Fine Organic Industries IPO: Here is what you should know

Mumbai-based Fine Organic Industries has set price band and dates for its upcoming maiden offer. Fine Organic Industries IPO will remain open between 20 and 22 June. Price band has been fixed at INR780 – 783 per share and investors can place orders minimum for 19 shares and in multiples thereafter. Here are some quick points about Fine Organic Industries IPO:

Fine Organic Industries IPO: All OFS

Fine Organic Industries IPO will not entail issue of fresh shares and as such the company will not get any proceeds from the IPO which is purely an Offer For Sale (OFS). All the funds will go to selling shareholders which plan to offload 7,664,994 shares, amounting to INR600.2 crore on the upper end of the price band. These shares will be sold by Prakash Damodar Kamat (1,530,005 shares), Mukesh Maganlal Shah jointly with Jayshree Mukesh Shah (824,397 shares), Jyotsna Ramesh Shah (1,544,976 shares), Jayen Ramesh Shah jointly with Neeta Jayen Shah (1,530,003 shares), Tushar Ramesh Shah jointly with Bina Tushar Shah (1,530,004 shares), Bimal Mukesh Shah jointly with Mukesh Maganlal Shah (705,609 shares).

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As one can guess, all the selling shareholders are promoters or are part of the promoter group. The company has no external investor.

Fine Organic Industries IPO: Focus on Oleochemical

Fine Organic Industries produces a wide range of specialty plant derived oleochemicals-based additives used in the food, plastic, cosmetics, paint, ink, coatings and other specialty application in various industries. As at 31 March 2018, it had a range of 387 different products sold under the ‘Fine Organics’ brand. It is the first company to introduce slip additives in India and is the largest producer of slip additives in the world.

In the 12 months ended 31 March 2018, the company had 631 direct customers and 127 distributors from 69 countries. Its direct customers are multinational, regional and local players manufacturing consumer products, such as Hindustan Unilever and Parle Products, and petrochemical companies and polymer producers globally. Its plastics additives and specialty additives are also used in the packaging of foods and other fast moving consumer goods.

Fine Organic Industries IPO: Focus on capacity expansion

The company currently has three production facilities: one in Ambernath (Maharashtra); one in Badlapur (Maharashtra); and one in Dombivli (Maharashtra). As at 31 December 2017, these three facilities have a combined installed capacity of approximately 64,300 Tonnes Per Annum (TPA).

Fine Organic Industries is planning to set up a new production facility in Ambernath with planned capacity of 32,000 TPA. This expansion will come at a cost of INR130 crore and is expected to come on stream in the fourth quarter of fiscal 2019.

Similarly, the company is planning to set up a new production facility in Leipzig, Germany with an initial installed capacity of 10,000 TPA. This facility is expected to commence operations in the third quarter of fiscal 2020 and will be owned and operated by a 50% joint venture company.

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Another area of investment will be a joint venture plant with Dutch family-owned Zeelandia International in Patalganga near Mumbai. The company plans to invest INR55 crore in the plant which will manufacture and distribute premixes for bakery and confectionary products and pan release agents. This facility, with installed capacity of 10,000 TPA, is expected to commence operations in the first quarter of fiscal 2019.

Fine Organic Industries IPO: Healthy margins coming under pressure

Over the last few years, the company has made significant progress in its business. This is clearly reflected in the way its revenues increased from INR497.5 crore in FY2013 to INR792.7 crore in FY2017. Topline increased each of these years but that was not the case with profits which dipped in FY2015. Nevertheless, profits and margins have shown a healthy growth in these years before coming under pressure in the nine months of FY2018.

Fine Organics’ financial performance (in INR crore)

FY2013FY2014FY2015FY2016FY20179M FY2018
Total revenues497.5574.2616.5667.7792.7594.7
Total expenses466.6479.6530.9550.8671.8500.2
Profit after tax20.961.757.176.277.758.5
Net margin (%)4.210.79.311.49.89.8

Fine Organic Industries IPO: Valuations

For the year ended March 2017, the company’s Earnings Per Share (EPS) stood at INR25.33 which translates into Price/Earnings (P/E) ratio range of 30.79 – 30.91. The company has Return on Net Worth (RONW) of 26.51%. The company claims it has no comparable listed peers in India.

Vipin Mathur

By working in multiple cultures and segments of various organizations, Vipin has earned 15 years of experience in managing and organizing different operations. Most recently, he is associated with IPO Central as CEO. At IPO Central, he plays a leading role in management and operational practices. He also guides authors and researchers about the latest trends and news of upcoming IPOs.

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