IPO Note - Ami Organics Ltd By Nirmal Bang
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Company Overview
Ami Organics Ltd (AOL) is a research and development driven manufacturer of specialty chemicals with varied end usage, focused towards the development and manufacturing of advanced pharmaceutical intermediates (“Pharma Intermediates”) and generic active pharmaceutical ingredients (“APIs”) and New Chemical Entities (“NCE”) and key starting material for agrochemical and fine chemicals, especially from its recent acquisition of the business of Gujarat Organics Limited (“GOL”).
Objects of the Issue
The issue is of Rs 570 cr including Rs 200 cr fresh issue and Rs 370 cr offer for sale. The company would use the funds to repay its debt and fund its working capital requirements
Investment Rationale
* Strong and diversified product portfolio ably supported by strong R&D and process chemistry skills
* Extensive geographical presence and diversified customer base
* High entry barriers
* Augmenting scale through organic and inorganic routes
* Consistent Financial Performance
Valuation and Recommendation
The company’s revenues grew by 20% over FY19-21 while EBITDA grew by 38% during same period. Due to economies of scale the company is able to improve its margins steady over the years. EBITDA margins improved to 23.5% in FY21 from 17.6% in FY19 due to operational efficiencies. AOL would be a net debt free company post the IPO which would give room for leverage for future growth. Specialty Chemicals industry has been booming in the past 4-5 years and Indian players have been gaining market share from their global peers. Considering the lucrative specialty chemicals industry and AOL’s position in it as a specialized player, we are positive on the growth prospects of the company. At upper band of Rs 610, the PE is 41.2x on FY21 earnings which looks attractive. We recommend “Subscribe”.
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