What is your view on the forthcoming IPO of Hemani Industries?

Even as the IPO markets are tentative about the fate of the mega LIC IPO, the fresh filings for IPOs are continuing at a frenetic pace. The latest to file for an IPO is Hemani Industries. It is a leading chemical company and it has recently filed the draft red herring prospectus (DRHP) with SEBI for its Rs.2,000 crore IPO. The normal IPO approval process by SEBI takes around 2-3 months so the final approvals should come in by June or July this year.

The proposed IPO of Hemani Industries includes a fresh issue of Rs.500 crore and an additional offer for sale or OFS of Rs.1,500 crore taking the overall issue size to Rs.2,000 crore. In the OFS portion, 3 of the original promoters of Hemani Industries will offload Rs.500 crore worth of shares each. The OFS is neither capital dilutive nor EPS dilutive. However, it does expand the floating stock of the company from a listing perspective.

Let me now turn to the fresh issue proceeds of Rs.500 crore and how the company plans to allocate the monies. The fresh issue proceeds will be utilized to fund capital expenditure (capex) for the proposed capacity expansion at Saykha industrial estate in Gujarat. Part of the funds will also be used to repay borrowings. Hemani manufactures a total range of agrochemicals and specialty chemicals, and in addition also offers CRAMS services.