Please refer to important disclosures at the end of this report
1
Leading domestic producers of synthetic pyrethroids
Heranba Industries are a crop protection chemical manufacturer, exporter
and marketing company based out of Vapi, Gujarat. Company manufactures
intermediates, technicals and formulations. Company is one of the leading
domestic producers of synthetic pyrethroids. Company’s pesticides range
includes insecticides, herbicides, fungicides.
Positives: (a) Presence in a wide range of products across the entire value chain
of synthetic pyrethroids (b) Product registrations in the domestic and international
markets enabling global outreach (c) Strong product portfolio and wide distribution
network (d) Experienced Promoters and Management Team.
Investment concerns: (a) There are outstanding legal proceedings involving the
Company, Promoters and certain Directors (b) Absence of large customers and
dependence on smaller customers increases uncertainty of demand which may
have an adverse impact on the business operations and financial performance
(c) Company has not entered into long-term agreements with the customers for
purchasing the products nor for the supply of raw materials with the suppliers.
Outlook & Valuation: Company has a robust past track record of performance. In
the future, we expect Company to gain market share and improve margins.
Company has priced its issue at 22.1x PE on a trailing basis, which is quite
reasonable by looking at the future prospects of the Company. Its peers such as
Rallis India, Sumitomo Chemicals and Bharat Rasayan are trading at 23.1x, 47.3x
and 27.0x PE on a trailing basis respectively. Company return ratios are superior
to peers (ROE is above 30%). Company has a strong financial position and has
been generating positive cash flow. We expect a good listing for the Company.
We are positive on the long-term prospects of the Company, we recommend
"SUBSCRIBE" to the Heranba Industries IPO for long term as well as for
listing gains.
Key Financials
Y/E March (` cr)
FY18
FY19
FY20
Net Sales
745.1
1,004.4
951.4
% chg
-
34.8
-5.3
Net Profit
46.9
75.4
97.8
% chg
-
60.9
29.6
EBITDA (%)
11.8
13.1
13.6
EPS (Rs)
12.0
19.3
25.0
P/E (x)
52.3
32.5
25.1
P/BV (x)
15.6
10.7
7.6
ROE (%)
29.8
33.0
30.5
ROCE (%)
37.8
47.8
37.8
EV/EBITDA
28.6
18.9
19.2
EV/Sales
3.4
2.5
2.6
Source: Company, Angel Research.
Note: Valuation ratios at upper price band.
SUBSCRIBE
Issue Open: February 23, 2021
Issue Close: February 25, 2021
Offer for Sale: 0.9 cr sh.
QIBs 50% of issue
Non-Institutional 15% of issue
Retail 35% of issue
Promoters 74.0%
Others 26.0%
Fresh issue: Rs 60 cr
Face Value: Rs 10
Present Eq. Paid up Capital: Rs 39.1 cr
Post Issue Shareholding Pattern
Post Eq. Paid up Capital: Rs 40.0 cr
Issue size (amount): Rs 625.2 cr
Price Band: Rs 626-627
Lot Size: 23 shares and in multiple thereafter
Post-issue mkt. cap: *Rs 2505 cr - **Rs 2509 cr
Promoters holding Pre-Issue: 98.8%
Promoters holding Post-Issue: 74.0%
*Calculated on lower price band
** Calculated on upper price band
Book Building
Heranba Industries Ltd
f
IPO Note | Agro Chemicals
February 22, 2021
Heranba Industries Ltd | IPO Note
February 22, 2021
2
Company background
Company started their manufacturing activity in the year 1996 with production of
an Intermediate product CMAC. By the FY 2001-2002, Management forward
integrated Company into the manufacturing of various Technicals like
metametron, cypermethrin, alpha, permethrin and deltamethrin. By the end of the
FY 2004-2005, Management further expanded the product range to Formulations,
which are final products sold to farmers as Pesticides, Herbicides, Fungicides for
crop protection and into public health products in the FY 2010-11. Company is
present in the entire product value chain of the agrochemicals industry i.e.
Intermediates, Technicals and Formulations and holds registrations for eighteen
Technicals for manufacture and sale in India, one hundred and three Technicals
& Formulations for manufacture and sale in the export markets and one hundred
and sixty nine Formulations registered for manufacturing and sale in India.
Issue details
Company issues comprise `60 crore through fresh issue and 90,15,000 equity
shares through offer for sale and in the price band of `626-627.
Pre and post IPO shareholding pattern
No of shares
(Pre-issue)
%
(Post-issue)
%
Promoter
38,606,530
98.8
29,591,530
74.0
Public
450,000
1.2
10,421,938
26.0
Total
39,056,530
100.0
40,013,468
100.0
Source: Company, Angel Research & RHP.
Note: Calculated at upper price band.
Objectives of the Offer
To fund working capital requirements.
General Corporate Purposes.
Key Management Personnel
Sadashiv K. Shetty, aged 66 years, is the Promoter, Chairman and Executive
Director of the Company. He holds a bachelor’s (physics and chemistry) and
master’s (chemistry) degree in science from University of Mysore. He has
experience of more than three decades in agrochemicals industry. He has been
on the Board since September 29, 1994. He has been and is responsible for the
overall supervision, direction and management of the Company. He is fully
involved in day-to-day affairs of the Company and future business strategies. He
has been instrumental in new products development and addition of capacities.
Raghuram K. Shetty, aged 61 years, is the Promoter and Managing Director of
the Company. He holds a bachelor’s degree in economics from University of
Mysore. He has pursued government commercial diploma from the Department of
Education, Bureau of Government Examinations, Maharashtra. He has also done
diploma in export and import management from the India International Trade
Centre, Mumbai. He has experience of more than three decades in
agrochemicals industry. He has been on the Board since September 29, 1994
and has been instrumental in developing export business of the Company.
Heranba Industries Ltd | IPO Note
February 22, 2021
3
Consolidated Profit & Loss Statement
Y/E March (` cr)
FY18
FY19
FY20
H1FY20
H1FY21
Total operating income
745.1
1,004.4
951.4
501.6
618.3
% chg
-
34.8
-5.3
23.3
Total Expenditure
657.3
873.0
822.0
425.9
519.1
Cost of material consumed
497.0
708.4
639.8
337.4
451.8
Purchase of stock in trade
0.0
6.5
15.3
3.4
13.8
Changes in Inventories
6.7
-17.1
-17.7
-14.0
-46.2
Excise Duty
3.8
0.0
0.0
0.0
0.0
Employee Benefits Expense
33.2
38.0
46.5
22.5
22.9
Other Expenses
116.5
137.3
138.1
76.7
76.8
EBITDA
87.8
131.4
129.4
75.7
99.3
% chg
-
49.7
-1.6
31.1
(% of Net Sales)
11.8
13.1
13.6
15.1
16.1
Depreciation& Amortisation
5.0
6.0
8.2
3.6
6.6
EBIT
82.8
125.5
121.1
72.1
92.7
% chg
-
51.5
-3.4
28.5
(% of Net Sales)
11.1
12.5
12.7
14.4
15.0
Interest & other Charges
11.8
10.7
8.8
3.8
3.5
Other Income
5.3
7.4
16.5
0.6
0.9
(% of Sales)
0.7
0.7
1.7
0.1
0.1
Recurring PBT
76.3
122.1
128.8
68.9
90.1
% chg
-
60.0
5.5
30.8
Tax
29.4
46.7
31.1
15.6
23.8
PAT (reported)
46.9
75.4
97.8
53.2
66.3
% chg
-
60.9
29.6
24.5
(% of Net Sales)
6.3
7.5
10.3
10.6
10.7
Basic & Fully Diluted EPS (Rs)
12.0
19.3
25.0
13.6
17.0
% chg
-
60.9
29.6
24.6
Source: Company, Angel Research
Heranba Industries Ltd | IPO Note
February 22, 2021
4
Consolidated Balance Sheet
Y/E March (` cr)
FY18
FY19
FY20
H1FY20
H1FY21
SOURCES OF FUNDS
Equity Share Capital
7.8
39.1
39.1
39.1
39.1
Other equity
149.5
189.1
281.8
237.0
342.2
Shareholders Funds
157.3
228.2
320.8
276.1
381.3
Total Loans
76.0
49.9
43.1
63.9
38.0
Other liabilities
9.0
10.3
8.6
8.8
10.0
Total Liabilities
242.3
288.3
372.6
348.8
429.2
APPLICATION OF FUNDS
Property, plant and equipment
46.2
51.1
95.4
97.8
130.7
Capital work-in-progress
1.2
16.0
37.8
10.7
3.3
Current Assets
374.5
451.6
471.3
493.0
623.8
Inventories
94.0
113.9
145.5
133.1
173.5
Trade and other receivables
203.1
253.3
258.5
267.8
372.8
Cash and cash equivalents
11.8
21.0
3.2
20.7
25.3
Other Assets
65.6
63.5
64.1
71.4
52.2
Current liabilities
208.2
272.1
252.2
270.8
358.9
Net Current Assets
166.3
179.5
219.1
222.2
264.9
Other Non Current Asset
28.6
41.7
20.2
18.1
30.3
Total Assets
242.3
288.3
372.6
348.8
429.2
Source: Company, Angel Research
Heranba Industries Ltd | IPO Note
February 22, 2021
5
Consolidated Cash Flow Statement
Y/E March (` cr)
FY18
FY19
FY20
H1FY20
H1FY21
Profit before tax
76.3
122.1
128.8
68.9
90.1
Depreciation
5.0
6.0
8.2
3.6
6.6
Change in Working Capital
(33.2)
(1.8)
(51.3)
(41.4)
(31.9)
Interest Expense
11.8
10.7
8.8
3.8
3.5
Direct Tax Paid
(17.3)
(49.1)
(39.9)
(21.5)
(15.6)
Others
9.3
(0.2)
(0.5)
1.2
(0.4)
Cash Flow from Operations
51.9
87.7
54.2
14.6
52.3
(Inc.)/ Dec. in Fixed Assets
(14.2)
(25.7)
(39.8)
(16.8)
(7.4)
Changes in investment
2.0
(0.6)
(3.8)
(3.9)
(9.9)
Others
(12.5)
(11.2)
(8.4)
0.2
1.3
Cash Flow from Investing
(24.7)
(37.4)
(52.0)
(20.6)
(15.9)
Changes in Borrowings
(8.3)
(26.1)
(6.9)
14.0
(5.1)
Interest paid
(11.4)
(10.3)
(8.4)
(3.6)
(3.3)
Dividend paid
(6.1)
(4.7)
(4.7)
(4.7)
(5.9)
Cash Flow from Financing
(25.8)
(41.1)
(19.9)
5.7
(14.3)
Inc./(Dec.) in Cash
1.5
9.2
(17.8)
(0.3)
22.1
Opening Cash balances
10.3
11.8
21.0
21.0
3.2
Closing Cash balances
11.8
21.0
3.2
20.7
25.3
Source: Company, Angel Research
Key Ratios
Y/E March
FY18
FY19
FY20
Valuation Ratio (x)
P/E (on FDEPS)
52.3
32.5
25.1
P/CEPS
46.5
29.9
23.7
P/BV
15.6
10.7
7.6
EV/Sales
3.4
2.5
2.6
EV/EBITDA
28.6
18.9
19.2
Per Share Data (Rs)
EPS (Basic)
12.0
19.3
25.0
EPS (fully diluted)
12.0
19.3
25.0
Cash EPS
13.5
21.0
26.5
Book Value
40.3
58.4
82.2
Returns (%)
ROE
29.8
33.0
30.5
ROCE
37.8
47.8
37.8
Angel ROIC (Pre tax)
37.6
52.0
37.9
Turnover ratios (x)
Receivables (days)
99.5
92.0
99.2
Inventory (days)
46.0
41.4
55.8
Payables (days)
131.0
121.2
121.2
Working capital cycle (days)
14.5
12.2
33.8
Source: Company, Angel Research (Valuation at the upper price band)
Heranba Industries Ltd | IPO Note
February 22, 2021
6
Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com
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