Aristo Bio-Tech and Lifescience
Aristo Bio-Tech and Lifescience is coming out with an initial public offering (IPO) of 18,12,800 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 72 per equity share.
The issue will open for subscription on January 16, 2023 and will close on January 19, 2023.
The shares will be listed on NSE Emerge Platform.
The share is priced 7.20 times higher to its face value of Rs 10.
Book running lead manager to the issue is Beeline Capital Advisors.
Compliance Officer for the issue is Neha Batra.
Profile of the company
The company is an agrochemical company engaged in the manufacturing, formulation, supplying, packaging and job work services in various Pesticides such as Insecticides, Herbicides, Fungicides, Plant Growth Regulators and a wide variety of other Agrochemicals for India as well as for Export. Agrochemical industries are very vast field and deals with production and distribution of pesticides and fertilizers to increase the crop yields. Agrochemicals (Crop protection products/pesticides) are designed to protect crops from insects, diseases and weeds. Currently the company has 182 products registered with CIB&RC for manufacturing and sales.
The company supplies its products across 20 states and its manufacturing agrochemicals such as Insecticides, Herbicides, Fungicides and Plant Growth Regulators which are directly sold to its customers and is also engaged in Job work as per customer requirements. The company is an ISO 9001: 2015 certified company for Quality Management System which confirms to the requirements of the quality standard for manufacturing of agrochemicals and pesticides and SMERA SME 3 for good credit worthiness.
The company’s diversified product portfolio can be classified as Herbicides/Weedicides, Fungicides, Plant Growth Regulator and Insecticides. Agrochemicals are an important agricultural support and boosts to it, while preventing, reducing and eliminating the impact of disease to increase food output and safety. The company has risen out the diversified portfolio of agrochemical product segment. Instituted with a vision to cater to growing needs of the agriculture market and provide high quality products, it now bags a wide range of agrochemicals products in its product portfolio like herbicides, insecticides, fungicides, plant growth regulators & fertilizers in various forms - liquid, dust, powder and granules. The company has expanded its operations beyond the borders of its state of inception to Punjab and Uttar Pradesh.
Proceed is being used for:
Meeting working capital requirement
General corporate purpose
Meeting the issue expenses
Industry overview
Covering more than 80,000 commercial products, India’s chemical industry is extremely diversified and can be broadly classified into bulk chemicals, specialty chemicals, agrochemicals, petrochemicals, polymers and fertilizers. Globally, India is the fourth-largest producer of agrochemicals after the United States, Japan and China. India accounts for 16% of the world production of dyestuffs and dye intermediates. Indian colorants industry has emerged as a key player with a global market share of 15%. The country’s chemicals industry is de-licensed, except for few hazardous chemicals. India holds a strong position in exports and imports of chemicals at a global level and ranks 14th in exports and 8th in imports at global level (excluding pharmaceuticals). The domestic chemicals sector's small and medium enterprises are expected to showcase 18-23% revenue growth in FY22, owing to an improvement in domestic demand and higher realisation due to high prices of chemicals. India’s proximity to the Middle East, the world’s source of petrochemicals feedstock, enables it to benefit on economies of scale.
The Indian chemicals industry stood at $178 billion in 2019 and is expected to reach $ 304 billion by 2025 registering a CAGR of 9.3%. The demand for chemicals is expected to expand by 9% per annum by 2025. The chemical industry is expected to contribute $300 billion to India’s GDP by 2025. An investment of Rs. 8 lakh crore ($107.38 billion) is estimated in the Indian chemicals and petrochemicals sector by 2025. The specialty chemicals constitute 22% of the total chemicals and petrochemicals market in India. The demand for specialty chemicals is expected to rise at a 12% CAGR in 2019-22.
Despite the current pandemic situation, the Indian chemical industry has numerous opportunities considering the supply chain disruption in China and trade conflict among the US, Europe and China. Anti-pollution measures in China will also create opportunities for the Indian chemical industry in specific segments. Additional support, in terms of fiscal incentives, such as tax breaks and special incentives through PCPIRs or SEZs to encourage downstream units will enhance production and development of the industry. The dedicated integrated manufacturing hubs under Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIR) policy to attract an investment of Rs 20 lakh crore ($276.46 billion) by 2035. To bring about structural changes in the working of domestic chemical industry, future investments should not only focus on transportation of fuels such as petrol and diesel, but also on crude-to-chemicals complexes or refineries set up to cater to the production of chemicals.
Pros and strengths
Scalable business model: The company’s business model is order driven, and comprises of optimum utilization of its existing resources. This business model has proved successful and scalable for the company in the last few financial years. It has adequate capacity to scale upward and it also undertakes aggressive marketing of its products along with maintaining superior quality.
Cost effective production and timely fulfillment of order: Timely fulfillment of the orders is a prerequisite in the industry. The company has taken various steps in order to ensure adherence to timely fulfillment and also to achieve greater cost efficiency. The company constantly endeavors to implement an efficient procurement policy for inputs required for production so as to ensure cost efficiency in procurement which in turn results in cost effective production.
Existing client relationship: The company constantly addressing the customer needs for variety of its products. The company’s existing client relationships help the company to get repeated business from its customers. This has helped the company to maintain a long-term working relationship with its customers and improve its customer retention strategy. It has a strong existing client relationship which generates multiple repeated orders. The company’s existing relationship with its clients represents a competitive advantage in achieving stable growth, gaining new clients and increasing its business.
Risks and concerns
Maximum revenue comes from limited customers: The company’s top ten customers have contributed 57.00%, 42.45% and 45.78% of its revenues for the period ended March 31, 2022, March 31, 2021 and March 31, 2020 based on Restated Financial Statements. However, the company’s top customers may vary from period to period depending on the demand and thus the composition and revenue generated from these customers might change as it continues to add new customers in normal course of business. Since the company’s business is concentrated among relatively few significant customers, it could experience a reduction in its results of operations, cash flows and liquidity if it loses one or more of these customers or the amount of business it obtains from them is reduced for any reason, including but not limited on account of any dispute or disqualification.
Business is subject to climatic conditions and cyclical in nature: As an agrochemical company, its business is sensitive to weather conditions such as rains, drought, floods, cyclones and natural disasters, as well as events such as pest infestations. There is growing concern that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns and the frequency and severity of extreme weather and natural disasters. The company’s results of operations are significantly affected by weather conditions in the agricultural regions in which its products are used. The most important determinant of its sales is the volume of crops planted. Adverse conditions early in the season, especially drought conditions, can result in significantly lower than normal plantings of crops and therefore lower demand for crop protection products. This can result in its sales in a particular region varying substantially from year to year.
Do not have any long-term agreement for supply of raw materials: The company is, to a major extent, dependent on external suppliers for its raw materials requirements and it does not have any long-term supply agreements or commitments in relation to the same or for any other raw materials used in its manufacturing process. Consequently, it is exposed to price and supply fluctuations in raw materials, and these fluctuations may adversely affect its ability to obtain orders and/or to execute them in a timely manner, which would have a material adverse effect on its business, results of operations and financial condition.
Outlook
Aristo Bio-Tech and Lifescience is an agrochemical company and is mainly engaged in the manufacturing, formulation, supplying, packaging, and job work services of various Pesticides. It delivers its products in India as well as engage in exporting products like Insecticides, Herbicides, Fungicides, Plant Growth Regulators, and a wide variety of other Agrochemicals. On the concern side, the company’s top ten customers contribute majority of its revenues from operations and any loss of business from one or more of them may adversely affect its revenues and profitability. Moreover, its top ten suppliers contribute majority of its purchases and any loss of business with one or more of them may adversely affect its business operations and profitability.
The company is coming out with an IPO of 18,12,800 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 72 per equity share to mobilize Rs 13.05 crore. Minimum application is to be made for 1600 shares and in multiples thereon, thereafter. On performance front, revenue from operations of the company had decreased by 0.73% from Rs 16721.81 lakh in Fiscal 2021 to Rs 16599.02 lakh in Fiscal 2022. Moreover, the company reported a net profit of Rs 146.17 lakh in Fiscal 2022 as compared to a net profit of Rs 107.57 lakh in Fiscal 2021.
Going forward, the company is planning to expand the scope and range of products provided to its existing customers by continuing to build its expertise and extending its capabilities. Moreover, the company intends to improve efficiencies to achieve cost reductions so that it can be competitive. This can be done through domestic presence and economies of scale. Increasing its penetration in existing regions with new range of products, will enable the company to penetrate into new catchment areas within these regions and optimize its infrastructure. As a result of these measures, the company will be able to increase its market share and profitability.
