Ami Organics Limited incorporated on January 3, 2004, is one of the leading research and development (“R&D”) driven manufacturers of specialty chemicals with varied end usage, focussed towards the development and manufacturing of advanced pharmaceutical intermediates (“Pharma Intermediates”) for regulated and generic active pharmaceutical ingredients (“APIs”) and New Chemical Entities (“NCE”) and key starting material for agrochemical and fine chemicals.

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They are one of the major manufacturers of Pharma Intermediates for certain key APIs, including Dolutegravir, Trazodone, Entacapone, Nintedanib and Rivaroxaban. They have developed and commercialised over 450 Pharma Intermediates for APIs across 17 key therapeutic areas since inception. Currently Ami Organics has 8 process patent applications and 3 additional pending process patent applications for which applications were made recently in March 2021. The company supply their products to more than 150 customers (including international customers) directly in India and in 25 countries overseas, using a distributorship network in certain cases.

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Promoters & Shareholding:

Nareshkumar Ramjibhai Patel, Chetankumar Chhaganlal Vaghasia, Shital Nareshbhai Patel and Parul Chetankumar Vaghasia are the company promoterswith pre issue holdings of 47.23%.

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Public Issue Details:

Offer for sale: Fresh issue of approx. 3,278,688 equity shares of Rs. 10 aggregating up to Rs. 200 Cr and OFS of approx. 6,059,600 equity shares aggregating up to Rs. 369.64 Cr.

Total IPO Size: Rs. 569.64 Cr.

Price band: Rs. 603 – Rs. 610.

Objective: For repaying certain debts, and working capital along with general corporate purposes.

Bid qty: minimum of 24 shares (1 lot) for Rs. 14,640 and maximum of 13 lots.

Offer period: 1^st Sep 2021 – 3^rd Sep 2021.

Date of listing: 14^th Sep 2021.

Pros:

• One of the major manufacturers of Pharma Intermediates for certain key APIs.
• Strong and diversified product portfolio.
• Professional and experienced management team.
• High entry barriers in the chemicals manufacturing industry.
• Strong R&D capabilities.

Cons:

• The company is subject to strict quality requirements, regular inspections and audits and regulatory scrutiny.
• Its business is working capital intensive.
• The company does not have long-term agreements with its suppliers for raw materials.
• Subjected to foreign exchange risks.

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Subscribe or avoid?

The global chemicals market is valued at around $4,738 Bn in 2019. The global chemicals market is expected to grow at 6.2% CAGR; reaching $6,785 Bn by 2025. The Specialty chemicals industry is driven by both domestic consumption and exports. India’s specialty chemical companies are gaining favour with global MNCs because of the geopolitical shift after the outbreak of Covid-19 as the world looks to reduce its dependence on China. Currently China accounts for ~15-17% of the world’s exportable specialty chemicals, whereas India accounts for merely 1-2% indicating that the country has large scope of improvement and wide spread opportunity, this along with Indian governments various initiatives it is expected have positive impact on the company and its business.

On the financial side, the company has had strong financial performance for the past 3 year; they have reported revenue of Rs. 341.99 Cr, Rs. 242.49 Cr and Rs. 238.90 Cr in the FY21, FY20 and FY19 respectively and net profit of Rs. 54 Cr, Rs. 27.47 Cr and Rs. 23.30 Cr in the FY21, FY20 and FY19 respectively.

For the last 3 years average EPS of Rs 12.71, P/E ratio is around 48x. On the upper price band of Rs 610 and EPS of Rs 17.14 for FY21, the P/E ratio works out to be 35.5x. Hence, the company is asking P/E in the range of 35.5x to 48x. There are listed peers like Vinati Organics trading at P/E of 75.5x (highest) and Neuland Laboratories at P/E of 31.6x (Lowest) and industry average is 49x. Hence this IPO is reasonably priced. Considering all the above factors, we recommend Investors to “SUBSCRIBE” to this IPO.

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Disclaimer:

This article should not be construed as an investment advise, please consult your Investment Adviser before making any investment decision.