{"id":895,"date":"2021-08-11T10:49:34","date_gmt":"2021-08-11T10:49:34","guid":{"rendered":"https:\/\/www.invest19.com\/blog\/?p=895"},"modified":"2021-08-11T10:49:36","modified_gmt":"2021-08-11T10:49:36","slug":"chemplast-sanmar-has-hit-the-primary-market-should-you-subscribe","status":"publish","type":"post","link":"https:\/\/www.invest19.com\/blog\/chemplast-sanmar-has-hit-the-primary-market-should-you-subscribe\/","title":{"rendered":"Chemplast Sanmar has hit the primary market. Should you subscribe?"},"content":{"rendered":"<div style=\"margin-top: 0px; margin-bottom: 0px;\" class=\"sharethis-inline-share-buttons\" ><\/div>\n<p>Another specialty chemical manufacturer is available for\nsubscription in the primary market. Chemplast Sanmar- a leader in manufacturing\nspecialty paste PVC (Poly Vinyl Chloride) resin that has application in building\nand construction, health care, electronics, automobiles, piping and siding,\nblood bags and tubing, wire and cable insulation etc. This is the 7<sup>th<\/sup>\nIPO in the month of August. The issue size of Chemplast Sanmar is a mix of\nfresh issue and offer for sale.<\/p>\n\n\n\n<p><strong>Chemplast\nSanmar IPO Details<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Issuer Company: Chemplast Sanmar<\/li><li>Industry: Specialty Chemicals<\/li><li>IPO Size: 3,850 cr.<\/li><li>Price Band: 530-541<\/li><li>Issue Open Date: 10 Aug, 2021<\/li><li>Issue Close Date: 12 Aug, 2021<\/li><li>Listing Date: 24 Aug, 2021<\/li><li>Minimum Lot Size: 27 shares<\/li><li>Face Value: 5 Rs. Per share<\/li><li>Employee Discount:&nbsp; <\/li><li>Retail Allocation: 10%<\/li><li>Listing Exchange: NSE, BSE<\/li><\/ul>\n\n\n\n<p><strong>Composition\nof Issue Size<\/strong><\/p>\n\n\n\n<p>The issue size of Rs. 3,850 cr. is a mix of fresh issue of Rs. 1,300\ncr. and offer for sale of Rs. 2,550 cr. at the upper price band. <\/p>\n\n\n\n<p>Offer for Sale: The object of the Offer for Sale is to allow Sanmar Holdings Limited and others to sell an aggregate of up to 47.13 million equity Shares held by them amounting at Rs. 2,550 cr. The company will not receive any proceeds from the Offer for Sale.<\/p>\n\n\n\n<p>Must Read: <a href=\"https:\/\/www.invest19.com\/blog\/car-trade-ipo-will-hit-the-primary-market-on-aug-09-should-you-subscribe\/\">Car Trade IPO will hit the primary market on Aug 09. Should you subscribe?<\/a><\/p>\n\n\n\n<p>Fresh Issue: The company has planned to raise fresh capital\ncomprising an aggregate of 2,40,29,574 equity shares having Face Value \u20b910\naggregating up to Rs. 1,300 Cr at the upper price band of Rs. 541. Out of the\nnet proceeds<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>An amount of Rs. 1,238.25 cr. will be utilized\nfor early redemption of Non-Convertible Debentures issued by the Company.<\/li><li>Rest will be utilized for general corporate\npurpose.<\/li><\/ul>\n\n\n\n<p><strong>About the\nCompany<\/strong><\/p>\n\n\n\n<p>Chemplast Sanmar Limited is a specialty chemicals manufacturer in\nIndia with focus on specialty paste PVC resin and custom manufacturing of\nstarting materials and intermediates for pharmaceutical, agro-chemical and fine\nchemicals sectors. CSL is one of India\u2019s leading manufacturers of specialty\npaste PVC resin on the basis of installed production capacity, as of December\n31, 2020. In addition, the specialty player is also the third largest\nmanufacturer of caustic soda and the largest manufacturer of hydrogen peroxide\nin the South India region, on the basis of installed production capacity as of\nDecember 31, 2020 and one of the oldest manufacturers in the chloromethanes\nmarket in India. Pursuant to the CCVL Acquisition, the company has acquired\n100.0% equity interest in CCVL that is the second largest manufacturer of\nsuspension PVC resin in India and the largest manufacturer in the South India\nregion, on the basis of installed production capacity as of December 31, 2020.\nThe product has high barriers to entry and limited competition is expected to\nbenefit existing manufacturers of specialty paste PVC resin in India in the\nmedium term and the demand for specialty paste PVC resin is expected to grow at\na CAGR of 6% to 8% between FY 2022 and 2025.<\/p>\n\n\n\n<p>&nbsp;<strong>Industry Growth Drivers<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>China\n     used to be the manufacturing hub but shift to India due to rising\n     restrictions in China has opened various opportunities for Indian\n     specialty chemicals.<\/li><li>Average\n     labor cost of China is growing at a CAGR of 19-20% while a 4-5% CAGR has\n     been recorded in India. This accounts for higher operating margins in\n     domestic companies.<\/li><li>Many S-PVC plants have had to shut down or shift\nfrom mercury-based catalyst processes to mercury-free processes owing to strict\nenvironmental regulations in China.<\/li><li>Chemplast Sanmar\nis a leading manufacturer of specialty paste PVC resin. Lack of raw material\navailability and technology creates barriers to enter specialty paste PVC resin\nmarket.<\/li><li>Specialty paste PVC (Poly Vinyl Chloride)\nresin that has application in building and construction, health care, electronics,\nautomobiles, piping and siding, blood bags and tubing, wire and cable\ninsulation etc.<\/li><li>Per capita consumption of specialty paste PVC\nresin in India is 0.1 kg compared with China\u2019s 0.6 kg and Western Europe\u2019s 2.4\nkg. Thus, the Indian market is fairly underpenetrated.<\/li><\/ul>\n\n\n\n<p><strong>Peers\nComparison<\/strong><\/p>\n\n\n\n<p>The company will face tough competition from PI Industries, SRF\nLimited, Finolex Ltd. and Navin Fluorine Ltd. Out of the listed peers PI\nIndustries, SRF and Navin Fluorine have delivered multi-bagger returns. Finolex\nIndustries delivers highest Return on Net Worth at 23.50%. Navin Fluorine\ncommands highest P\/E ratio at 73.8x followed by PI Industries with 58.94x.<\/p>\n\n\n\n<p><strong>Financials<\/strong><\/p>\n\n\n\n<p><strong>Sale of\nProducts (Rs. in millions)<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"455\" height=\"296\" src=\"https:\/\/www.invest19.com\/blog\/wp-content\/uploads\/2021\/08\/Screenshot-212.png\" alt=\"\" class=\"wp-image-897\" srcset=\"https:\/\/www.invest19.com\/blog\/wp-content\/uploads\/2021\/08\/Screenshot-212.png 455w, https:\/\/www.invest19.com\/blog\/wp-content\/uploads\/2021\/08\/Screenshot-212-300x195.png 300w\" sizes=\"auto, (max-width: 455px) 100vw, 455px\" \/><\/figure>\n\n\n\n<p><strong>Observations<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Revenues of the company are increased\nsubstantially by 73.54% in last two years.<\/li><li>Company generated 95% of their revenues\ndomestically whiles rest are generated globally.<\/li><li>Revenues from selling products in domestic\narea have been increased by 218% in FY21.<\/li><\/ul>\n\n\n\n<p><strong>Financial\nStatements<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"\"><tbody><tr><td>Income Statement (In Millions)   <\/td><td>   \u00a0FY21   <\/td><td>   FY20   <\/td><td>   FY19   <\/td><\/tr><tr><td>Gross Operating Income   <\/td><td>\n  38151.08\n  <\/td><td>  12655.1   <\/td><td>  12667.74   <\/td><\/tr><tr><td>Cost of Employee &amp; Inventory   <\/td><td> 22367.05   <\/td><td> 5041.82   <\/td><td>\n  4779.42\n  <\/td><\/tr><tr><td>\n  Other Expenses\n  <\/td><td>\n  6005.59\n  <\/td><td> 4411.54   <\/td><td>\n  4553.60\n  <\/td><\/tr><tr><td>\n  EBITDA\n  <\/td><td>\n  9778.44\n  <\/td><td> 3201.74   <\/td><td>\n  3334.72\n  <\/td><\/tr><tr><td>\n  Depreciation\n  <\/td><td>\n  1309.83\n  <\/td><td>\n  873.61\n  <\/td><td>\n  563.76\n  <\/td><\/tr><tr><td>\n  Interest \n  <\/td><td>\n  4333.62\n  <\/td><td>\n  954.57\n  <\/td><td>\n  482.75\n  <\/td><\/tr><tr><td>Profit Before Tax,       Exceptional items       and JV   <\/td><td>\n  4134.99\n  <\/td><td> 1373.56   <\/td><td>\n  2288.21\n  <\/td><\/tr><tr><td>Share of restated profit\/loss from   joint ventures   <\/td><td>\n  3315.91\n  <\/td><td>\n  656.54\n  <\/td><td>\n  354.22\n  <\/td><\/tr><tr><td>Profit on investments in Joint   ventures   <\/td><td> 4809.67   <\/td><td><\/td><td><\/td><\/tr><tr><td>Profit Before Tax and exceptional   items   <\/td><td>           5628.75  \u00a0   <\/td><td>     717.02   <\/td><td>     1933.99   <\/td><\/tr><tr><td>\n  Exceptional Items\n  <\/td><td>\n  156.84\n  <\/td><td><\/td><td><\/td><\/tr><tr><td>\n  Profit before Tax\n  <\/td><td>   5471.91<\/td><td> 717.02   <\/td><td>   1933.99   <\/td><\/tr><tr><td>\n  &nbsp;Tax\n  <\/td><td>\n  1369.47\n  <\/td><td> 255.77   <\/td><td>\n  749.35\n  <\/td><\/tr><tr><td>\n  Profit After Tax\n  <\/td><td>   4102.44 <\/td><td>461.25   <\/td><td> 1184.64   <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<ul class=\"wp-block-list\"><li>Company\u2019s revenue is increased substantially by 73.54% in last two years.<\/li><li>EBITDA margins of the company stood at 25.6% in FY21. <\/li><li>Company has sufficient cash flows at Rs. 303.48 cr. led by redemption of investments that may support them to operate smoothly. <\/li><li>Company has increased its long-term borrowings heavily, currently stood at Rs. 2,024 cr.; however proceeds from fresh issue for payment of borrowing will reduce cost of debt that will increase PAT margins further.<\/li><li>PAT grew by 195% in FY21.<\/li><li>Considering the upper price band at Rs. 541 and FY21 Earning Per Share (EPS) of Rs. 30.6, the company is demanding a P\/E multiple of 17.67x, much lower than the Industry P\/E of 56.35x.<\/li><\/ul>\n\n\n\n<p>Also Read: <a href=\"https:\/\/www.invest19.com\/blog\/cement-player-nuvoco-vistas-will-hit-the-primary-market-on-aug-09-should-you-subscribe\/\">Cement player Nuvoco Vistas will hit the primary market on Aug 09. Should you subscribe?<\/a><\/p>\n<div class='epvc-post-count'><span class='epvc-eye'><\/span>  <span class=\"epvc-count\"> 2,527<\/span><\/div><div class=\"pld-like-dislike-wrap pld-template-1\">\n    <div class=\"pld-like-wrap  pld-common-wrap\">\n    <a href=\"javascript:void(0);\" class=\"pld-like-trigger pld-like-dislike-trigger \" title=\"\" data-post-id=\"895\" data-trigger-type=\"like\" data-restriction=\"ip\" data-ip-check=\"0\" data-user-check=\"1\">\n                        <i class=\"fas fa-thumbs-up\"><\/i>\n                    <\/a>\n    <span class=\"pld-like-count-wrap pld-count-wrap\">4    <\/span>\n<\/div><\/div>\n\n","protected":false},"excerpt":{"rendered":"<p>Another specialty chemical manufacturer is available for subscription in the primary market. Chemplast Sanmar- a leader in manufacturing specialty paste PVC (Poly Vinyl Chloride) resin [&hellip;] <span class=\"read-more-link\"><a class=\"read-more\" href=\"https:\/\/www.invest19.com\/blog\/chemplast-sanmar-has-hit-the-primary-market-should-you-subscribe\/\">Read More<\/a><\/span><\/p>\n","protected":false},"author":1,"featured_media":898,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[70,2,7],"tags":[],"class_list":["post-895","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-ipo","category-stock-market","category-investment"],"_links":{"self":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts\/895","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/comments?post=895"}],"version-history":[{"count":1,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts\/895\/revisions"}],"predecessor-version":[{"id":899,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/posts\/895\/revisions\/899"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/media\/898"}],"wp:attachment":[{"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/media?parent=895"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/categories?post=895"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.invest19.com\/blog\/wp-json\/wp\/v2\/tags?post=895"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}