Chemcom IPO to Open on Sep. 21. Should you Subscribe?

Don’t worry Computer Age Management Services Ltd. (CAMS), Chemcon Speciality Chemicals IPO is joining you on 21st September for subscription and keep active for tough competition. The Chemcon IPO is a blend of Offer for sale and fresh issue in which 4,500,000 equity shares are allowed to sell for an aggregate amount of Rs.  153 crores at the upper price band while the new issue will fetch Rs. 165 crores by issuing an aggregate of 4,852,940 shares. Promoters of the company: Kamalkumar Rajendra Aggarwal and Naresh Vijaykumar Goyal are selling their entire stake.

 The net proceeds from the fresh issue will be utilized for meeting capital expenditures to expand manufacturing facility, working capital requirements and general corporate purposes.

Chemcon IPO Details

  • Issuer Company: Chemcon Speciality Chemicals Limited
  • Industry: Chemicals
  • IPO Size: 318 cr.
  • Price Band: 338-340
  • Issue Open Date: 21 Sep, 20
  • Issue Close Date: 23 Sep, 20
  • Listing date: Oct 01, 20
  • Status: Upcoming
  • Minimum Lot Size: 44 shares
  • Employee Discount: NA
  • Face Value: 10 RS. Per-share
  • Retail Allocation: 35%
  • Exchange: NSE, BSE

Company Overview

Gujarat-based ISO 9001:2015 and 14001:2015 certified company has a history of more than two decades in the chemical industry. Chemcon speciality chemicals are the sole producer of HMDS (Hexamethyldisilazane) and CMIC which are used in the pharmaceutical industry predominantly. The company is the third-largest manufacturer of HMDS and second-largest manufacturer of CMIC in the world. The product portfolio of the company is not limited to the pharmaceutical industry but has strong footprints in the oilfield segment. The company produces Calcium Bromide, Zinc Bromide and Sodium Bromide which are used as completion fluids in the oilfields. The company also undertakes contract manufacturing projects for chemical custom manufacturing.

Peer Comparison

In the listed space, the company has several competitors such as Vinati Organics, Aarti Industries, Sudarshan Chemical Industries, Fine Organic Industries, Atul, Paushak and Neogen Chemicals. However, the product mix of the company and its global coverage makes it a major player in the oligopolistic market structure.

SWOC Analysis

Strength: The tenacity of the Chemcon chemicals Ltd. banks upon their core products HMDS (Hexamethyldisilazane) and CMIC which are predominantly used in the pharmaceutical industry and the company claims to be the leading producer of both speciality chemicals. The company has a vast manufacturing facility which is catering more than ten countries and there no reliability over a single firm or country makes it a value bet. Moreover, the product portfolio of the company is not limited to producing chemicals for pharmaceuticals industry; it has also established their footprints in oilfields industry, silanes industry and contract manufacturing related to customizing chemicals.

Weakness: As a leading producer of speciality chemicals: the company will require funds to meet its capital expenditures for expansion and to fulfil their working capital requirements. The company will also require heavy spending upon R&D infrastructure which could dampen their healthy balance sheet. Any changes in the cost of inputs required for their core products could upset their supply chain. More the suppliers of their inputs are from China too and the recent issues between Indian and China are expected to lower their total productivity. The United Arab Emirates (UAE) contributes to 26.43% of the total revenues and any import duty by the UAE government may affect the revenues of the company.

Opportunities: The recent import restriction on Chinese goods has increased the investor’s love of Indian speciality chemical companies. Major customers of the company are Hetero Labs Limited, Laurus Labs Ltd, Aurobindo Pharma Ltd, Lantech Pharmaceuticals Ltd, Macleods Pharma Ltd and they are likely to grow in numbers due to recent ‘Make in India’ initiative. Many countries are avoiding trades with China which will force them to move to Chemcon for their product.

Challenges: Keeping in mind the rising number of companies in the field of speciality chemicals, the company could face some competition in future. For the expansion plans, the company will require to raise funds in future the company would require to look for economical acquisition cost alternatives. The company will be required to keep working on product development to remain leading manufacturer and distributor of the core products.

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