Neogen Chemicals IPO Review: Should you Invest?

Neogen Chemicals IPO plans to raise Rs 132.35 crore, and comprised of a fresh issue and an offer-for-sale. The company has already raised Rs 39.70 crore from a total of seven anchor investors at the price of Rs 215 per share, which is the upper end of its price band.

The two main promoters to the issue are Haridas Thakarshi Kanani and Beena Haridas Kanani. The book running lead manager to this IPO is Inga Advisors Private Limited and Batlivala & Karani Securities India Private Limited is the co-book running lead manager.

Neogen Chemicals Business Profile

• Neogen Chemicals is one of the leading manufacturers of specialty chemicals that are bromine-based, and lithium-based. As on February 28, 2019, the company had manufactured an aggregate of 198 products, that comprise of 181 organic chemicals and 17 inorganic chemicals.
• The company’s products are used in application industries such as pharmaceutical, agrochemical, flavour and fragrance and electronic chemicals. Organic chemicals forms about 60-70 per cent of the company’s revenues and the rest comes in from inorganic chemicals.
• The company has two active manufacturing sites. The company has also invested in a 50,000 square meter plot in Dahej SEZ, which is leased from Dahej SEZ, on which the company plans further investment in machinery to set up the first phase capacity to produce lithium inorganic chemicals of about 12,00,000 tonnes per annum. The company expects the plant to commence operations by FY20. Further, the company plans to invest an additional 126,000 litre glass-lined reactor capacity in Vadodara, which is expected to be operational by FY20.

Objective and Neogen IPO Details

The company will use the proceeds of the IPO for the prepayment or repayment of all or a portion of certain borrowings availed by the company.

The funds will be used for early redemption of 9.8% FRCPS, long term working capital. and general corporate purposes.

Issue Open: April 24th, 2019 –April 26th, 2019

Issue Type: Book Built Issue IPO

Issue Size: 61.6 lakh Eq Shares of Rs10 (total of approx. 132.35 Cr)

Fresh issue of shares: 32.6 lakh

Offer-for-sale: 29 lakh

Issue Price: Rs 212-Rs 215 Per Equity Share

Market Lot: 65 Shares

Minimum Order Quantity: 65 Shares

Listing At: BSE, NSE

Listing Date: May 8th, 2019

Should you Invest?

The company’s standalone total income and profit have grown at a compounded annual growth rate (CAGR) of 19.66% and 30.61%, respectively, over the period FY14-18. On a consolidated basis, the total income and profit after tax rose 19.69% and 30.29%, respectively.

Neogen’s listed peers Aarti Industries, Atul, Navin Fluorine International, Vinati Organics and Paushak have performed well over the past three years.

However, since the issue size is lower than Rs 250 crore, the shares will be listed in the ‘T’ group, which means there will be some restrictions on price movements

The investors may “subscribe” for long term to Neogen Chemicals IPO.