Rossari Biotech makes strong debut; share price jumps 64% over issue price

The stock rallied 64% to Rs 698 against issue price of Rs 425 on the BSE.

Shares of Rossari Biotech made a strong debut by listing at Rs 670, a 58 per cent premium against its issue price of Rs 425 per share on the BSE on Thursday. Minutes later, the stock extended its gains and rallied 64 per cent to hit a high of Rs 698 on the exchange.

On the National Stock Exchange (NSE), too, shares hit a high of Rs 695, after opening at Rs 669. At 10:02 am, the stock was trading at Rs 677, a 59 per cent higher on the NSE and BSE. A combined around 5 million equity shares changed hands on both the exchanges.

The Rs 496 crore initial public offering (IPO) of the specialty chemicals maker, Rossari Biotech, had received massive investor interest with the IPO getting subscribed 79.37 times. The reserved portion for retail investors witnessed 7.23 times subscription and non-institutional investor’s portion was subscribed 240 times. The portion set aside for qualified institutional buyers was subscribed 85 times.

As per the objectives of the issue, the company clarified that they may use this proceeds to repay a debt and fund working capital. Further, they mentioned in their strategies that they may also go for inorganic expansion in the years to come.

Rossari Biotech is into acrylic polymer business, which finds application into the home & personal care along with paints. The management highlighted that they have witnessed decent traction from the home & personal care products due to the Covid-19. The company has return ratios in the high thirties.

“The company has delivered robust growth in revenue/EBITDA/PAT over FY15-FY20, reporting CAGRs of 31%/51%/78%, leading to high return ratios (RoE/RoCE at 25%/32% in FY20). The new capacity expansion at Dahej (132ktpa) should strengthen its portfolio in the high-growth HPPC segment to serve its wide customer base. Customised product offering, fungible capacities, and rapid finished product conversion rate remain the key differentiators for the company,” analysts at Emkay Global Financial Services said in IPO note.

Analysts at Angel Broking believe Rossari will command a premium over most of its chemical peers as it is net debt-free as well as it has better asset turnover, working capital days, return on equity (ROE) and return on capital employed (ROCE) better than most of its peers. In the last three years, Rossari reported 32 per cent and 66 per cent revenue and PAT CAGR due to the strong promoter and management team.