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IPO Analysis: Heranba Industries

Ganesh V
/ Categories: Mindshare, IPO Analysis
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IPO Analysis: Heranba Industries

IPORating- Invest

About the issue

Heranba Industries is a crop protection chemicals manufacturer. It manufactures various types of pesticides including insecticides, herbicides, fungicides, and plant growth products. It is entering the capital market with its initial public offering (IPO) of equity shares of the face value of Rs 10 each. The price band of the issue has been fixed at Rs 626 to Rs 627 per equity share. The total number of shares for sale is 90,15,000. The opening date of the IPO is February 23, 2021 while its closing date is February 25, 2021. Around 50 per cent of the issue will be reserved for qualified institutional buyers (QIB), 15 per cent for non-institutional investors (NII) and the remaining 35 per cent for the retail investors. The objective of the offer is to fund working capital requirements and also, to fund expenditures towards general corporate purposes.

Heranba Industries Ltd

 

Issue open

Feb 23, 2021 – Feb 25, 2021

Issue type

Book built issue IPO

Issue size

90,15,000 equity shares of Rs 10
(aggregating up to Rs 625.24 crore)

Face value

Rs 10 per equity share

Issue price

Rs 626-Rs 627 per equity share

Market lot

23 shares

Min. order quantity

23 shares

Listing at

BSE, NSE

 

About the company

Heranba Industries is engaged in the business of manufacturing and marketing of various agrochemicals, which have a pan-India presence. They have integrated operations across research & development (R&D), manufacturing, marketing & distribution of a wide range of crop protection chemicals, public health, and animal health solutions.  It covers the pan India market through a strong network of 8,600 dealers and exports to 60 countries. The firm has a long success record of providing innovative agrochemical products to farmers. The company has three fully-integrated modern manufacturing units in Vapi (Gujarat), with an in-house R&D facility, producing various crop protection and public health products. The company has an aggregate manufacturing capacity of 14,024 MTPA. Meanwhile, its business verticals include domestic institutional sales of technical, technical exports, branded formulations, formulations exports, and public health products. 

Strengths

The company’s range of product portfolio includes intermediates, formulations, and technical. 

It has its presence in a wide range of products across the entire value chain of synthetic pyrethroids. 

Other factors include:  

Domestic as well as global reach. 

Strong product portfolio and wide distribution network. 

Experienced promoters and management team. 

Diversified and stable customer base. 

Financials

Figures in Crores

FY20

FY19

FY18

FY17

FY16

Total assets

540.93

434.29

344.51

260.97

259.76

Sales

951.37

 

745.1

607.82

536.75

Direct expenditure

727.16

787.25

556.57

485.59

416.28

Gross profit

224.21

217.19

188.53

122.23

120.47

Operating expenditure

78.33

78.39

95.4

71.34

75.16

Operating profit

145.88

138.8

93.13

50.89

45.31

Other income

16.53

7.39

5.31

2.5

0.84

Interest

8.84

10.73

11.81

12.37

13.43

Depreciation

8.2

5.95

5.01

4

4.06

Profit before tax

128.84

122.12

76.31

34.52

27.82

Tax

31.09

46.72

29.43

14.2

10.94

Profit after tax

97.75

75.4

46.88

20.32

16.88

EPS (unadjusted)

25.03

19.31

60.01

26.02

21.61

 

Valuation & recommendation 

If we look at the peer group of Heranba, then their average P/E ratio is 60.99. If we look at the price band of Heranba Industries and calculate the P/E ratio at the higher price of Rs 627, then we would get a value of P/E ratio of 25.05. This is lower than the industry average. The portfolio of Heranba Industries has many known brands. It is exporting to developed countries with good margins. This offers an opportunity to generate strong revenue in the future. The industry is highly driven by new products on the back of research & development. The range of its business activities, both in the domestic and international markets, offers opportunities to enhance revenue and profitability. The company has a diverse and stable client base that provides the required stability. Heranba Industries has been performing well on the financial front, and its operating margins are growing consistently. The management of Heranba Industries has more than three decades of experience in the agrochemicals sector and is well-qualified to manage the operations of the company. Looking at the above positives, we believe that the company will keep growing its business at a healthy rate, and hence, you can invest. 

 

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