Mumbai-based Laxmi Organic Industries Ltd, a manufacturer of acetyl intermediates and speciality intermediates, has filed for an initial public offering (IPO).
The IPO comprises a fresh issuance aggregating to Rs 500 crore ($68 million) and an offer for sale by promoter Yellow Stone Trust worth Rs 300 crore ($40.8 million), the company said in a statement.
Last week, VCCircle reported that the company had appointed Axis Capital and DAM Capital Advisors for the IPO.
The net proceeds from the issue will be utilised for funding capital expenditure planned towards setting up a manufacturing facility for fluorospeciality chemicals, working capital requirements, purchase of plant and machinery, and upgrading existing units, among others.
The firm plans to use the capital to enter new markets globally, particularly Europe. Currently, Laxmi Organic has a presence in over 30 countries including China, the Netherlands, Russia, Singapore, United Arab Emirates, the UK and US.
Once public, the firm would join listed peers such as Aarti Industries Ltd, Vinati Organics Ltd, Atul Ltd, Galaxy Surfactants Ltd and Fine Organics Industries Ltd -- the last two went public in 2018.
In July and October this year, speciality chemicals maker Mumbai-based Rossari Biotech Ltd and Vadodra-based Chemcon Specialty Chemicals made stellar debuts on stock exchanges.
Laxmi Organic
Founded in 1990 by Vasudev Goenka, the company has emerged as a major manufacturer of acetyl intermediates and speciality intermediates that are used in diverse industries such as pharmaceuticals, agro-chemicals and food packaging.
Starting operations in 1992 as a manufacturer of acetaldehyde and acetic acid, Laxmi Organic is now the largest manufacturer of ethyl acetate in India with approximately 30% of the market share and 55% of the diktene derivatives market, as per the company’s statement.
Laxmi Organic has been catering to clients including Alembic Pharmaceuticals, Dr. Reddy's Laboratories, Hetero Labs, Laurus Labs, Macleods Pharmaceuticals, Mylan Laboratories, Neuland Laboratories, Suven Pharmaceuticals, Granules India, United Phosphorous, Syngenta Asia Pacific and Sudarshan Chemicals.
In 2012, World Bank’s International Finance Corporation (IFC) invested $8.75 million (Rs 47.5 crore) for a 10.05% stake at an enterprise valuation of $105 million. The company bought back this stake in January this year for Rs 82 crore.
IFC had also sanctioned a loan of $10 million for the company’s expansion, going by VCCEdge, the data research arm of Mosaic Digital
The chemicals maker’s revenue has doubled since IFC’s investment to Rs 1,078 crore for the year to March 2017 from Rs 514 crore for 2011-12.
Laxmi Organic’s manufacturing facility in Mahad, Maharashtra, has a capacity to produce 127,000 tonnes per annum of ethyl acetate, 16,500 tonnes per annum of acetic anhydride, and 17,500 tonnes per annum of diketene derivatives, as per the firm’s website.
The company's products cater to sectors including pharmaceuticals, crop sciences, life sciences and solvent applications.
Laxmi Organic’s wholly-owned subsidiaries globally include Cellbion Lifesciences Pvt Ltd, Laxmi Organic Industries (Europe) BV, Laxmi Petrochem Middle East EZE, Laxmi Lifesciences Pvt Ltd and Viva Lifesciences Pvt Ltd.
According to a February 2020 report by India Ratings, Laxmi Organic operates primarily in ethyl acetate and diketene derivatives product segments.
Laxmi Organic is set to enter the fluorinated chemicals segment by acquiring assets from Miteni SpA (Italy) through its wholly owned subsidiary Viva Lifesciences, the report said.
It also plans a capex of around Rs 225 crore across 2019-20 and 2020-21 towards building fluorochemicals capacity, using a mix of internal accruals and debt of around Rs 160 crore.
The company expects to bring the fluorochemicals capacity on-stream from 2021-22, to provide a substitute for Chinese imports and to reduce dependence on commodities like ethyl acetate and imported raw material.
Laxmi Organic completed the de-bottlenecking of its ethyl acetate and diketene plant in 2018-19 to increase capacities; as a result, consolidated revenue grew 14% to Rs 1,568 crore in 2018-19.
However, a sharp correction in acetic acid prices impacted ethyl acetate realisations during the second half of 2018-19. Moreover, acetic anhydride prices fell due to an improvement in global supply.
As a result, consolidated operating profit margins fell to 9.6% in 2018-19 (from 10.8% in 2017-18). At a standalone level, Laxmi Organic recorded revenues of Rs 1,429 crore and operating profit margin of 10.7% in 2018-19.