All You Need to Know About Heranba Industries IPO

22 Feb 2021  Read 1386 Views

February may be the shortest month in the number of days, but with 7 IPOs so far, it has become a very big month for Indian investors. Including this Heranba IPO, isn’t this exciting for all the investors?

You may think that this company is not as famous as you haven’t heard about the company previously. But this IPO may change your mindset towards it.

In this article, you will get to know all the details required to decide whether to invest in Heranba IPO or not.

About Heranba Industries Limited

Incorporated in 1992, Heranba Industries Limited is a Gujarat-based crop protection chemical manufacturer. It is one of the leading domestic producers of synthetic pyrethroids. The company manufactures different pesticides like insecticides, fungicides and other pest control products.

Heranba Industries operates in different verticals such as:

  • Manufacturing and selling of insect control chemicals.
  • Domestic sales of Technicals to companies 
  • Domestic sales of Branded formulations under its brand name, 
  • Formulations export, and 
  • Technicals exports 

The company has 3 well-equipped manufacturing units in Vapi, Gujarat, with an aggregate manufacturing capacity of 14,024 MTPA. It has an in-house R&D team at Unit I and II that are recognized by the Department of Scientific and Industrial Research (DSIR). 

It has a strong network in the domestic as well as the overseas market. In India, it has 8600 dealers across 16 states. In the overseas market, it exports its products to more than 60 countries through international distribution partners.

Promoter and management of the company 

Promoters of the company include Sadashiv K Shetty, Raghuram K Shetty, Babu K Shetty and Vittala K Bhandary; their total holding equates to 98.85 percent of the total share capital, as of February 10, 2021.

                      

Competitive strengths of Heranba 

  • The company has a presence in a wide range of product portfolio, including Intermediates, Formulations, and Technicals.
  • Domestic and global reach.
  • Strong product portfolio and a wide distribution network.
  • Diverse and stable customer base.
  • Knowledgeable promoters and management team.

Company Financials

Particulars

For the year ended (in million)

30-Sep-20

31-Mar-20

31-Mar-19

31-Mar-18

Total Assets

7,881.20

6,247.63

5,604.43

4,504.65

Total Revenue

6,192.11

9,679.06

10,118.38

7,504.10

Profit After Tax

663.11

977.50

754.02

468.76

Considering the issue price of Rs 627 to be the listing price, Heranba Industries is available at a P/E of 18.9x (annualized basis on FY21E EPS of Rs.33.2), which is reasonable compared to its peers. 

Heranba IPO Details

IPO Opening Date

Feb 23, 2021

IPO Closing Date

Feb 25, 2021

IPO Price

Rs 626 to Rs 627 per equity share

Issue Type

Book Built Issue IPO

Face Value

Rs 10 per equity share

Listing At

BSE, NSE

Market Lot

23 Shares

Min Order Quantity

23 Shares

Issue Size

Equity Shares of Rs 10 aggregating up to Rs 625.24 Cr

Fresh Issue

Equity Shares of Rs 10 aggregating up to Rs 60.00 Cr

Offer for Sale

9,015,000 Equity Shares of Rs 10

IPO Lot Size

The IPO market lot size is 23 shares. A retail-individual investor can apply for up to 13 lots (299 shares or Rs 187,473).

Application

Lots

Shares

Amount

Minimum

1

23

Rs 14,421

Maximum

13

299

Rs 187,473

Tentative Timetable

The IPO open date is February 23, 2021, and the close date is February 25, 2021. The issue may list on March 5, 2021.

IPO Open Date

Feb 23, 2021

IPO Close Date

Feb 25, 2021

Basis of Allotment Date

Mar 2, 2021

Initiation of Refunds

Mar 3, 2021

Credit of Shares to Demat Account

Mar 4, 2021

IPO Listing Date

Mar 5, 2021

Objects of the Issue

  • To meet general corporate purposes.
  • To meet working capital requirements. 
  • To meet public issue expenses.

Risks Involved 

  • There are outstanding legal proceedings against the company Promoters and Directors that may affect its business, financial performance, and operations.
  • Their top customers constituted not exceeding 22.03% and 20.85% of its revenue for the period ended September 30, 2020, and FY 2020, respectively. The absence of regular customers and dependence on different customers makes the demand of their products uncertain and may harm its business and financial performance.
  • There is no long-term contract with its customers to buy their products. Nor with its suppliers for acquiring the raw materials. This makes the demand and supply uncertain. There is no assurance that these customers and suppliers will continue to purchase its products or sell raw materials to it or that they will not scale down their orders.
  • A major portion of the total expenses is material cost. An increase in prices or a decrease in the supply of materials would significantly affect the profitability of the company.
  • The company requires the renewal of some registrations for its products manufactured in India. It also needs to register its products in overseas jurisdictions through its International Distribution Partners to enable exports to such countries. Any failure in registering its products in India or the international markets may affect its domestic and international sales.

Summing Up: Is this IPO Good to Invest?

  • The Grey Market Premium is Rs 200-210, which is around 33% of the issue price. Hence, people can get the benefit of listing gains. 
  • Its performance is better when compared with its competitors.
  • The company has shown stable revenue and profit growth over time.
  • But there are many risks which the company has to face, which may impact its financial performance.
  • The company was fully-owned by the promoter group pre-IPO. The offer is 25.85% which means that promoters will remain in the majority with a stake of 74.15%. Hence, investors may not be able to influence decision-making.

The bottom line is that financial performance indicates that the company has potential. But the risks and the dominance of promoters may be unfavourable for investing. 

Hence, it all comes down to investor expectations and financial goals.

Happy Investing!

About the Author: Prasuk Jain | 10 Post(s)

Prasuk is an inquisitive and tenacious person with a mix of enthusiasm and a positive attitude, currently pursuing CA. 

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