Heranba Industries IPO: Grey market premium stable at Rs 200; should you subscribe when issue opens?

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February 19, 2021 10:56 AM

Agrichemicals manufacturer Heranba Industries' Rs 625-crore initial public offering (IPO) will open for subscription on Tuesday, February 23, 2021.

Heranba Industries IPO, IPOThe grey market premium of Heranba Industries shares is stable at Rs 200 or 32 per cent from the IPO price

Agrichemicals manufacturer Heranba Industries’ Rs 625-crore initial public offering (IPO) will open for subscription on Tuesday, February 23, 2021, and will be available for subscription till Thursday, February 25, 2021. The subscription for anchor investors will open on February 22, 2021. The basis of share allotment is likely to be finalised on March 2 and shares are expected to be credited to demat account on March 4. According to Axis Capital IPO note, post issue, promoters and promoter group shareholding will come down to 74.15 per cent from 98.85 per cent while public shareholding will go up to 25.85 per cent from 1.15 per cent. The grey market premium of Heranba Industries shares is stable at Rs 200 or 32 per cent from the IPO price.

Heranba Industries’ public health products include general insect control, termiticide, larvicide, indoor residual spray, rodenticide and cockroach gels which are Formulations of synthetic pyrethroids. The agrochemical firm is one of the leading domestic producers of synthetic pyrethroids like cypermethrin, alphacypermethrin, deltamethrin, permethrin, lambda-cyhalothrin, etc. Anish Moonka, Head of Research, JST Investments, told Financial Express Online that the sheer number of competitors (10+) with significant market share showcases a lack of any pricing power. Given reasonable valuations of 20 times earnings, Heranba Industries looks good for listing gains in the short term. “For the long term, we would like to monitor some more key deliverables before taking up any action,” Moonka added.

Emkay Global Financial Services and Batlivala & Karani Securities India are the book running lead managers to the IPO, while Bigshare Services Pvt Ltd is the registrar of the issue. Keshav Lahoti, Associate Equity Analyst, Angel Broking Ltd, expects the company to gain market share and improve margins in the future. Heranba Industries has priced its issue at 22.1x PE on a trailing basis, which looks quite reasonable to Lahoti in context to the future prospects of the company. “We expect a good listing of Heranba Industries, and are positive on the long term prospects of the firm. We recommend ‘subscribe’ to the Heranba Industries IPO for long term as well as for listing gains,” Lahoti added.

An analyst at Marwadi Shares and Finance Ltd has also recommended to ‘subscribe’ to the Heranba Industries Ltd IPO. Considering FY 20 adjusted EPS of 24.43 on a post-issue basis, the upper price band implies a P/E ratio of 25.67X. “Seeing the future prospects of the company, sustainable and growing financial statements of the past years, we see the company’s price band is at a reasonable valuation,” the analyst said.

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