Heranba Industries IPO is off to a decent start — Here’s why investment experts and retail investors are excited

Advertisement
Heranba Industries IPO is off to a decent start — Here’s why investment experts and retail investors are excited
  • The ₹525 crore initial public offering (IPO) of agrochemical company Heranba Industries opened today.
  • The company has fixed a price band of ₹626-627 per share, and the issue will remain open for subscription till February 25.
  • The shares were commanding a premium of ₹140-150 in the grey market over the set price band of ₹626-627 per share.
  • According to Angel Broking, the company has a robust past track record of performance. It has a strong financial position and has been generating positive cash flow.
The ₹525 crore initial public offering (IPO) of agrochemical company Heranba Industries opened today and has so far seen a decent subscription rate. In just two hours of opening, the retail portion of the issue was subscribed 77%, and the overall subscription was at 39%.

The company has fixed a price band of ₹626-627 per share, and the issue will remain open for subscription till February 25.


The Gujarat-based company is a crop protection chemical manufacturer, exporter and marketer. Heranba is one of the leading domestic producers of synthetic pyrethroids like cypermethrin, alphacypermethrin, deltamethrin, permethrin, lambda-cyhalothrin.
Advertisement

Heranba Industries IPO is off to a decent start — Here’s why investment experts and retail investors are excited

The public issue has received positive reviews from top brokerages, and the grey market is ready to pay a hefty premium for its shares. The shares were commanding a premium of ₹140-150 in the grey market over the set price band of ₹626-627 per share. However, the grey market is not an official measure of the market premium.

Streets View: Heranba Industries
BrokerageRecommendation
Angel BrokingSubscribe
Hem SecuritiesSubscribe
Capital MarketsSubscribe
ICICI DirectSubscribe

Advertisement

Bigger market share, decent IPO pricing, strong future outlook and others that led to positive reactions from analysts

Leading domestic player and growing export market

According to the ICICI Direct report, Heranba is one of the leading domestic producers of pyrethroids in India. The company held 19.5% domestic market share in 2019, and 68% of its FY20 revenues came from the segment.

“It is in the entire value chain of synthetic pyrethroids that provides flexibility to shift between products depending on the demand-supply and pricing dynamics,” it added.
Advertisement

The brokerage said more than half of the global demand for Pyrethroids comes from China, and due to the shutdown of chemical plants in China amid pollution, higher volumes of Pyrethroids are expected to be exported out of India.

Strong product portfolio and stable revenue base

The company manufactures and supplies raw material to leading domestic and multinational agrochemical companies such as Sumitomo Chemical, Sulphur Mills, PI Industries and others.
Advertisement

Heranba Industries IPO is off to a decent start — Here’s why investment experts and retail investors are excited
Heranba

It also procures certain raw material from other companies depending on demand and supply, and pricing dynamics. This diverse and stable customer base provides the necessary revenue stability to the company as not more than 18.57% of its aggregate sales come from its top ten customers for the period ended September 30.

Justified valuation

According to Angel Broking, the company has a robust past track record of performance. It has a strong financial position and has been generating positive cash flow.
Advertisement

The IPO has been priced at 22.1x PE (price to earnings) on a trailing basis, which is quite reasonable by looking at the company's future prospects, the brokerage added. The price-to-earnings (P/E) ratio shows the price that the market is willing to pay for a stock based on its earnings. Higher the P/E, the more expensive the stock.

PeersTrading at a PE
Rallis India23.1x
Sumitomo Chemicals47.3x
Bharat Rasayan27.0x

SEE ALSO: IPO-bound Zomato's valuation jumps to $5.4 billion as it cashes in another $250 million

Advertisement
Indian startup founders are wary of Chinese investors, prioritise follow-up funding over term sheet conditions