Laxmi Organic IPO opens March 15, grey market premium zooms 100%; subscribe for long-term or listing gains?

The Rs 600-crore Laxmi Organic Industries initial public offering (IPO) is scheduled to open for subscription next week on March 15, 2021. The issue comprises a fresh issue of equity shares worth Rs 300 crore and offer-for-sale (OFS) of Rs 300 crore by the promoter Yellow Stone Trust, according to the red herring prospectus (RHP) filed. The book running lead managers to the Mumbai-based Laxmi Organic are Axis Capital Ltd and DAM Capital Advisors Ltd (formerly known as IDFC Securities Limited), while the registrar to the issue will be Link Intime India Private Ltd. The public issue will close for subscription on March 17, 2021.

Abhay Doshi, Founder, UnlistedArena.com, dealing in Pre-IPO & Unlisted Shares, told Financial Express Online that the expected price band of the issue is Rs 130 per share. Doshi said in the grey market, Laxmi Organic shares were seen trading at Rs 260, over the predicted issue price of Rs 130 apiece, implying a premium of 100 per cent. Upon listing, Laxmi Organic Industries will join the listed peers such as Aarti Industries Ltd, Atul Ltd, Fine Organic Industries Ltd, Navin Fluorine International Ltd, Rossari Biotech Ltd and SRF Ltd. Manthan Mehta, Head Unlisted & Private Equity Rurash Financial Services Pvt Ltd, told Financial Express Online, that Laxmi Organic Industry is the largest Indian exporter of ethyl acetate, especially in Europe. Given the company’s experience and a direct presence in Europe, it will further help to strengthen its position and increase sales in the future.

Rossari Biotech, Chemcon Specialty IPOs subscribed up to 150 times

In the calendar year 2020, Rossari Biotech and Chemcon Specialty Chemicals, which were subscribed almost 80 times and 149 times respectively. Manthan Mehta also said that many MNCs are investing in India for manufacturing their flexible packaging, paints, adhesives and sealants, accordingly active players in the Acetyl Intermediates space like Laxmi Organic Industries will be at a greater advantage in the domestic market. “Thus, owing to the favourable outlook in the chemical space in India, we believe that that company should be looked at from a medium to long term perspective,” he said.

The current sentiment and the IPO market in India have been very positive for all investors over the last 2 quarters.”However, short term traders should subscribe for Laxmi Organics only for listing gains even though fundamentals appear to be good,” AR Ramachandran, Co-founder & Trainer, Tips2Trades, told Financial Express Online. Ramachandran also said that it would be better to wait for a meaningful correction for long-term investors to re-enter the stock post IPO.

Laxmi Organic Industries has planned to utilise the net proceeds from the issue for setting up a manufacturing facility for fluorospecialty chemicals, working capital requirement, and for the purchase of plant and machinery for augmenting infrastructure development. In addition, funds would be used for prepayment or repayment of all or a portion of outstanding loans, and funding capital expenditure requirements for expansion of its SI Manufacturing Facility, besides general corporate purposes. The company will not receive any proceeds from the OFS.