Rossari Biotech Ltd received a staggering response to its initial public offering on the final day on Wednesday for what was the first IPO since India went into a lockdown in late March to control the Covid-19 pandemic.
The offering of 8.173 million shares, excluding the anchor allotment portion, received bids for nearly 649 million shares towards the end of day three, stock-exchange data showed. The book was subscribed about 79.4 times.
The quota reserved for institutions and retail investors was subscribed 85.3 times and 7.24 times, respectively. The portion set aside for non-institutional investors, including corporate bodies and wealthy individuals, was covered nearly 240 times.
HNIs typically bid on the final day of a public offering to keep their IPO financing costs at a minimum. They borrow short-term capital from various avenues, barring banks, to fund their IPO applications and deploy only a small fraction of their own capital—called margin money—upfront.
Last Friday, Rossari raised Rs 148.87 crore ($19.8 million) from a bunch of anchor investors including Abu Dhabi’s sovereign wealth fund and existing investor Malabar Investments. Rossari allotted a little over 3.5 million shares at the upper end of the price band to 15 investors.
A little more than four months ago, Rossari had raised Rs 100 crore in a pre-IPO round by allotting shares to eight institutional investors including private equity and hedge funds.
With the pre-IPO transaction, Rossari had managed to raise two-thirds of the fresh money it was otherwise aiming to mop up via the IPO when it filed its draft prospectus in December 2019.
At the time of filing, the IPO’s size was estimated at Rs 700 crore. Now, the IPO size stands at Rs 496.25 – excluding the pre-IPO round – at the upper end of the price band announced.
The company is now seeking a valuation of Rs 2,206 at the upper end of the price band as compared with an estimated Rs 2,681 crore it had sought at the time of its IPO filing seven months ago.
Rossari Biotech denied it had cut its valuation. “We… have not trimmed our valuations. In February 2020 we did our pre-IPO placement… at Rs 425 per share and even now our IPO is priced at Rs 425 per share,” the company said.
However, the company didn't clarify on its December 2019 estimated valuation.
The IPO comprises a sale of 5.25 million shares each by promoters Edward Menezes and Sunil Chari worth Rs 446 crore. The company also aims to raise Rs 50 crore in fresh capital. Rossari will use the fresh capital and the pre-IPO money to repay debt, fund working capital requirements and meet general corporate expenses.
Rossari will join listed peers such as Aarti Industries Ltd, Vinati Organics Ltd, Atul Ltd as well as Galaxy Surfactants Ltd and Fine Organics Industries Ltd, both of which went public in 2018.
Axis Capital and ICICI Securities are merchant bankers arranging the share sale. Axcelus Finserv Pvt. Ltd is the adviser to the overall offer.
Rossari was originally incorporated as a partnership firm, Rossari Labtech, in March 2003. It makes specialty chemicals used as raw material in the FMCG, apparel, poultry and animal feed industries.
The company reported consolidated net profit of Rs 65.25 crore for the year ended March 2020 on operating revenue of Rs 603.81 crore. Its 2018-19 consolidated net profit was Rs 45.68 crore on revenue of Rs 517.12 crore.