IPO Details

Face Value	Rs.10
Price Band	Rs.338 – Rs.340
Listing At	BSE, NSE
Min. Order Quantity	1 Lot = 44 Shares
Listing Date	1st Oct, 2020
Offer for Sale	Rs.153 Cr.
Fresh Issue	Rs.165 Cr
IPO Size	Rs.318 Cr

Chemcon Company Details

Chemcon are a manufacturer of specialized chemicals, such as HMDS and CMIC which are predominantly used in the pharmaceuticals industry (the “Pharmaceutical Chemicals”), and inorganic bromides, namely Calcium Bromide, Zinc Bromide and Sodium Bromide, which are predominantly used as completion fluids in the oilfields industry (the “Oilwell Completion Chemicals”).

The key customers of 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, Macleods Pharmaceuticals Limited and the key customers of Oilwell Completion Chemicals include Shree Radha Overseas, Water Systems Specialty Chemical DMCC, Universal Drilling Fluids and CC Gran Limited Liability Company.

The Promoters of this company are KAMALKUMAR RAJENDRA AGGARWAL, NAVDEEP NARESH GOYAL AND SHUBHARANGANA GOYAL. The lead managers to the issue are Intensive Fiscal Services Private Limited and Ambit Capital Private Limited & the Registrar to this issue is Link Intime India Private Limited.

Chemcon Limited IPO Date

The opening and the closing date of Chemcon IPO is Sep 21, 2020 – Sep 23, 2020.

Chemcon IPO Listing Date

Find the dates below on basis of allotment, refund, listing and more:

Basis of Allotment Finalization	Sep 28, 2020
Refunds Initiation	Sep 29, 2020
Credit of Shares to Demat Account	Sep 30, 2020
Share Listing Date	Oct 1, 2020

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Chemcon IPO Price Band / Cash Price

The face value of each share is Rs 10, but the price band of the IPO is Rs.338 to Rs.340.

Chemcon IPO Equity Size

This Initial Public Issue of 9,800,000 Equity Shares of Rs.10 each for cash at a price of Rs.338 to Rs.340 per equity share aggregating to Rs.318 Cr.

Chemcon IPO Equity Share Offering

Fresh Issue: The Fresh Issue of 5,500,000  Equity Shares by their Company, aggregating to Rs.165.00 Cr,

Issue Size: 9,800,000 Equity Shares of Rs.10 each, aggregating to Rs.318.00 Cr

Offer for Sale: Offer for sale consists of Up to 4,500,000 Equity Shares of face value of Rs.10 each, aggregating Rs.153 Cr.

Business strategies of Chemcon Limited

• Expansion of our total installed production capacity
• Augmenting growth in the current geographic markets and expanding into new geographic markets
• Exploring newer applications of our existing products as well as focusing on new products that are in synergy
  with our current operations
• Continue to strive for cost efficiency

Financial Summary of Chemcon Speciality Chemicals

On the basis of Standalone statement:-

Amount (in INR & Millions)
	31-Mar-20	31-Mar-19	31-Mar-18	31-Mar-17
Total Assets	2,257.92	1,730.33	970.66	626.80
Total Revenue	2,660.17	3,053.26	1,583.91	899.96
Total Expense	NA	2,431.13	1,179.22	855.66
Profit After Tax	488.53	430.41	263.81	28.24

 

Earnings per Equity Share

	31-Mar-20	31-Mar-19	Mar-18	31-Mar-17
Basic & Diluted	15.37	13.54	08.30	00.89

Issue Objective

These are the IPO Issue Objects of the company

• Capital expenditure towards expansion of our Manufacturing Facility (“Project”);
• To meet working capital requirements; and
• General corporate purposes

Chemcon IPO – Basis of the Offer Price

The issue price is determined by the company in consultation with the Lead manager on the basis of the following qualitative and quantitative factors.

Qualitative factors are:

• We are a leading manufacturer globally of the Pharmaceutical Chemicals and we are a leading manufacturer
  in India of the Oilwell Completion Chemicals (Source: Frost & Sullivan Report);
• Diversified customer base coupled with long standing relationships;
• The specialty chemicals industry in which we operate has high entry barriers;
•  Consistent financial performance with a strong financial position;
• Manufacturing facility with dedicated plants for each of our products; and
•  Experienced senior management.

The relevant quantitative factors are:

On the basis of standalone statement:-

	Basic & Diluted EPS	RONW	NAV (Rs.)
Mar-19	13.54	44.94%	30.14
Mar-18	8.30	49.20%	–
31-Mar-17	0.89	10.44%	–

●       Price to Earnings (P/E) ratio in relation to Issue Price of Rs

Particulars	P/E ratio
Highest	33.06
Average	26.13
Lowest	26.13

• Competitive Peers: There are no listed entities which are focused exclusively on the segment in which they operate. Hence, it is not possible to provide an industry comparison in relation to the Company.

Brokers Review

Top Stock Brokers Review	Company Reputation	Competitive Edge	Financial Statement	Popularity Index	Promoters Reputation
Angel Broking	7.5/10	7.4/10	8.5/10	8.1/10	7.1/10
Sharekhan	7.2/10	7.1/10	8.6/10	8.1/10	7.2/10
Kotak Securities	7.3/10	7.5/10	8.4/10	8.1/10	7.3/10
ICICI Direct	7.3/10	7.3/10	8.7/10	8.1/10	7.1/10
IIFL	7.5/10	7.2/10	8.8/10	8.0/10	7.1/10
Edelweiss	7.5/10	7.4/10	8.4/10	8.3/10	7.2/10
Zerodha	7.4/10	7.1/10	8.5/10	8.1/10	7.0/10
5Paisa	7.1/10	7.1/10	8.4/10	8.1/10	7.1/10
Karvy	7.4/10	7.3/10	8.2/10	8.1/10	7.1/10
Motilal Oswal	7.1/10	7.1/10	8.6/10	8.3/10	7.2/10

Should you Subscribe

At the upper price band of Rs 340, Chemcon is available at P/E of 25.5x on FY20, which is attractive when compared to peers. Considering healthy business performance, regular capacity expansions, strong customer base, expanding margin profile and improving outlook for the sector, we have a subscribe rating on this IPO,” Geojit Financial Services said. Its peers Aarti Industries, Vinati Organics, Atul and Paushak are available at P/E of 36.9x, 41.5x, 30.8x and 41.5x respectively.

Company has shown consistent financial performance with a strong financial position. Also, the specialty chemicals industry in which companies operate has high entry barriers Therefore, looking after all, we recommend subscribing the issue both for short & long term horizon,” said Hem Securities.

Chemcon’s revenue grew at a CAGR of 29 percent during FY18-FY20, EBITDA nearly 25 percent and profit 36 percent. It has a healthy balance sheet with stable cash flows, net debt is Rs 44 crore with D/E ratio of 0.3 in FY20.

The company’s expansion plans to set up two new plants and one laboratory with a total volumetric reactor capacity of 251.00KL, at existing manufacturing facility Manjusar, Vadodara, would significantly increase the capacity by 60 percent, total volumetric reactor at 625.85 KL. Also, it would enable us to benefit from economies of scale in the next few years. Fundamentally too, company looks sound with impressive ROCE & ROE at 37.92 percent & 34.23 percent for FY20, favourable debt-equity ratio and stable PAT & EBITDA margins,” said Rudra Shares while recommending to subscribe the IPO for listing as well as long term gains.

Choice Broking also advised investors to subscribe to the issue given the attractive valuations and positive fundamentals, but the promoter & promoter group’s corporate governance issue is making the brokerage cautious.

“The management has indicated that the company will not be impacted by any means, if the outcome of the appeal is not favourable. Also the specialty chemical sector got re-rated in the last 5-6 months. Before re-rating, the above peers were available at lower valuations. Thus considering the above observations, we assign and subscribe with caution rating for the issue,” it explained.

While subscribing the issue, investors have to consider some risk factors like outbreak of coronavirus; fluctuations in foreign currency exchange rates; political, social, legal and economic changes; increase in raw material prices; geopolitical tension in the Asia region; delay in demand revival of oilwell completion chemicals as around 30-35 percent of revenue comes from oilwell chemicals; and around 59 percent of revenue (FY20) was derived from top 5 customers.