Ami Organics - IPO Note
Last Updated: 10th December 2022 - 12:03 am
Ami Organics is a 17-year old company located in the state of Gujarat and specializing in the high growth segments of Active Pharma Ingredients (APIs) and specialty chemicals. Essentially, Ami Organics caters to the pharmaceuticals and the agrochemicals space and has over 150 clients spread across 25 nations including India. Ami organics operates through 3 plants; all located in Gujarat at Ankleshwar, Sachin and Jhagadia with total capacity of 6,060 MTPA (million tonnes per annum). Jhagadia and Ankleshwar were acquired in Mar-21 and are not reflected in FY21 results.
Ami Organics IPO is tapping the primary market with an IPO of Rs.570 crore consisting of a fresh issue of Rs.200 crore and an offer for sale (OFS) of Rs.370 crore. The IPO is priced in the band of Rs.603-610.
Key terms of the Ami Organics IPO offer
Key IPO Details |
Particulars |
Key IPO Dates |
Particulars |
Nature of issue |
Book Building |
Issue Opens on |
01-Sep-2021 |
Face value of share |
Rs.10 per share |
Issue Closes on |
03-Sep-2021 |
IPO Price Band |
Rs.603 - Rs.610 |
Basis of Allotment date |
08-Sep-2021 |
Market Lot |
24 shares |
Refund Initiation date |
09-Sep-2021 |
Retail Investment limit |
13 Lots (312 shares) |
Credit to Demat |
13-Sep-2021 |
Retail limit - Value |
Rs.190,320 |
IPO Listing date |
14-Sep-2021 |
Fresh Issue Size |
Rs.200 crore |
Pre issue promoter stake |
47.23% |
Offer for Sale Size |
Rs.370 crore |
Post issue promoters |
41.05% |
Total IPO Size |
Rs.570 crore |
Indicative valuation |
Rs.2,225 crore |
Listing on |
BSE, NSE |
HNI Quota |
15% |
QIB Quota |
50% |
Retail Quota |
35% |
Data Source: IPO Filings
Some highlights of Ami Organics core business
1. It has a leadership position in most of the specific APIs it manufactures
2. Commercialized over 450 pharma intermediates in 17 therapeutic areas
3. Eight patent applications approved and 3 more in process
4. Net margins improved from 9.77% to 15.85% over last 2 years
5. Completed Rs.100 crore pre-IPO placement with marquee investors
6. Pharma intermediates account for 88.4% of total revenues
7. Pharma intermediates Trazodone and Dolutegravir top revenue contributors
Important Financials of Ami Organics
Ami Organics is a profit-making company with consistent growth in top-line revenues, bottom-line net profits and net profits margins. Its return on net worth (RONW) is way above the peer group.
Financial Parameter |
Fiscal 2020-21 |
Fiscal 2019-20 |
Fiscal 2018-19 |
Net Worth |
Rs.166.93 cr |
Rs.111.81 cr |
Rs.82.22 cr |
Revenues |
Rs.340.61 cr |
Rs.239.64 cr |
Rs.238.51 cr |
EBITDA |
Rs.80.15 cr |
Rs.41.02 cr |
Rs.42.08 cr |
Net Profit |
Rs.54.00 cr |
Rs.27.47 cr |
Rs.23.30 cr |
Net Margins (%) |
15.85% |
11.46% |
9.77% |
EBITDA Margins (%) |
23.53% |
17.12% |
17.64% |
ROCE (%) |
25.25% |
22.40% |
29.11% |
RONW (%) |
32.35% |
24.57% |
28.33% |
Data Source: Company RHP
Across key ratios like net margins and return on equity, growth has been significant in FY21 over FY19. The only catch has been flat to lower ROCE. However, since a chunk of the fresh fundraising will be utilized for repayment of debt, the ROCE should improve in the coming quarters. Also, its capacity utilization at the Sachin facility is just 63% and an improvement will result in better-fixed cost absorption.
Currently, the capacity of the Ankleshwar plant and the Jhagadia plant have not been included as they were only acquired in March 2021. Once they also come on stream, the boost to the top line and the bottom line would be significant. Already, the RONW of Ami Organics is well above the peer group in the industry.
Investment Perspective for Ami Organics
Active Pharma Ingredient or APIs is a fast-growing segment globally. For a long time, China has been the global leader in the supply of pharma intermediates. However, post the pandemic and the supply chain constraints, most global pharmaceutical players are looking at India as a viable option. That opens up a big window of opportunity.
a) Nearly 70% of the fresh issue proceeds will go towards repaying of debt. This will not only improve the solvency ratios of the company but also improve the ROCE ratios. This is likely to favorably impact valuations post the IPO.
b) Among its top revenue-generating intermediates like Trazodone, Dolutegravir, Entacapone and Pazopanib, Ami Organics has an intermediates market share ranging from 70% to 85%, giving them leadership in these core segments.
c) Ami Organics is likely to gain from high entry barriers in the pharma intermediates industry. Compliance requirements are stringent and in this area, the company has built solid entry barriers since it takes a long time to get enlisted as an API supplier.
d) If you compare Ami Organics on the P/E ratio based on indicative post-issue valuations, it discounts FY21 profits at a P/E ratio of 41X. That is relatively attractive if you compare it with peer group companies like Aarti Industries and Vinati Organics.
Ami Organics brings to the table the combination of a solid financial track record, a commitment to reduce debt as well as smart entry barriers built up in the pharma intermediates business. The pricing is reasonable and Ami Organics may have the added advantage of being in the right industry at the right time.
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