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Ami Organics - IPO Update

Ami Organics - IPO Update
IPO
01/08/2021

Ami Organics has already filed the draft red herring prospectus with SEBI for its proposed public issue of shares. The company is into the fast growing and lucrative specialty chemicals space and has seen rapid growth in the last few years. Also, globally, there is a shift towards India for specialty chemicals. Most global users of specialty chemicals are counting on India as an alternative source of specialty chemicals for an array of uses.

What exactly is the business model of Ami Organics?

Ami Organics is a focused manufacturer of specialty chemicals with varied end usage. Speciality chemicals account for 20% of the $4 trillion chemicals industry globally, and India's market for specialty chemicals is projected to grow at a CAGR of 12% to $64 billion by CY25.

In India, the domestic speciality chemicals industry is expected to clock double the global CAGR of 11.7% in the next five years. That was the outperformance that we had seen in Indian specialty chemicals segment even in the CY15-20 period. Indian specialty chemicals industry is valued at $32 billion and expected to grow to $64 billion in the next five years.

Some of the advantages for specialty chemical companies in India are strong domestic consumption, favourable labour cost and government impetus under the PLI scheme. IN fact, on the market share front, China is the largest player with an 18% share. However, with most consumers looking away from China post the pandemic, it opens a huge opportunity for India. Here, the labour costs are nearly one-third of China and half of Vietnam, so cost-wise it is a big advantage. That is where the big edge for India lies.

However, this is a capital intensive industry and capex will be constant work in progress in an industry that will have to consistently scale up capacity to meet global needs. That will be the challenge.

Nature of the proposed issue by Ami organics

Ami Organics had first got approval from SEBI for the issue in the year 2018 but had to put off after the markets went into a tailspin and the market was not ripe for a smaller sized specialty chemicals company. However, post the pandemic the conditions are ripe for specialty chemicals to gain larger market share from China and that is why the Ami Organics IPO has been timed now. 

The initial public offer or IPO will be a combination of a fresh issue and an offer for sale. The company will raise fresh funds of Rs.300 crore through the IPO and in addition will also offer a total of 60,59,600 shares by promoter and existing shareholders as part of the offer for sale or OFS. Of course, these are subject to modifications at the time of final RHP approval of the issue. 

The company is not expanding capacity at this point of time and will look at that option in the future. For now, it will utilise Rs.140 crore from the IPO proceeds for repayment of certain high cost debt so as to improve its solvency ratios and reduce financial risk to enable future leveraging to expand capacity. In addition, the company will also allocate Rs.90 crore out of the issue proceeds for funding working capital requirements.

The big challenge for Ami Organics will be to keep the capital expenditure flows steady to enable the company to meet demand enhancement. Its ratio of capex to operating cash flows is likely to be constantly under pressure. 

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Supriya Lifesciences IPO - 7 Thing you Need to Know

Supriya Lifesciences IPO - 7 Thing you Need to Know
IPO
01/08/2021

Supriya Lifesciences, a manufacturer of active pharma ingredients (APIs) has filed the draft red herring prospectus (DRHP) with SEBI for its proposed IPO. The company is planning to raise Rs.1,200 crore from the primary market, which will include a fresh issue of Rs.200 crore and an offer for sale of Rs.1,000 crore. Here are 7 thing you need to know about the forthcoming Supriya Lifesciences IPO

1.  The company has already filed the draft red herring prospectus or DRHP with SEBI and the regulatory approval has already been received by the company. The next steps are to file the RHP (red herring prospectus) with the ROC before finalizing the terms of the issue like dates, price band etc. 

2.  The company will have a face value of Rs.2 per share. It will come out with a fresh issue of Rs.200 crore and an offer of sale (OFS) by existing shareholders up to Rs.1,000 crore held by its promoter Satish Waman Wagh. 

3.  Out of the total issue of Rs.1,200 crore, only Rs.200 crore will come into the company as fresh funds. The company will use around Rs.85 crore for its current capital expenditure program. Supriya Lifesciences plans to expand its existing manufacturing facilities at its main plant at Lote, Maharashtra. In addition, the company  will also use part of the funds to invest in existing manufacturing technologies to build new capabilities in order to support production. It will also use around Rs.60 crore of funds for loan repayments.

4.  The company is a profit making company. For FY20, Supriya Lifesciences had reported total revenues of Rs.323 and a healthy net profit of Rs.73.37 crore. That represents a net margin of almost 23% for the fiscal year. On a yoy basis, the revenues were up 12% while profits almost doubled. For the nine months ended Dec-20, the company has reported net profits of Rs.76 crore highlighting the growth on an annual basis. 

5.  The company has reserved 75% of the issue size for qualified institutional buyers or QIBs as it expects a strong institutional appetite for the IPO. The allocation to the non-institutional investors or the HNI investors will be 15% while the retail investors will be left with just 10% allocation. These are the retail bidders putting bids of up to Rs.200,000. Hence higher subscription on retail portion could be on the cards.

6.  Supriya Lifesciences is not only a key manufacturer and supplier of active pharma ingredients in India with a strong R&D focus, but also a key player in certain niche segments. In fact, as of Mar-21, Supriya Lifesciences had niche offerings of 39 APIs focused on diverse therapeutic segments. These segments include inter alia antihistamine, analgesic, anaesthetic, vitamin, anti-asthmatic and anti-allergic products.

7.  Supriya Lifesciences also has a very strong export franchise and it has been the largest exporter of chlorpheniramine maleate and ketamine hydrochloride from India between FY2017 and FY2020. In addition, Supriya Lifesciences is also among the largest exporters of salbutamol sulfate from the country.

While we need to await the finer pricing and valuation details, the company business model does look robust.

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Investors Hesitant, Vodafone Idea on Road to Collapse: Birla’s SOS to Govt.

02/08/2021

Aditya Birla Group chairman Kumar Mangalam Birla has offered to hand over his stake in Vodafone Idea Ltd to any state-run company or financial institution in a bid to keep the debt-laden telecom operator afloat.

The billionaire has written to the government saying the company has been trying to raise Rs 25,000 crore to sustain its operations but potential foreign investors—all non-Chinese—have shown “understandable hesitation” to invest. The investors, he added, want to see “clear government intent” to have a three-player telecom market in India.

Birla, one of India’s wealthiest people, also said that without the government’s help Vodafone Idea is heading towards an “irretrievable point of collapse”. 
The Aditya Birla Group owns an 18.48% stake in Vodafone Idea, partly via publicly listed group companies Grasim (11.55%) and Hindalco (2.6%). This stake is now worth Rs 3,929 crore after the telecom firm’s stock crashed 10% on Tuesday in a Mumbai market that jumped 1.65%.

 

What really happened?

 

The unprecedented statement comes after the government slapped a hefty bill on Vodafone Idea, Bharti Airtel Ltd and some other companies asking billions of dollars in past dues.

The government says Vodafone Idea owes more than Rs 50,000 crore as per a revenue-sharing arrangement under the licensing norms. Telecom companies pay a percentage of their adjusted gross revenue (AGR) as license fees to the government. While the companies argue that income from non-core businesses such as rent should not be included in the AGR, the government thinks otherwise. The Supreme Court, too, has sided with the government.

Birla said the government must provide clarity on the AGR liabilities and allow it a moratorium period to make the payments.

 

Why it matters?

 

The telecom sector was bustling with a dozen companies until a few years ago. But only three private-sector companies—Vodafone Idea, Bharti Airtel and Reliance Jio — are in operation now, in addition to state-run MTNL and BSNL. This is in thanks in part to the near-zero tariffs that Reliance Jio introduced when it launched five years ago. 

If Vodafone Idea collapses, as Birla fears, the sector will effectively become a two-horse race with billionaire Mukesh Ambani-led Reliance Jio calling the shots. This could lead to massive job losses, drive tariffs higher and dampen consumer sentiment.

On the flip side, if the government does take over Vodafone Idea, the company and its employees will get a reprieve. But that may also be temporary, especially considering the state of affairs at most government-run companies including MTNL and BSNL.

 

Similar Article: Birla group willing to exit stake in Vodafone Idea

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RBL Bank Swings to Q1 Loss as Provisions Nearly Triple

02/08/2021

RBL Bank has slipped into a loss for the first quarter through June 2021 from a profit a year earlier after it set aside almost thrice the amount than before to cover for possible bad loans.

The private-sector bank posted a standalone net loss of Rs 459.5 crore for the April-June period compared with a net profit of Rs 1,412.2 crore a year earlier.

Net interest income—the difference between interest earned and paid—fell 7% to Rs 970 crore while the net interest margin shrank to 4.36% from 4.85% a year earlier.

The bank’s provisions to cover for potential non-performing assets (NPAs) jumped to Rs 1,425.67 crore from Rs 500 crore in the corresponding period of the last financial year.

 

Other key details:


1. Operating profit for Q1 grew 17% from a year earlier to Rs 807 crore.

2. Total deposits rose 21% year-on-year to Rs 74,471 crore while the low-cost CASA deposits grew 35%

3. Retail deposits jumped 47% to Rs 29,505 crore but retail advances grew only 7% to Rs 32,071 crore.

4. The bank’s overall capital adequacy ratio is at 17.2%, slightly above the minimum norm of 15%.

5. Asset quality worsened as gross NPA ratio came in at 4.99% versus 3.45% a year earlier.

 

Management Commentary: 


RBL Bank MD and CEO Vishwavir Ahuja said the lender’s revenue and operating profit “held up well” during the quarter.

However, the effect of the second wave of the COVID-19 pandemic on the asset quality was “rather severe and different from the first wave” given the nature of the bank’s businesses, he said.

Ahuja also said that economic activity and growth revival are now visible.As a result, the bank decided to increase its provisions to preparefor normalized levels of business.

The bank is also ramping up its physical and digital presence as well as expanding its secured retail assets business in a bid to improve its financial performance, he added.

 

Also Read: Quarterly Results - RBL Bank and PNB Bank

 

 

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IPOs raise Rs.27,000 crore in fiscal 2021-22

IPO
02/08/2021

As per the latest data put out by Praxis, the Indian IPO market saw new issues collecting Rs.27,052 crore in the first four months. Considering that another Rs.70,000 crore of IPOs are lined for FY22, this could end up being a record year for IPO collections, even bettering 2017 by a margin. But, we have to wait for that to actually happen. For now, what we do have is the performance of the first four months of FY22.

Interestingly, the first four months collection is very close to the total amount of Rs.31,277 crore raised via IPOs in FY21. The largest fund raising in this fiscal was Zomato IPO which managed to raise Rs.9,375 crore through its IPO in July. This figure of Rs.27,052 crore does not include the Rs.7,735 crore that was raised via the Power Grid INVIT, which is the infrastructure investment trust sponsored by Power Grid.

One factor that appears to have worked for the IPOs is the commendable listing performance of a majority of the IPOs in FY21 and in the first 4 months of FY22. That has led to record subscription numbers with recent issues like Tatva Chintan Pharmachem and Rolex Rings getting oversubscribed to the tune of 180X and 130X respectively. The robust BSE IPO index has also fuelled the appetite of retail, HNI and QIB investors for IPO as an asset class by itself.

Also Check: List of Upcoming IPOs in August 2021

 

There is a much bigger story set to unfold this year. The Rs.70,000 crore to be raised via IPOs this fiscal includes a slew of digital leaders like Paytm, Nykaa, Policybazaar, MobiKwik, CarTrade etc. All IPOs listed in FY22 are trading above their issue price with premiums ranging from 14% to 110%. This is excluding the LIC IPO.

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NSE announces quantity freeze limits for derivative contracts

02/08/2021

As part of its risk management system, NSE issued a circular on 31 July highlighting the logic for quantity freeze and the respective quantity freeze limits for the 3 indices traded in F&O viz. Nifty, Bank Nifty and Nifty Financial Services index. For all the 3 indices, the quantity freeze limits shall be announced on a monthly basis, with revisions where warranted. The frequency distribution of quantity freeze will be as under.

Index benchmarked quantity freeze limits in F&O
 

Index Level From

Index Level To

Quantity Freeze

0

5,750

8,500

>5,750

8,625

5,500

>8,625

11,500

4,200

>11,500

17,250

2,800

>17,250

27,500

1,800

>27,500

40,000

1,200

>40,000

55,000

900

>55,000

No Upper Limit

600

Data Source: NSE

In case of contracts on indices, all orders that are entered in the trading system with quantity more than the respective freeze quantity limit (specified above) for the index shall be frozen and automatically rejected by the Exchange. 

Does quantity freeze apply for individual stocks?

Yes, quantity freeze applies to individual stocks also, and orders entered in the trading system more than the respective freeze quantity limit shall be frozen and automatically rejected by the Exchange. Post quantity freeze, orders will only be accepted up to 1 % of MWPL or Rs.2.50 crore notional value, whichever is lower.

What is the applicable quantity freeze today?

The quantity freeze for the 160 F&O stocks are available on www.nseindia.com. However, for greater clarity, the below table captures the quantity freeze limits for the 3 indices on which F&O trading is currently permitted.
 

Index Name

Current Index Level #

Quantity Freeze

Nifty 50

15,763

2,800

Bank Nifty

34,584

1,200

Nifty Financial Services

16,469

2,800

# - closing value on 30 July

The above levels are applicable effective 02 August and are subject to monthly review.