Chemspec Chemicals is a company engaged in manufacturing the Speciality Chemicals been used in Pharmaceutical Formulations, API and Personal Care, including Skin and Hair Care. The company was started in 1975 by Mr Jayant C Vora. The company also produces chemicals for the formulation of fungal infection treatment and anti-bacterial medicine. It is the largest manufacturer of these medicines’ chemicals in India. It also manufactures anti-hypertension therapeutic segments and manufactures bulk drug intermediates. In this article, we take a closer look at the Chemspec Chemicals IPO Details and its possible future prospects.
The manufacturing facility of the company is at Taloja, Maharashtra. The capacity of their unit is 6,000 TPA. The company is one of the few companies that have got license approval from the US FDA and all the ISO quality Control Standards. It is one of the leading manufacturers of FMCG ingredients critical additives. The chemicals used for skin and hair care products.
It also operates in Pharma through API, formulations, Anti-bacterial Drug Chemical, Anti-Fungal Drug Chemical and Anti-Hypertension drugs. The company has now been associated with nearly 136 clients throughout their business history. Due to their experience and true innovation and manufacturing facility, the company has delivered end-to-end solutions with high product quality service.
OBJECTS OF THE IPO ISSUE:
- Prepayment of all the loans of the company, which be availed on a consolidated basis.
- To meet corporate targets.
- To fund the working capital requirement.
BASIS OF THE IPO OFFER:
- The company holds a Leadership position in the sector in which it operates. The sector also holds a strong entry barrier for new players.
- The company has Long- Term Associations with the top tier client. It also has strong relations with their supplier.
- The company has a focused R&D facility. It also holds for a method enhancement strategy to drive out the research and development in their business operation.
- The company has a diversified product portfolio. Most of the products of the company are operationally essential products widespread throughout sectors.
- The company has an Advanced Manufacturing facility. It is been approved by US FDA and ISO Quality Control and Safety Standards.
CHEMSPEC CHEMICALS IPO DETAILS:
Chemspec Chemicals has its headquarters in Navi Mumbai. Recently the company submitted its DRHP to the SEBI. The company is seeking approval from SEBI to float its IPO in the market. The IPO of the company is worth Rs.700 Crore. The company mentioned in their DRHP that the IPO would not contain any issue of fresh equity shares; the IPO will be a fully OFS based IPO. The OFS will be brought forward by the company’s promoters and selling stakeholders.
The stakeholders offloading their stake via OFS are as follows:
| Bhaichand Amoluk Consultancy Services LLP | Rs. 233.40 Crore |
| Mitul Vora | Rs. 233.30 Crore |
| Rishabh Vora | Rs. 233.30 Crore |
| IPO Opening Date | |
| IPO Closing Date | |
| Issue Type | Book Building Type |
| Face Value | Rs. 2/ Equity Share |
| IPO Price | |
| Market Lot | |
| Min Order Quantity | |
| Listing At | BSE, NSE |
| Issue Size | Rs.700 Crore |
| Fresh Issue | No issue of fresh equity |
| Offer for Sale | Rs.700 Crore |
| Basis of Allotment Date | |
| Initiation of Refunds | |
| The Credit of Shares to Demat Account | |
| IPO Listing Date | |
| Basis of Allotment Type | % Of allotment in the IPO Offer |
| Qualified Institutional Buyer | 50 |
| Non-Institutional Investor | 15 |
| Retail | 35 |
FINANCIAL TRENDS OF CHEMSPEC CHEMICALS IPO
| Particulars | For the year ended in Crores | ||||
| 31-Mar-21 | 31-Mar-20 | 31-Mar-19 | |||
| Total Assets | 257.42 | 2,54.49 | 242.64 | ||
| Total Revenue | 510.33 | 607.01 | 335.26 | ||
| Profit After Tax | 81.08 | 60.74 | 5.15 |
| PARAMETERS | MARCH 21 | MARCH 20 | YoY % |
| Core EBITDA Margin (%) | 23.65 | 15.54 | 52.17 |
| EBIT Margin (%) | 22.50 | 15.65 | 43.80 |
| Pre-Tax Margin (%) | 21.97 | 14.39 | 52.69 |
| PAT Margin (%) | 16.03 | 10.18 | 57.40 |
| Cash Profit Margin (%) | 18.05 | 11.82 | 52.71 |
| ROA (%) | 31.68 | 24.45 | 29.58 |
| ROE (%) | 56.78 | 75.59 | -24.88 |
| ROCE (%) | 65.86 | 61.01 | 7.95 |
| Asset Turnover(x) | 1.98 | 2.40 | -17.67 |
| Sales/Fixed Asset(x) | 6.09 | 8.23 | -25.98 |
| Working Capital/Sales(x) | 3.89 | 11.61 | -66.53 |
| Receivable days | 71.26 | 61.90 | 15.13 |
| Inventory Days | 36.72 | 40.28 | -8.84 |
| Payable days | 63.14 | 60.57 | 4.24 |
| Net Sales Growth (%) | -15.20 | 83.02 | -118.31 |
| Core EBITDA Growth (%) | 20.31 | 310.03 | -93.45 |
| EBIT Growth (%) | 21.94 | 522.40 | -95.80 |
| PAT Growth (%) | 33.47 | 1088.79 | -96.93 |
| EPS Growth (%) | -99.91 | 1429.85 | -106.99 |
| Total Debt/Equity(x) | 0.05 | 0.50 | -89.85 |
| Current Ratio(x) | 2.97 | 1.37 | 116.08 |
| Quick Ratio(x) | 2.27 | 0.97 | 134.93 |
| Interest Cover(x) | 42.65 | 12.45 | 242.61 |
WEAKNESS AND THREATS OF CHEMSPEC CHEMICALS IPO:
- The company’s business relies heavily on the performance of its manufacturing facilities. It depends on the strategy and efficiency of production. Any unexpected, unanticipated, or long-term interruption of their manufacturing activities might significantly negatively impact their whole manufacturing operations.
- The company’s success is dependent on the performance of its clients. As the company only prepares the speciality chemical being utilized in the final product, any decrease in the demand for this final product can lead to a decrease in the demand for their speciality chemicals. It will hurt the company’s business operation.
- The company has a high revenue dependence on their FMCG segment. It constitutes nearly 84% of their total revenue.
- The company is heavily affected due to the COVID-19 pandemic. It has affected their operation and the financial parameters upfront, including revenue, profitability ratio and margins.
- The company’s major revenue stream is from small clients. The company needs to shift its client base to big and established clients for a regular income stream.
- The company is highly vulnerable to any fluctuation been faced in terms of the raw material availability, price and supply and demand aspect. It can lead to a significant impact on their margins.
- The company doesn’t have a strong long-term association with many of its clients and suppliers.
- The company is engaged in a highly competitive sector. The chemical sector, especially the Speciality Chemical sector, is equipped with many organized and unorganized players. It restricts the pricing power of the company.
- The company is engaged in a high and large amount of working requirements. It is well known that the sizeable gross current assets of the company have further been driven by the Cycle of large receivables and Moderate inventory days.
- Any Change in global trade policies can also affect the business outlook of the company. The company is also engaged in a sector where it needs to undergo regular safety, environmental and quality control audits and follow strict guidelines, laws and regulations.
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STRENGTHS AND GROWTH ASPECTS OF CHEMSPEC CHEMICALS IPO:
- The company has a highly comfortable financial risk profile. It is well supported by the liquidity that the company holds upfront.
- The company has experience of around 40 years. The clients of the company have been linked with the company for now more than two decades. It indicates the company’s strong presence and the trust of its client base in its business operation and production facility.
- The company is one of the most preferred FMCG and Pharmaceutical Formulations and some of the API’s suppliers to Global Companies.
- The company has healthy Debt protection metrics.
- The company has expanded their business operation and reach in the last three financial years. The company expanded their global presence and their distribution network to 43 countries worldwide. The company now has reach and market position in North America, Europe, the APAC region, Japan, the Middle East and Africa.
- The company is among the top four producers in the world in their product portfolio segment.
- It is also the world’s major producer of UV absorbers.
- The company is also the world’s second-largest producer of speciality chemicals used in the Skin Care and Hair Care segment.
- The company has a huge market share of around 70% in ‘chemilide’. It is an anti-bacterial component.
- The company’s manufacturing facility at Taloja in Maharashtra has been audited and been certified as per the ISO and US FDA Standards.
- The company has a strong client base. The client base of the company is as follows:
| Beiersdorf AG | L’Oréal | Dr. Reddy’s Laboratories |
| Glenmark Life Sciences | Unilever Supply Chain Company AG | DSM Nutritional Products |
| Godrej Consumers Products | CTX Lifesciences |
- The company will also benefit from the Make In India Campaign and PLI scheme been launched by the Govt. of India. The Govt. of India has the initiative to boost the production of Speciality Chemicals, which is benefited by the current Super Cycle of the Speciality Chemicals.
- The growth of the Indian Chemical FMCG sector will also boost various opportunities for the company. The FMCG sector registered a growth of the first ten months of the year. Similarly, as per a report from CRISIL, the India API Pharma business is expected to grow to $65 billion in 2024.
- The company is engaged in a business where there are many barriers for a new player to enter the market. These barriers include the complexities associated with the production chemistry, high capital requirement, time and expense, need for new technological innovations and Certifications and Audits.
Also Read : List of Mainboard IPO’s in India.
Also Read : List of Upcoming SME IPO’s in India.
PROMOTERS:
The promoters of the company are:
- Jayant Vora
- Mitul Vora
- Rishabh Vora
- Bhaichand Amoluk Consultancy Services LLP
| Pre-Issue Share Holding | 100% |
| Post Issue Share Holding |
CONTACT DETAILS:
Plot No. 3-C, MIDC Taloja, Tal – Panvel, District – Raigad,
Navi Mumbai – 410 208, Maharashtra, India
Tel.: +91 22 2740 1932
E-mail: investor.relations@chemspec.co.in
Website: www.chemspec.co.in/
REGISTRAR:
Link Intime India Private Ltd
Link Intime India Private Ltd
C 101, 247 Park, L.B.S. Marg,
Vikhroli (West), Mumbai – 400083
Phone: +91-22-4918 6270
Email: Chemspec.ipo@linkintime.co.in
Website: http://www.linkintime.co.in
LEAD MANAGER(S) OF CHEMSPEC CHEMICALS IPO:
- Axis Capital Limited
- JM Financial Limited
