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Salient features of the IPO:

* Specialty chemicals manufacturer Ami Organics Ltd. (AOL), is coming up with an IPO to raise Rs. 570cr, which opens on 1st Sept. and closes on 3rd Sept. 2021. The price band is Rs. 603 - 610 per share.

* The issue is a combination of fresh and OFS. The company will not receive any proceeds from the OFS part of the issue. Of the net proceeds from the fresh issue, Rs. 140cr will be used to prepay or repayment of the debt and another Rs. 90cr will be utilized to fund the working capital requirements of the company.

.* The company in consultation of the BRLMs have undertaken a preIPO placement aggregating to Rs. 100cr. It allotted 0.17cr shares at a price of Rs. 603 per share.

Key competitive strengths:

* competitive strengths:

* Strong and diversified product portfolio ably supported by strong R&D and process chemistry skills 

* Extensive geographical presence and diversified customer base with long standing relationships

* High entry barriers in the chemicals manufacturing industry in which the company operates

* Strong sales and marketing capabilities

* Experienced and dedicated management team

* Consistent financial performance

Risk and concerns:

* Unexpected change in government policies and regulations

* Revenue concentration risk

* Unfavorable forex rates

* Difficulty in sustaining the profitability

* Competition

Below are a few key observations of the issue:

* AOL is a R&D driven manufacturer of specialty chemicals with varied end usage. It focuses towards the development & manufacturing of pharma intermediates for regulated and generic active pharmaceutical ingredients (API) and new chemical entities. As per the F&S Report, the company is one of the major manufacturers of pharma intermediates for certain key APIs, which finds application in certain high-growth high-margin therapeutic areas like anti-retroviral, anti-inflammatory, anti-psychotic, anti-cancer, anti-Parkinson, antidepressant and anti-coagulant.

* It also manufactures key starting material for agrochemical and fine chemicals. The company diversified the product offerings by completing the acquisition of two manufacturing facilities operated by Gujarat Organics Ltd. (GOL), which manufactures added preservatives (parabens and parabens formulations, which have end usage in cosmetics, animal food and personal care sector) and other specialty chemicals (with end usage in the cosmetics, dyes polymers and agrochemicals sector).

* Since inception, AOL has developed and commercialized over 450 pharma intermediates for APIs. Business from this segment has increased by 21.7% CAGR over FY19-21 and contributed around 88% to the total revenue. On a small base, business from the Specialty chemicals segment increased by 173.6% CAGR and contributed 4.9% to total revenue in FY21.

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