Here's why Rossari Biotech bought Unitop Chemicals for ₹421 crore
Rossari Biotech— the chemicals company that had a blockbuster IPO in 2020 — is planning to acquire its peer company Unitop Chemicalsfor ₹421 crore.
- The company’s share price is up by 2.5% on June 3 after announcing its plans.
- Operating in the same sector, Rossari can add Unitop Chemicals’ production capacity of 86,000 million tonnes per year to its own without having to make too many changes.
- Rossari will be digging into its own coffers to fund the transaction with 65% equity being acquired on closure and the rest coming in over the next two years.
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The company’s share price is up by 2.5% as of 12:30pm on June 3, after the announcement. "We believe the acquisition will be EPS [earnings per share] accretive for Rossari," said Edelweiss in its report dated June 2. Simply put, the financial services company believes that Unitop and Rossari are a good fit and the acquisition will result in gradual growth.
As per the plan approved by the board, Rossari will be buying up 100% of Unitop Chemicals’ equity capital. 65% of it will be acquired upon closure of the transaction and the rest will be balanced over the next two years.
“Unitop Chemicals is a natural fit with our operations and brings with it immense synergies and complementary growth dimensions,” said Rossari’s executive chairman Edward Menezes and managing director Sunil Chari in a joint statement.
Here’s what Rossari will gain from Unitop
Since both companies are in the chemical manufacturing space, they use similar technology, require the same talent in their employees and dabble in the same verticals. For instance, Unitop Chemicals’ expertise is in manufacturing surfactants — the kind found in detergents, wetting agents, emulsifiers, and so on. This is one of Rossari’s four core chemistries.
Moreover, Unitop Chemicals has three manufacturing sites and its main facility in Dahej is near Rossari’s existing facility in the area. Overall, Rossari will be able to capitalise on Unitop’s production capacity of 86,000 million tonnes per annum (MTPA) to boost its own output.
And, while the two companies work in the same arena, there is little overlap in end-users. This means Unitop Chemicals' customers will be an entirely new set of clients for Rossari to monetise with cross-selling and will help expand the company's market reach.
Wodehouse Capital was the exclusive financial advisor to Unitop Chemicals for the deal. Rossari does not plan on raising any debt for this transaction. It will be funding the investment using the cash it already has on its balance sheets.
In April, Rossari raised ₹300 crore through the preferential issue of equity shares. This is after the company went public in July 2020 and was one of the hottest initial public offerings (IPO) of the year, listing at a premium of 59%.
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