• Laxmi Organic is one of the leading manufacturer of Acetyl intermediaries and Specialty intermediaries in India
• Possesses over three decades of experience in large scale manufacturing of chemicals
• Global footprint with customers spread across 30 countries as exports contribute to a-fourth of company’s revenues
• Amongst the largest manufacturers of ethyl acetate holding approximately 30% market share in India
• In Fiscal 2010, Laxmi Organic commenced manufacturing Specialty intermediaries by acquiring Clariant’s diketene business. Today, it holds a ~55% market share of the Indian diketene derivatives market and has one of the most extensive portfolio of diketene products
• Acquisition of Miteni well places the company to enter high margin specialty fluorochemicals space

Founded in 1989, Laxmi Organic Industries started manufacturing acetaldehyde and acetic acid in 1992. In 1996, the company moved on to manufacture ethyl acetate.

The company currently operates two manufacturing facilities in Mahad, Maharashtra. One facility produces Acetyl intermediaries (AI), and the second one dedicatedly manufactures Specialty intermediaries (SI). As of December 31, 2020, the production capacity for AI was 161,320 MTPA, while SI was 78,045 MTPA.

There are two distillery’s located in Satara and Kolhapur district of Maharashtra to manufacture ethanol or specially denatured spirit. The AI and SI manufacturing units fully consume ethanol produced at the distilleries.

Laxmi Organic Industries IPO opens for subscription between March 15 to March 17, 2021. Given the strong prospects in the chemicals manufacturing space, a robust financial profile, the company appears to be an excellent long-term bet.

Laxmi Organic’s product portfolio

The company manufactures two broad categories of products:

1. Acetyl intermediaries – ethyl acetate, acetaldehyde, fuel-grade ethanol and other proprietary solvents
2. Specialty intermediaries – ketene, diketene derivatives, namely esters, acetic anhydride, amides, arylides and other chemicals

These products get used across industries, such as pharmaceuticals, agrochemicals, dyes & pigments, inks & coatings, paints, printing & packaging, flavour and fragrances, adhesives and several other industrial applications.

Product expansion plan

The company proposes to diversify into the manufacturing of specialty fluorochemicals. Laxmi organic has recently acquired assets, registrations and patents of Miteni. A manufacturer of organic fluorospecialties and electrochemical fluorination.

Customer base across growing industries

Industry backdrop

Ethyl acetate is a highly versatile solvent and finds its use in multiple applications across industries. Ethyl acetate gets derived from non-aromatic raw materials, and the bio-based origin gives it a distinct identity. Given the lower toxicity when exposed to humans, ethyl acetate is the preferred solvent over traditional solvents. The industry will witness a move to green solvents like ethyl acetate because of other solvents’ health hazards.

The global ethyl acetate market may grow at a CAGR of 4-5% over the next decade in terms of volumes. In terms of value, the market can increase by 5-6% over the same period.

The global diketene derivatives market is estimated to be $1.2Bn in 2019. The company expects volumes will grow by 4% CAGR over the next five years. India’s demand will also increase during the same period, and imports will fulfil 40% of the domestic market requirements.

About the Promoters of Laxmi Organic

Well experienced board and management team actively contribute to the operations and strategy of Laxmi Organic Industries. The promoter, Mr Ravi Goenka, has extensive experience in the chemicals industry.

Financial Profile

Below is the condensed financial information of Laxmi Organic Industries Limited.

Amounts in Rs Cr excluding per share data

• Healthy revenue growth, strong margins and therefore, strong return on net worth

Comparison with listed peers

• As per the company, the relevant industry composite P/E ratio is 21.7x

Offer proceeds

 Utilization of proceeds from the fresh issue of shares:

• Investment in wholly-owned subsidiary Yellow Fine Chemicals Private Limited for part-financing it’s capital expenditure. This infusion is concerning setting up the manufacturing facility for fluorospecialty chemicals
• Funding capital expenditure to expand SI manufacturing facility
• Fund working capital requirements of the company
• Prepay/repay outstanding borrowings availed by the subsidiary company Viva Lifesciences Private Limited
• General corporate expenses

IPO Factsheet

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The information provided in the red herring prospectus filed by the company with the Securities and Exchange Board of India (www.sebi.gov.in) is the basis for this note. However, I recommend that the reader validate the data before making any financial decision. Also, investment in an initial public offering (IPO) is subject to market risks. It should be evaluated, keeping your risk profile and investment objective in mind. The author will not be responsible for any financial loss or otherwise resulting from any action taken based on the above.

The author is a senior finance professional with over fifteen years of work experience in corporate finance and has an affinity for personal finance and investment management. Please leave your comment or share thoughts on this article via email at decodefinance.in@gmail.com. For more articles, please visit the website www.decodefinance.in

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