Clean Science and Technology Ltd. will hit the primary market on July 07. Should you subscribe?

Indian specialty chemical industry has been an outperformer this year and rising trend in chemical industry has given premium valuations to specialty chemical companies. Clean Science and Technology, a leading manufacturer of performance chemicals (i.e. MEHQ, BHA and AP) will open for subscription on July 7. In the month of June, 5 IPOs had kept investors busy. This month Clean Science and technology is the second IPO after G R Infraprojects.

Clean Science and Technology IPO Details:

  • Issuer Company: Clean Science and Technology Ltd.
  • Industry:  Specialty Chemicals
  • IPO Size: 1,546.62 cr.
  • Price Band: 880-900
  • Issue Open Date: 7 July, 21
  • Issue Close Date: 9 July, 21
  • Listing Date: 19 July, 21
  • Minimum Lot Size: 16 shares
  • Face Value: 1 Rs. Per share
  • Employee Discount: NA
  • Retail Allocation: 35%
  • Listing Exchange: NSE, BSE

Composition of Issue Size

The issue size of 1,546.62 crores is a complete Offer for Sale comprises sale of up to 17.18 million shares by Ashok Ramnarayan Boob, Krishnakumar Ramnarayan Boob, Siddhartha Ashok Sikchi and Parth Ashok Maheshwari.

Must Read: G R Infraprojects will hit the primary market on July 07. Should you subscribe?

About the Company

Clean Science and Technology is a globally focused entirely on developing newer technologies using in-house catalytic processes, which are eco-friendly and cost competitive. This has enabled them to emerge as the largest manufacturer globally of certain specialty chemicals in terms of installed manufacturing capacities as of March 31, 2021. The company has continued its focus on product identification, process innovation, catalyst development, significant scale of operations as well as our measures towards strategic backward integration that have all contributed to their success as one of the fastest growing and among the most profitable specialty chemical companies globally. The company’s name was changed to ‘Clean Science and Technology Private Limited’ in 2006, to reflect our vision of focusing on sustainable chemistry led by innovative technology and lower effluents. They manufactures functionally critical specialty chemicals such as Performance Chemicals (i.e. MEHQ, BHA and AP), Pharmaceutical Intermediates (i.e. Guaiacol and DCC), and FMCG Chemicals (i.e. 4-MAP and Anisole). Within 17 years of incorporation, we have grown to be the largest manufacturer globally of MEHQ, BHA, Anisole and 4-MAP, in terms of installed manufacturing capacities.

Industry Growth Drivers

  • Specialty chemicals industry is in a rising trend as the progress trend of population in India and their dependency on FMCG and pharmaceuticals is growing faster.
  • Exports are on the rise as India is becoming a central manufacturing hub for various specialty chemicals due to increasing restrictions in China to combat pollution.
  • China used to be the manufacturing hub but shift to India due to rising restrictions in China has opened various opportunities for Indian specialty chemicals.
  • Average labor cost of China is growing at a CAGR of 19-20% while a 4-5% CAGR has been recorded in India. This accounts for higher operating margins in domestic companies.
  • Indian Government has taken a lot of initiatives to push specialty chemicals industry such as ‘Make In India’ program and ‘Productivity Linked Incentives’ Scheme.
  • 100% Foreign Direct Investment (FDI) has been permitted by the government to support the production capacities.
  • India’s specialty chemical industry accounts for $70 billion and studies from various institutions believe that $100 billion valuation is not so far.  

Peers Comparison                                             

In the listed space, the company faces tough competition from Rossari Biotech, Fine Organics, Camlin Fine Sciences, PI Industries and Navin Fluorine Limited.

Financials

The specialty chemical company is a leading manufacturer of Performance Chemicals (i.e. MEHQ, BHA and AP) and generates 62.32% revenues from them. The product portfolio of the company is diversified to Pharmaceutical intermediates and FMCG chemicals too. Bayer AG, Genex Laboratories Limited, Nutriad International NV, SRF Limited, Vinati Organics are a few of its customers. On the financial front, Clean Science and Technology has been able to increase their revenues by 15.3% in last two years. Company has been able to generate 53% EBITDA margins due to higher efficiency while profit after tax is increased by 42.52 in last two years. Company is almost debt-free and doesn’t have any interest obligations. Return on Capital Employed is 73.89% while Return on Equity stood at 36.76%. Company has strong cash flows and continuously spending on fixed assets for capacity expansion to meet the aggregate demand. Considering the upper price band and FY20 Earning Per Share (EPS), the company is demanding a P/E multiple of 48.2x, much in-line with the listed peers.

Also Read: Why should you stick to investing in market leaders only?

811
2

Leave a Reply

Your email address will not be published. Required fields are marked *