Laxmi Organic kicks off its ₹600 crore IPO – should you subscribe?

• Laxmi Organic has launched its ₹600 crore initial public offer (IPO) today, and it will be open for subscription till March 17.
• The price band is fixed at ₹129-130, and each lot consists of 115 equity shares.
• Analysts are bullish on the company, pointing out its strengths and strategic measures undertaken.
• The company has proposed to use the proceeds of the IPO towards capital expenditure for setting up new facilities and expanding its capacities.

Laxmi Organic has kicked off its initial public offer (IPO) worth ₹600 crore today, March 15. It joins companies like Anupam Rasayan, Craftsman Automation, EaseMyTrip, MTAR Technologies among others.

Laxmi Organic Industries Ltd’s initial share sale is now open and will be live till March 17, with a price band of ₹129-130. Each lot consists of 115 shares. A total of 4.65 crore shares are available for subscription in the IPO.

50% of the issue is reserved for qualified institutional buyers (QIB), 15% for non-institutional bidders and the remaining 35% for retail investors.

The proceeds of the IPO are proposed to be used for repayment of certain borrowings, capital expenditure towards setting up a production facility, funding capital expenditure requirements towards expanding of specialty intermediates manufacturing facility, among other things.

What is the business of Laxmi Organic?

Laxmi Organic is one of the largest manufacturers of ethyl acetate, which is used as a solvent for paints, varnishes, cleaning mixtures and perfumes. Laxmi Organics is also the only manufacturer of diketene derivatives in India.

Founded in 1989, Laxmi Organic is based in Mumbai and is a part of the Goenka Group. It has over three decades of experience in large scale manufacturing of chemicals.

Currently, it is the largest manufacturer of ethyl acetate in India, with a market share of 30%. Its market share will be further augmented after the acquisition of Yellowstone Chemicals.

At the moment, Laxmi Organic’s product line is divided in two categories – Acetyl Intermediates (AI) and Specialty Intermediates (SI).

The AI category includes ethyl acetate, acetaldehyde, fuel-grade ethanol and other proprietary solvents. Specialty Intermediates comprises ketene, diketene derivatives namely esters, acetic anhydride, amides, arylides and other chemicals.

Its current manufacturing capacity totals to 2.39 lakh metric tonnes per annum, with each chemical having its dedicated manufacturing facility.

Here are some of the clients of Laxmi Organic

Laxmi Organic has clients in over 30 countries, including Netherlands, China, Russia, Singapore, UAE, UK and USA. Its clients include Dr. Reddy’s Laboratories, Granules India, Hetero Labs, Heubach Colour, Mylan Laboratories, Huhtamaki India, among others.

Laxmi Organic – strengths and strategies

Leading manufacturer of ethyl acetate

Laxmi Organic is one of the largest manufacturers of ethyl acetate with a market share of 30% in India.

“Ethyl acetate is a highly versatile solvent used in multiple applications across industries. It is derived from nonaromatic raw materials. The bio-based origin of ethyl acetate gives it a distinct identity and makes it a preferred solvent over traditional solvents,” stated an Axis Capital report.

Only Indian manufacturer of diketene derivatives

It is also the only Indian manufacturer of diketene derivatives. This is a significant strength as India has traditionally imported the chemical. Due to its research and development efforts, Laxmi Organic has captured 55% of the revenue share in the Indian market.

Diversified customer base

Laxmi Organic customers are spread across various sectors like pharmaceuticals, agrochemicals, dyes and pigments, inks and coatings, paints among others. Pharmaceuticals is the biggest contributor to its top line, with a share of 35.7% of the company’s total revenue.

Strategically located manufacturing facilities, vertical integration and supply chain efficiencies

Laxmi Organic currently has two manufacturing facilities in Maharashtra, which are in close proximity to several ports, including major ones like Jawaharlal Nehru (Nhava Sheva) Port, JSW port and Mumbai port.

The company also has distilleries located near sugar mills in Maharashtra, giving them easy access to supply for molasses.

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