Rossari Biotech IPO⁠— 40 scientists, China, and other factors that make the share sale hot

Rossari
  • Rossari Biotech will remain open till July 15 with a fixed price band of ₹423-425 per equity share.
  • The recent Indo-China border standoff also provides a great opportunity for the company to double-up its reach.
  • Rossari Biotech has over 300 customers from a diversified product portfolio of home, personal care to animal health and nutrition products.
  • The company has a large market share in the home care products and personal care market. According to the ICICI Direct report, the market is expected to grow at a rate of 5.4% to US$308 billion.
The Mumbai-based speciality chemical maker Rossari Biotech’s ₹496 crore initial public offering has been subscribed 33.65% on July 13, day one of bidding. Rossari Biotech will remain open till July 15 with a fixed price band of ₹423-425 per equity share.

The company has also raised ₹148.87 crore from anchor investors on Friday (July 10) including SBI Mutual Fund, HDFC Mutual Fund and ICICI Prudential Mutual Fund.

Here's why the IPO is hot!

Rossari Biotech is a specialty chemicals manufacturing firm and the sector is among the street's favourite

The 17-year old Rossari Biotech is part of a sector that has most recently created a new billionaire. The $1.1 billion Shri Ram Group of Companies (SRF), which manufactures chemical raw materials was one of the rare exceptions that made money when coronavirus pandemic led to bloodbath in the stock markets. One of the primary reasons behind the SRF increase was a sudden spike in all Indian chemical stocks. During the pandemic, Indian companies ditched Chinese suppliers and were looking for cheaper alternative options in India — leading to a sudden spike in the share price.
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StocksPrice gains since March 31
Clariant Chemicals India113.65%
Omkar Specialty73.68%
Poddar Pigments Ltd.56.39%
Gulshan Polyols46.63%
BASF India Ltd.19.17%
SRF Ltd18.62%
*As of July 14 9:20 am

The tensions between India and China may continue the trend in favour of chemical makers like Rossari

“China continues to be a major competitor in this space for Rossari and any trade decision to reduce Chinese imports would certainly play out well for the company in the long run,” said Emkay Research.

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The company is also setting up another manufacturing facility at Dahej in Gujarat with a proposed capacity of 132,500 million tonnes per annum. Rossari’s own imports from China are less than 5% of its needs.

BI India

A strong line-up of customers and an impressive history of earnings

Rossari Biotech’s profit has grown 78% in the last four years from ₹18.1 crore in 2017 to ₹84.3 crore in 2020.

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YearProfit before tax
FY17₹18.1 crore
FY18₹38.5 crore
FY19₹62.5 crore
FY20₹84.3 crore

The reason for the strong growth is a wide variety of customers ranging from FMCG and apparel, to poultry and animal feed industries to companies that make home and personal care products. Some of the significant customers include HUL, Panasonic India, RSPL Ltd, IFB Industries Ltd. and Millennium Papers.

Apart from India, the company has its operations spread over 17 other nations, including Vietnam, Bangladesh and Mauritius. 11% of its revenue in FY20 came from exports.

Not just that, the specialty chemicals sector itself is set for an explosion in growth. The global market is expected to grow at a rate of 5.4% to $308 billion by 2023 from $237 billion in 2018, according to broking firm ICICI Direct.
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BI India

The growing health consciousness among will boost demand for home and personal care products and Rossari may be a direct beneficiary

Nearly half of the company’s revenue comes from home, personal care and performance chemicals. The increased awareness about health & hygiene as well as a considerable increase in disposable income has helped the company in recent years, and is likely to continue.

BI India

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It spends on research and development

Rossari has two R&D facilities – one within the Silvassa facility and another one in Mumbai and a dedicated team of 22 employees in the R&D facilities

According to Rossari, managing director, Sunil Chari, the company does a lot of work on intelligent chemistry. “We have a lab in IIT Mumbai. We are probably the only chemical company which has such a centre in IIT and we have 40 scientists working there and we will continue to come up with a lot of solutions,” he told The EconomicTimes.

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