Laxmi Organics IPO : Subscribe or NOT?

The data has been compiled from various sources and might have small difference but overall theme is to subscribe or not — we will focus on that

Laxmi Organics IPO– Almost 30 yr old company involved in manufacturing of ethyl acetate and diketene and derivatives

Business — Company is among the largest manufacturer of ethyl acetate with 30% market share in India and sole manufacturer of diketene with 55% market share in India approximately

Offer purpose — Offer for sale (600cr) including fresh issue of 300 cr. for repayment of debt, existing capacity expansion and new expansion for specialty chemicals

Key domains -Company have two major segments.Acetyl (52% revenue with single digit margin) and specialty intermediates (28% revenue with double digit margin)

Risks —

Company has low margins for its products

High raw material cost poses challenge for company

Strength

Company products are used in various industries and well diversified

Company have low customer concentration with no customer having more than 10% revenue contribution

Future

Company is expanding to lucrative fluorospeciality segment which have higher margins

Company existing capacity is being expanded and thus gives revenue visibility

Valuations

Looking at EBITDA and growth shown, company looks expensive

Bullish market and IPO frenzy makes the valuations stretched leaving little room for improvement until company shows growth

Should we apply?

People can subscribe for long term only if they want to bet on growth potential on new segments

If applying, recommended to sell on getting gains on listing day

One can avoid for investment purposes presently as there are better listed option available in market

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