cent each while Nifty Auto gained the least among all indices.
