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1 November 2023

Organic Recycling Systems IPO: Pioneering Sustainable Waste Management Solutions

Introduction:

Organic Recycling Systems IPO, an initiative to revolutionize sustainable waste management, recently marked its presence in the financial market. This Fixed Price Issue of Rs 50.00 crores consisted solely of a fresh issue of 25 lakh shares. The bidding process for the IPO commenced on September 21, 2023, and concluded on September 26, 2023. The allotment results were revealed on Friday, September 29, 2023, and the shares officially commenced trading on BSE SME on October 6, 2023. Each share was priced at ₹200, with the minimum application lot size set at 600 shares, requiring a minimum investment of ₹120,000 for retail investors.

Market Participants:

Arihant Capital Markets Ltd played a crucial role as the book running lead manager for the Organic Recycling Systems IPO, while Maashitla Securities Private Limited served as the registrar. The market maker for this IPO was Arihant Capital Markets.

Stock Performance:

As of October 19, 2023, the stock of Organic Recycling Systems Ltd was trading at ₹245.15, indicating a 3.72% increase. The stock had an opening price of ₹236.95, with a daily high and low of ₹247.90 and ₹231.00, respectively. The previous closing price stood at ₹236.35, with a total traded value of 42,600 shares.

Ownership Structure:

The company had a pre-issue shareholding of 30.14%, which decreased to 20.35% post-issue.

Financial Insights:

Organic Recycling Systems Ltd demonstrated positive growth in its financial performance. As of March 31, 2023, the company's assets stood at ₹11,931.10 lakhs. The company reported substantial revenue from operations, amounting to ₹2,534.10 lakhs in fiscal 2023. Notably, the company achieved a profit after tax of ₹365.38 lakhs. The net worth of the company reached ₹2,550.07 lakhs, with reserves and surplus at ₹2,014.40 lakhs. Total borrowings were reported at ₹6,981.41 lakhs.

Market Indicators:

Key performance indicators included a Price-to-Earnings (P/E) ratio of 25.54, Post P/E of 42.11, Market Capitalization of ₹153.99 crores, Return on Equity (ROE) of 21.76%, Return on Capital Employed (ROCE) of 13.06%, Debt/Equity ratio of 2.7, Earnings per Share (EPS) of ₹7.83, and Return on Net Worth (RoNW) of 14.33%.

Objectives of the Issue:

The proceeds from the Organic Recycling Systems IPO were intended for the following objectives:

1. Reduction of the aggregate outstanding borrowings of the Company.
2. General Corporate Purpose.

Expert Opinion:

pointed out that the company is actively involved in waste management with a technological focus to create a win-win situation for all stakeholders. While the company faced setbacks in FY21 and FY22 due to the pandemic's impact, its performance in FY23 indicates promising prospects ahead, particularly in the specialized services and solutions segment for Municipal Solid Waste (MSW) projects. However, the issue seemed to be aggressively priced. Well-informed and cash-surplus investors may consider investing for medium to long-term rewards.

Subscription Status:

The Organic Recycling Systems IPO witnessed substantial interest from investors, with an overall subscription rate of 3.24 times as of September 26, 2023. Retail investors displayed a strong appetite with a subscription rate of 2.21 times. The issue also garnered significant interest from other investor categories, with a subscription rate of 4.28 times among NIIs.

Conclusion:

The Organic Recycling Systems IPO offers investors an opportunity to participate in an industry dedicated to innovative and sustainable waste management solutions. However, as with any investment, conducting thorough research and assessing the company's competitive positioning, growth prospects, and financial stability is imperative. Diversification and risk management also remain fundamental principles in stock market participation.

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