Laxmi Organic IPO listing day strategy: Grey market premium falls; wait for dips to buy more or book profit?
Laxmi Organic Industries shares will make the stock market debut on Thursday, March 25, 2021. Earlier this week, a specialty chemicals manufacturer finalised the basis of share allotment. The Rs 660 crore IPO was subscribed 107 times and was sold in a price band of Rs 129-130 per share. The grey market premium has further fallen to Rs 50-52 on Wednesday, from Rs 65-70 on the previous day. The shares of speciality chemicals manufacturer were trading at Rs 182, up 21 per cent from the IPO price, according to data provided by UnlistedArena.com, which tracks the grey market.
Laxmi Organic Industries 12th IPO to be listed
Laxmi Organic Industries IPO will be the 12th company to be listed on the bourses. The already listed companies in the specialty chemical space are Aarti Industries Ltd, Atul Ltd, Fine Organic Industries Ltd, Navin Fluorine International Ltd, Rossari Biotech Ltd and SRF Ltd. Laxmi Organics specializes in manufacturing ethyl acetate and diketene derivatives in India. “As shares are decently valued, we are expecting bumper listing gains from this IPO. Any good correction in the share price should be a buying opportunity to add more into the portfolio,” Ranjit Jha, CEO, Rurash Financial, told Financial Express Online.
Laxmi Organic Industries is a leading manufacturer of ethyl acetate with over 30 per cent market share in India and the only manufacturer of diketene derivatives in India. Laxmi Organic reported dismal earnings performance mainly led by contraction in operating margins and higher depreciation charges. While its revenue recorded a CAGR of 4 per cent over FY18-20, EBITDA and net profit both recorded negative 4 per cent CAGR during the same period. Vikas Jain, Senior Research Analyst at Reliance Securities, told Financial Express Online that the IPO is valued at 46x and 32x EPS for FY20 and annualized FY21, respectively, which look to be aggressively priced. “Notably, its peers are available at discount so we are not positive at current valuations and would wait for some declines,” Jain added.
Laxmi Organic’s products find application in end user industries such as pharmaceuticals, agrochemicals, dyes and chemicals, inks and coatings, paints, printing and packaging, flavors and fragrances, adhesives and other industrial applications. Marwadi Shares and Finance Ltd told Financial Express Online that considering FY20 adjusted EPS of 2.66 on a post-issue basis, the company is going to list at a P/E of 48.82X with the market cap of Rs 34,276 million. The peers of the company namely Aarti Industries Ltd is at P/E of 24.92X and Fine Organics Industries Ltd is at 35.46X. If an IPO opens with meaningful listing gains, this will make the valuation more expensive, limiting the upside potential. “Hence, the investor should position themselves to book profit on the day of listing in case of strong listing,” it added.
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