IPO Review - Heranba Industries Ltd

Heranba Industries (Heranba) incorporated in 1992, is an agrochemical company. It is also one of the leading domestic producers of synthetic pyrethroids. The company is present in the entire product value chain of the agrochemicals industry. The business verticals include (a) domestic bulk sales of Technicals (31.6% of FY20 sales), (b) technicals bulk exports (36.5%) (c) branded formulations (12.7%), (d) formulations exports (12.8%) and (e) insect control chemicals (6.4%). Heranba has more than 9,400 dealers having access to multiple states in India. It has three manufacturing facilities in and around Vapi with a capacity of 14,024 MTPA.

Investment Rationale

Leading integrated domestic player in synthetic pyrethroids

Heranba is one of the leading domestic producers of pyrethroids (~68% of FY20 revenues; 19.5% domestic market share in 2019). It is in the entire value chain of synthetic pyrethroids that provides flexibility to shift between products depending on the demand-supply and pricing dynamics. The company also has a strong pending product pipeline in pyrethroids including formulations filed by partners in domestic, export markets. Apart from this, more than half of the global demand for Pyrethroids comes from China. Hence, due to shutdown of chemical plants in China amid pollution, higher volumes of Pyrethroids are expected to be exported out of India.

Strong product portfolio, wide distribution network

Heranba manufactures and supplies Technicals to leading agrochemical companies operating in and outside India. In domestic formulations, it has more than 9,400 dealers having access to 21 depots in multiple states. The company's International distribution partners have obtained registrations for 371 products in 41 countries across the Middle East, CIS, Asia, South East Asia and Africa. Further, 172 of the company's products have been filed by its overseas customers, which are pending for registration.

Priced at FY20 P/E of 25.7x on upper band

Benefiting from being an integrated pyrethroids manufacturer with a strong product pipeline, geographical expansion coupled with favourable macro factors are likely to drive growth. Apart from this, it has one of the strongest return ratios in Industry and healthy balance sheet. We have a SUBSCRIBE recommendation on the IPO. At Rs. 627, the stock is available at 25.7x FY20.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Heranba_IPOReview.pdf

Source : Equity Bulls

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