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Heranba Industries Limited is here with IPO | Third Eye's View

Heranba Industries Limited's IPO is opening for public tomorrow to raise up-to Rs. 625.24 crores. So, let's discuss this IPO.



Company profile

Heranba is a manufacturers of Synthetic Pyrethroids and its intermediates in India based out of Vapi, Gujarat, with Corporate and Administration Offices in Mumbai. It has a wide network of business in India as well as in world market with a phenomenal growth rate year after year. It produce advance agro-chemical solutions based on specially developed technology. Its Public Health products are supplied in both Government Tenders and to Pest control companies.

It has expertise on all the key chemical reactions on commercial scales. Presently engaged in the following processes:


Objective of the IPO

1. To fund working capital requirements

2. General corporate purpose

Third Eye View - Not growth oriented but a good opportunity for retail investors to participate in. 


Financial data


Numbers are looking fabulous. Net worth is increasing, profit is increasing, EPS is increasing. However, revenue has decreased during the year ended 31 March 2020 by 5.3% year-on-year, which could be one time decrease as we can see growth back on track in 30 September 2020 numbers, where revenue is higher by 23.29% YoY.

Third Eye View - Overall financials are looking strong.

Valuation of share

* P/E of 24.97 at upper price band of Rs. 627 and considering EPS of 25.03.

Third Eye View - Valuation is attractive.


Positives points

1. There is no Fund or Institutional Investor who are selling stake to en-cash the current bull market that's a big plus in my view.

2. Big tail wind is there. Government is creating agri-infrastructure in the country and pushing use of latest farm technologies to maximise the land potential.

3. No qualification or reservation by statutory auditors on the financial statements of the company.

4. Attractive valuation of IPO.

Negative points

1. Trend towards organic farming is increasing off lately. And both pyrethroids and insecticides, which are used to control pests, are known to cause health hazards in humans. For instance, they can trigger asthma attacks in individuals with sensitive lungs, which may prove fatal in certain cases. Toxicity evidence from laboratory animal studies and human epidemiological studies indicates that pyrethroids are developmental neurotoxins that may also adversely affect behavior, fertility and hormonal balance in human beings.

2. Objective of the IPO is not something where we can expect significant growth after fund raise. Had it been for capex or expansion, it would have been more attractive stock for long term also. So, investors should see past performance of the company to judge future and should not expect something huge in near future. 

3. Significant increase in remunerations to KMP. It was Rs. 27.7 million for 2017, Rs. 45.39 million for 2018 and Rs. 102.96 million for 2020. 

4. Export revenue from China out of our total revenues for the six months period ended on September 30, 2020 and for the Fiscal 2020, 2019 and 2018 was ₹ 910.75 million, ₹1,281.44 million, ₹1,690.53 million and ₹1,723.43 million representing 14.71%, 13.24%, 16.70% and 22.97%, respectively. Any restriction on India-China trade might impact company's business.


That's it from my side. Please share your views in comment box below.


About author: 

Manish Negi is a Chartered Account and an experienced auditor. 

Twitter -  www.twitter.com/camanishnegi

Koo - www.kooapp.com/profile/camanishnegi

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Comments

  1. ArushiFebruary 23, 2021 at 12:45 PM

    This is quite a good analysis! Thanks for a detailed one...

    ReplyDelete
  2. Swaminathan SwamiFebruary 25, 2021 at 1:20 PM

    Guess Capex Expansion already happened in 2018 and R&D Lab Operational in October 2020. So Benefits of Growth from New country approvals and addressing export opportunities would be without gestation, if all goes as per management vision - whose stake increases to 25% post issue. Stake increase a good indicator of mngmt confidence.

    ReplyDelete

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