Privi is a good scalable business and it’s backward integration puts it apart from competition. It’s positioning in aroma chemical space is very strong and it’s an indirect bet on FMCG segment. However, it’s steady state ebitda margin we can assume to be at 13-14 % and it has to continuously invest in assets to remain strong in the market. Strong FCF generation might be quite a time away for this company. Hence, there will be a limit to its commanded valuation multiples and it will be it’s growth which will determine expansion/contraction in its valuation multiples.
In contrast, ADI, after being separately listed and with 60 % enhanced capacity and it’s new plants to manufacture sterols and higher concentration tocopherol going into stream in FY21, looks a far interesting bet in terms of its attractiveness to an investor especially because of its potential of good FCF generation. To me this business seems to be ripe for a good margin expansion as also has a relatively good scalable opportunity at this stage and with its reduced equity capital post listing, commanded valuation multiples expansion might be good that’s what I believe.
Rgds.