Chemcon Speciality Chemicals IPO is set to open on 21-09-2020 in the Price Band of Rs. 345-350 per equity share. The IPO comprises of a fresh issue of Rs 165 crore and an offer for sale of Rs 45 lakh equity shares by promoters Kamalkumar Rajendra Aggarwal and Naresh Vijaykumar Goyal.

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Chemcon Speciality Chemicals IPO Details

Issue Period21 Sept –  23 Sept 2020
Issue DetailsFresh Issue of Equity shares upto ₹ 165 Crores
 + Offer for Sale of upto 4,500,000 Equity Shares
Issue Size (₹ Cr)₹ 317 – ₹ 318  Cr
Price Band₹ 338 – 340
Bid Lot44 Shares 
Issue Structure : 
QIB50% of the offer 
NIB15% of the offer
Retail35% of the offer 3,273,529  Shares ) (Rs.111.30 Cr)
Applications 1x retail74398
BRLMsIntensive Fiscal Services, Ambit Capital
RegistrarLink Intime India Pvt. Ltd.

Updates

  • ANCHOR ISSUE : Chemcon Speciality Chemicals Ltd.Chemcon Speciality Chemicals raised ₹95.40 crore from 13 anchor investors by allotting 28.05 lakh shares at ₹340 a share. The anchor investors include IDBI Emerging Business Fund, ICICI Prudential Child Care Plan, IIFL Special Opportunities, HSBC Global Investment, Mirae Asset Health Care, Kuber India, Ashmore India, India Acorn and Tata Multi Asset Fund.

About Chemcon Speciality Chemicals:

  • Chemcon Speciality Chemicals ltd. is a manufacturer of specialised chemicals, such as HMDS and CMIC which are predominantly used in the pharmaceuticals industry and inorganic bromides, namely Calcium Bromide,Zinc Bromide and Sodium Bromide, which are predominantly used as completion fluids in the oilfields industry
  • Chemcon Speciality Chemicals is the only manufacturer of HMDS in India and was the third largest manufacturer of HMDS worldwide in terms of production in the calendar year 2019 .
  • It is the largest manufacturer of CMIC in India and the second largest manufacturer of CMIC worldwide, in terms of production and capacity in calendar year 2019 (source: Frost & Sullivan Report).
  • Chemcon Speciality Chemicals is the only manufacturer of Zinc Bromide and the largest manufacturer of Calcium Bromide in India, in terms of production in calendar year 2019 (source: Frost & Sullivan Report).
  • Chemcon Speciality Chemicals is an ISO 9001:2015 and ISO 14001:2015 certified company for the “Manufacture and supply of pharmaceutical intermediates, silanes and oilfield chemicals”.
  • Chemcon Speciality Chemicals manufacturing facility is located at Manjusar near Vadodara in Gujarat.
  • In this Manufacturing Facility, there are currently seven operational plants of which two plants are dedicated to the manufacturing of HMDS and ancillary products (including one plant dedicated to the manufacturing of hi-purity HMDS), one multipurpose plant, currently being used for manufacturing of HMDS and other pharmaceutical chemicals, two plants are dedicated to the manufacturing of CMIC and two plants dedicated to the manufacturing of our Oilwell Completion Chemicals, along with three warehouses for the storage of our products and raw materials.
  • Chemcon Speciality Chemicals also has an in-house laboratory at our Manufacturing Facility to test our raw materials procured, as well as products at the various stages of the manufacturing process. It has five leased warehouses located outside the Manufacturing Facility, in Manjusar, Vadodara.
Chemcon Speciality Chemicals Ltd - India
  • Chemcon Speciality Chemicals Corporate Office is located in Vadodara and our sales and marketing offices are located in Hyderabad and Mohali, which are on a leasehold basis

Chemcon Speciality Chemicals: Financials

Particulars202020192018
 from Operations262.05303.34157.64
EBITDA as stated70.2666.0845.09
EBITDA Margin (%) 26.81%21.79%28.61%
Profit Before Tax64.9261.240.55
Net Profit48.8543.0426.38
NPM %18.64%14.19%16.73%
Equity Share Capital31.7831.787.94
Reserves as stated114.5965.2545.68
Net worth as stated142.7195.7753.62
Long Term Borrowings14.62.472.5
Short Term Borrowings28.6829.7413.61
EPS (₹)15.3713.548.3
RONW(%)34.2344.94%49.20%
Net Asset Value (₹)44.9130.1416.87
ROCE37.92%53.90%62.06%
ROE34.23%44.94%49.2
Equity Post IPO36.63
FV10
IPO Price340
EPS (Post IPO) FY2013.34
PE FY2025.49
P/BV7.57
Market Cap1245
Mcap/Sales4.75

Chemcon Speciality Chemicals IPO:Salient Points

  • Chemcon Speciality Chemicals is the largest manufacturer of CMIC in India and the second largest manufacturer of CMIC worldwide, in terms of production and capacity in calendar year 2019 (source: Frost & Sullivan Report).
  • Chemcon Speciality Chemicals is the only manufacturer of Zinc Bromide and the largest manufacturer of Calcium Bromide in India, in terms of production in calendar year 2019 (source: Frost & Sullivan Report).
  • Chemcon Speciality Chemicals suppllies its products to domestic customers and also exports to countries including United States of America, Italy, South Korea, Germany, People’s Republic of China, Japan, United Arab Emirates, Serbia, Russia, Spain, Thailand and Malaysia.
  • In Fiscals 2020, 2019 and 2018, the Pharmaceutical Chemicals, contributed 63.75%, 63.14% and 62.18% of company’s total revenue from operations respectively, while its Oilwell Completion Chemicals, contributed 33.47%, 35.30% and 35.63% respectively of our total revenue from operations.
  • In Fiscals 2020, 2019 and 2018, its revenue from exports (including Deemed Exports) contributed 39.78%, 31.99% and 47.84%, respectively of its revenue from operations. Tts revenues from exports (including Deemed Exports) have grown at a CAGR of 17.57% between Fiscals 2018 and 2020.
  • The key customers of its Pharmaceutical Chemicals include Hetero Labs Limited, Laurus Labs Limited, Aurobindo Pharma Limited, Sanjay Chemicals (India) Private Limited, Lantech Pharmaceuticals Limited, Ind -Swift Laboratories Limited, Vivin Drugs & Pharmaceuticals Limited and Macleods Pharmaceuticals Limited
  • The key customers of its Oilwell Completion Chemicals include Shree Radha Overseas, Water Systems Specialty Chemical DMCC and CC Gran Limited Liability Company.

Chemcon Speciality Chemicals IPO: Assessment

  • The specialty chemicals industry in which Chemcon Speciality Chemicals operates has high entry barriers.
  • With the completion of two additional plants,company could significantly benefit from economies of scale.
  • India is currently a net importer of HMDS, with about 40% of India’s domestic demand in CY19 being catered by imports majorly from China and Germany.
  • India and China are the only countries that produce CMIC. As per Frost & Sullivan Report India, a major CMIC consumer market, is expected to witness a demand growth at a CAGR of 11.0% between 2019 and 2023. It further expects that the company is well positioned to substitute the imports from China.
  • Currently most of the chemical companies are trading at high P/Es, due to the China replacement theme.
  • Chemcon Speciality Chemcials could benefit from shift of sourcing of chemcial from China by various countries.
  • On the Post issue equity, P/E works out to be ~ 25.5based on Fy20 results. The demanded P/E valuation looks reasonable for a company engaged in chemical space.
  • As per company RHP, the listed industry peers of the company are Aarti Industries, Vinati Organics, Fine Organics Industries and Neogen Chemicals which are trading at higher PE
  • I intend to apply in Chemcon Speciality Chemicals IPO and chances of allotment are somewhat low due to small issue size.
  • As on 18-09-20, Chemcon Speciality Chemicals IPO was commanding a Grey market Premium (GMP) of Rs. 220-230
  • Do check this page for any last minute updates

Standard disclaimer:  I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2)  Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors.  I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or  leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.