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Valiant Organics SME IPO – Details & Review

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Valiant Organics, a chemicals manufacturing company has announced its SME IPO and the IPO is opened on 29-Sep for subscription.

Issue Details of Valiant Organics IPO:  

  • IPO Open :  29th Sep to 4th Oct 2016
  • Issue Price band: Rs 220 per share
  • Issue Size: Rs 21.43 crores
  • Minimum Bid – 600 shares
  • Maximum Bid – 600 shares
  • Minimum Investment:  Rs 132000
  • Book Running Lead Managers :  Aryaman Financial Services
  • Registrar – BigShare Services Pvt Ltd
  • Listing: The shares will be listed on SME platform of BSE.

Background:

Valiant Organics Ltd is a chemical manufacturing company (incorporated in 1984) mainly engaged in the business of manufactures and markets various types of chlorophenols in India.

Those chlorophenols are mainly used in agro-chemical industry, pharmaceutical industry, dyes industry as well as in manufacturing of cosmetics and veterinary drugs. They offers mono chlorophenols comprising para chlorophenol and ortho chlorophenol; and di-chlorophenols, such as 2,4 di-chlorophenol and 2,6 di-chlorophenol. Visit chittorgarh.com for more detail.They operate a single location manufacturing facility at Sarigam Industrial Estate having an installed capacity of 4,800 metric tonnes per anum. They also offer customized specification of Chlorophenols as per the customer needs.

The company is planning to increase installed capacity from existing 4800 MTPA to 21,600 MTPA over the period of the next three years. Currently the company operates with full capacity (99+%). The enhanced capacity will aid company in establishing market leadership and increase more customers.

Objective of the issue: The company will not receive any proceeds from the Offer.

  • achieve the benefits of listing the Equity Shares on the BSE SME Platform of BSE Ltd;
  • carry out the sale of Shares by the Selling Shareholders;
  • enhance their brand name and provide liquidity to the existing shareholders;

Unique Points 

  • Unique product portfolio
  • Fully integrated manufacturing facility
  • Existing well established goodwill and client relationships

Risks

  • Significant revenue from limited number of customers: The company derives its entire operational revenues from sale of chlorophenols in the domestic as well as overseas market. It depends on a limited number of customers for a significant portion of its revenues. Revenue from its top 10 customers constituted 82.08% and 74.78% of its net sales for fiscal 2015 and 2016 respectively.
  • Geographical constraints: The company’s manufacturing operations have been geographically concentrated in the State of Gujarat. Though, the company has customer relations in various parts of India, its export market is limited to a few regions in U.S.A., Europe and Asia. Its total export sales for the financial year 2015-16 amounted to 44.35% of the total sales
  • Competition: There are very few manufacturers of chlorophenol in India. The company sees Chinese manufacturers of chlorophenols as its primary competitors. It faces substantial competition on the basis of product range, product quality, and product price including factors, based on reputation, needs, and customer convenience

Financials:

The company has gradually increased its export to 44 %  in FY16 from 30 %  in FY14 at 22 %  CAGR. At the same time, it is struggling on the domestic front. Revenue from domestic segment has reduced by 2 % over FY14-16.

Particulars (Rs cr) 2016 2015 2014 2013 2012
Revenue 53.47 60.23 43.91 35.21 33.18
  -11% 37% 25% 6%  
           
EBITDA 17.16 12.37 9.57 7.17 7.18
EBITDA margin % 32% 21% 22% 20% 22%
  39% 29% 33% 0%  
           
PAT 10.31 7.27 5.54 4.03 3.92
PAT margin % 19% 12% 13% 11% 12%
  42% 31% 37% 3%  
           
EPS 28.31 19.98 15.22 11.06 9.16
  42% 31% 38% 21%  
           
ROCE % 61.45 43.78 43 37.12 39.96
D/E x 0.04 0.36 0.27 0.16 0.13

Valuation as compared to its peers:

Companies EPS P/E RONW
Jayant Agro Organics 21.07 14.81 14.16
Atul Ltd 97.28 23.71 23.28
Clariant Chemicals Ltd. 22.44 33.7 8.2
Sharda Cropchem 19.94 19.66 24.55
Valiant Organics Ltd 28.31 7.77 45.3

Should you invest: 

Company has decent revenue growth (except last year) and good growth in Profits. Also, EPS has increased consistently.  The chemical companies are gaining lots of market attention in 2016 with many chemical companies have given good returns.

So investors can subscribe to this IPO with medium to long term view. If you get listing gains, that icing on the cake.

Disclaimer:  The articles or analysis on this website should not be constituted as Investment advice. Please consult your financial advisor before making any investments.

If you have any queries related to this article or any other personal finance query ( Investment, Taxation etc), please comment below

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