Chemcon

IPO Size

`318 Cr

Price Band

`338-340 Per Share

Minimum Lot Size

44 Share

Face Value

`10 Per Share

Employee Discount

NA

Retail Allocation

35%

Issue Open Date

21 Sep 20

Issue Close Date

23 Sep 20

Listing Date

01 Oct 20

About the Company:

Gujarart-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 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 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.

Outstanding Litigation:

S.No. 1 - Company 2 - Directors 3 - Promoters
Entity Name By the Company Against the Company By the Director Against the Director By the Promoter Against the Promoter
Criminal cases - - - - - -
Material civil cases - - - - - -
Taxation matters - 2.69 - - - -
Regulatory Procedings - - - Not Quantifiable - Not Quantifiable
Amt. (In Million Rs.) - 2.69 - - - -

Financial Statements:

Income Statement FY20 FY19 FY18
Gross Operating Income 2660.17 3053.26 1583.91
Cost of Employee & Inventory 1629.57 2090.28 966.05
Other Expenses 288.33 282.29 159.4
EBITDA 742.27 680.69 458.46
Depreciation 46.2 28.64 22.59
Interest 46.84 40.02 30.36
Profit Before Tax 649.23 612.03 405.51
Tax 160.7 181.62 141.7
Profit After Tax 488.53 430.41 263.81

Recommendation

As per CA Ajay Chouhan, SEBI Registered Research Analyst, recommendation is to 'Subscribe'. The Chemcon speciality chemicals claim to be the leading producer of HMDS ad CMIC global wide. The recent restrictions on imports from China by various countries has given a special treatment to speciality chemical producing sector in India as major companies will bank upon their produce. Chemcon is expected to get the same treatment and premium P/E multiple as well. Moreover, its coverage in 10 countries will not let it to rely upon single buyer. The product portfolio of the company also contains speciality chemicals for oilfields, silanes industry and contract manufacturing for chemical customization. At a P/E multiple of 22.12 (considering the FY20 earnings and upper price band) investors should apply for listing gains and long terms investment too.

Promoter of the Company

The promoters of the company are KamalKumar Rajendra Aggarwal, Navdeep Naresh Goyal, and Shubharangana Goyal.

Peer Comparison

In the listed space, the company has number of 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 their global coverage makes it a major player in the oligopolistic market structure.

Objectives of the Issue

Offer for Sale

The object of the Offer for Sale is to allow the shareholders to sell an aggregate of up to 4,500,000 Equity Shares held by them. The company will not receive any proceeds from the Offer for Sale. Offer for Sale Size is of 4,500,000 Equity Shares having ₹10 aggregating up to Rs.153 Cr at the upper price band of Rs. 340.

Fresh Issue

The company has planned to raise fresh capital comprising an aggregate of 4,852,950 shares having ₹10 aggregating up to Rs. 165 Cr at the upper price band of Rs. 340. The net proceeds from the issue will be utilized for meeting capital expenditures which is required to expand their manufacturing facility in which total expenditure is expected at Rs. 41.03 crores. The net proceeds will be further utilized for taking care of working capital requirements amounting at Rs. 90 crores while rest will be utilized for other corporate purposes.