Laxmi Organic dips 5% after raising Rs 259 crore via QIP issue

Share of Laxmi Organic Industries (LOIL) dipped 5 per cent to Rs 286.40 on the BSE in Thursday's intraday trade after the company approved the allotment of nearly 10 million equity shares at an issue price of Rs 269.20 per share. The stock of the diversified chemicals manufacturer had rallied 12 per cent on the BSE on Wednesday.

In an exchange filing, LOIL announced the successful completion of its fund-raise of Rs 259 crore through qualified institutions placement (QIP) of its equity shares. The fund raising committee, at its meeting held on October 10, 2023, approved the allotment of 9.63 million equity shares of face value of Rs 2 at an issue price of Rs 269.20 per share, the company said.

LOIL is a leading manufacturer of ethyl acetate and di-ketene derivatives products in India. The company is a global supplier of essentials and specialty chemicals with presence in over 52 countries and serving the needs of regional and global customers. It has three existing manufacturing sites in Mahad, Maharashtra; an upcoming site in Lote, Maharashtra, and an expansion is planned at the 84 acres brownfield site in Dahej, Gujarat.

The management said the company is committed and excited to deliver the projects at both Lote and Dahej, which provides its customers with a diversified product portfolio across Essentials and Specialties. Both upcoming sites have ample headroom for future expansion. The new Innovation campus coming up in Mahape will strengthen the company’s customer collaborations with a focus on new product and process development, the management said on positive response received for fund-raise.

However, thus far in the calendar year 2023, LOIL has underperformed the market by falling 3.5 per cent, as compared to 8.6 per cent rise in the S&P BSE Sensex. The stock had hit a 52-week low of Rs 220.70 on March 29, 2023.

For the April-June quarter (Q1-FY24), LOIL had reported a weak set of numbers with earnings before interest, taxes, depreciation, and amortization (Ebitda) down 21 per cent year on year (YoY) at Rs 81.3 crore, margin contracting 249 bps at 11 per cent. Total income decreased 3 per cent YoY to Rs 737.5 crore, and profit after tax down 41 per cent at Rs 38.3 crore over the previous year quarter.

The company said lower realisations in essentials impacted profitability but YoY & QoQ volume growth is cushioning the drop.

The ramp up of incremental capacities over FY24 and FY25 is likely to improve the operational Ebitda, and is drive profitability growth, according to analysts.

For 2023, Fitch Ratings estimates that while demand for speciality chemicals will vary by markets and industry, given the higher interest rates, the largest sector that will see demand impact will be construction.

"The demand on the other extreme is likely to improve for the automotive sector benefitting from the greater chip availability. 45 per cent of the speciality sector demand that goes into Pharmaceuticals and Agrochemicals is likely to see demand flattish through the year," LOIL said in its FY23 annual report.