Laxmi Organic share price soars, list at 20% premium over IPO price

Laxmi Organic Industries shares listed on the stock exchanges today at a premium over the IPO price. Laxmi Organic Industries stocks made the debut on the bourses at Rs 156.20 per share, up Rs 26.20 from the IPO price of Rs 130 apiece. Laxmi Organic Industries entered Dalal Street earlier this month to raise Rs 600 crore through the public issue. Amid the surging interest in IPOs, Laxmi Organic Industries’ public issue was subscribed 107 times by investors. Shares of Laxmi Organic had a market capitalization of Rs 4,118 crore on the listing. 

Laxmi Organic Industries is another leading chemicals manufacturer. The company’s products find application in various high-growth industries, including pharmaceuticals, agrochemicals, paints, printing, packaging, flavours, fragrances, adhesives and other industrial applications. Laxmi Organic is also the only Indian manufacturer of diketene derivatives with a significant market share and one of the largest portfolios of diketene products, according to Angel Broking. 

Through the amount raise via the IPO, Laxmi Organic plans to repay debt and use the funds to invest in Yellowstone Fine Chemicals Private Limited, a subsidiary of the company. Post issue, promoter shareholding has been trimmed to 72.9% from 89.5% pre-IPO. Public shareholding in the firm now increases to 27.1% from 10.5% earlier. 

Valuations concerns do persist for Laxmi Organic Industries. “At Rs 130, the stock is available at 48.8x FY20. We believe valuations are on the higher side given it is a commodity business,” ICICI Direct said in a note. “We also believe that upcoming incremental opportunity from fluoro-specialities division for three/four years forward is also largely discounted in the price and thus leaves limited opportunity on the table,” the note added. 

Laxmi Organic Industries plans to expand its current product offerings, which will support growth going forward. “. It intends to perform and deliver products pursuant to the long-term contracts already entered into with certain customers. The company believes that the introduction of such products would increase profit margins and the long-term contracts would provide incremental and steady revenues,” ICICI Direct said.

Highlighting the risks involved, Angel Broking noted that the company’s manufacturing facility is located in one geography which poses a risk. Further, owing to its exposure to foreign clients the risk of foreign currency exchange runs highs. Meanwhile ICICI Direct said that Acetic acid prices remain volatile which is a key raw material for Laxmi Organic’s acetyl intermediates.

Laxmi Organic Industries joins the likes of Aarti Industries, Atul Ltd, Fine Organic Industries, Navin Fluorine International, Rossari Biotech, and SRF that are already listed on the bourses.

(The recommendations in this story are by the respective research and brokerage firm. The Outlooker Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)