Indian IPOs
>> 20 Microns
20 Microns IPO Note
2 September 2008
Source: www.keynoteindia.net
Price Band: Rs. 50 - 55 per share
Issue open between: September 8 - September 11, 2008
Book Running Lead Managers: Keynote Corporate Services Ltd.
To List on: NSE and BSE
Market Cap post-listing: Rs. 78 Cr. or $18 million (based on the cap price)
Executive Summary
- Incorporated in 1987, 20 Microns Ltd. (20ML) is a leading producer of micronised minerals in India. It produces various industrial minerals such as Cacium Carbonate, China Clay (Kaolin), Talc, Dolomite, Silica, Mica and Barytes.
- These minerals are used in various industries which comprises of paints, plastics, paper, glass and ceramics.
- India is endowed with huge deposits of industrial minerals including limestone, clay, talc, dolomite, barytes, mica, etc. It has a globally strong position in the production of these minerals. For instance in barytes production, India ranks 2nd, while in talc and mica production it ranks 4th and 10th respectively.
- Demand from user industries (viz. paint, paper, plastics, ceramics, etc.) is driven primarily by economic growth and rising per capita income levels over the last 4-5 years. This has led to increased opportunities for the industrial minerals industry.
- 20ML has a robust track record in the white minerals industry. Commencing operations with a small capacity of just 2,400 tonnes per annum (tpa), it has scaled up over the last 2 decades to reach a size of 96,400 tonnes per annum in FY08. It is one of the only two producers of China Clay in Asia, second only to English Indian Clays Ltd.
- 20ML has 8 manufacturing locations spread across India, giving it the advantage of being in close proximity to either its captive mines or key customers. Also 8 marketing offices and 13 depots facilitate better customer servicing through just in time (JIT) deliveries.
- Captive mines located close to most of its plants can act as one of the entry barriers to new competition.
- The company plans to further augment the capacity by 41,000 tpa. The project consists of expansion in talc, calcined clay, specialty chemicals production and implementation of wet grinding process.
- The company also plans to focus on its strong R&D capabilities to develop high value specialty minerals which carry better pricing and therefore better EBITDA margins.
- The IPO is priced at 18.1x based on pre-issue weighted average EPS and 14.9x based on FY08 pre-issue EPS.
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