Chemcon Speciality Chemicals Limited, started in 1988, is Vadodara based 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 (the 'Oilwell Completion Chemicals'). They were the only manufacturer of HMDS in India and were the third largest manufacturer of HMDS worldwide in terms of production in the calendar year 2019 (as per Frost & Sullivan Report). They were 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 (as per Frost & Sullivan Report). Further, they were the only manufacturer of Zinc Bromide and the largest manufacturer of Calcium Bromide in India, in terms of production in calendar year 2019 (as per Frost & Sullivan Report). Company supplies the products to domestic customers and also export the products 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, our revenue from exports (including Deemed Exports) contributed 39.78%, 31.99% and 47.84%, respectively of the revenue from operations. The key customers of the 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 and the key customers of the Oilwell Completion Chemicals include Shree Radha Overseas, Water Systems Specialty Chemical DMCC and CC Gran Limited Liability Company. Chemcon is an ISO 9001:2015 and ISO 14001:2015 certified company. Its manufacturing facility is located at Manjusar near Vadodara in Gujarat. As on the date of this RHP, within its Manufacturing Facility, they currently have 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 the Oilwell Completion Chemicals, along with three warehouses for the storage of the products and raw materials. They also have an in-house laboratory at the Manufacturing Facility. Further, they have five leased warehouses located outside the Manufacturing Facility, in Manjusar, Vadodara. The Corporate Office (which is owned by company) is located in Vadodara and the sales and marketing offices are located in Hyderabad and Mohali, which are on a leasehold basis. In FY20, FY19 and FY18, the Pharmaceutical Chemicals, contributed 63.75%, 63.14% and 62.18% of the total revenue from operations respectively, while the Oilwell Completion Chemicals, contributed 33.47%, 35.30%and 35.63% respectively of the total revenue from operations. Due to pandemic situation, there is no significant effect on Pharmaceutical Chemicals, but demand for OilWell Completion chemicals reduced significantly and they are yet to resume manufacturing of new batches of OilWell Completion chemicals since the lockdown lifted. On financial performance front, Chemcon has posted turnover/net profits of Rs. 90 cr. / Rs. 3 cr. (FY17), Rs. 158.47 cr. / Rs. 26.56 cr. (FY18), Rs. 304.32 cr. / Rs. 43.41 cr. (FY19) and Rs. 266.02 cr. / Rs. 49.34 cr. (FY20). Company hasn't provided Q1 FY21 results, which is quit surprising, but it may be down as demand for OilWell Completion Chemicals reduced significantly in Q1 of FY21 as per RHP. Thus company has posted good growth over last couple of years on consistent basis except losses in FY20, when top-line reduced. Company has posted an average EPS of Rs. 13.59 and average RoNW of 40.30% for last three fiscals. Issue is priced at a P/BV of 7.57. If we attribute latest earnings of FY20 on fully diluted equity post issue, then asking price is at a P/E of around 25. So this IPO looks fully priced. The comparison between peers is shown in above table, but it can't be compared strictly. On BRLM's front, for Intensive Fiscal Services Private Limited and Ambit Capital Private Limited both haven't handled any IPO. ( As on 15.09.2020 ) As per financials, company's growth is good, RoNW is 40.3% for last three fiscals and issue is priced at P/E of around 25 as per FY20. So as per listed peers it looks fairly priced. Also whole sector is performing very well with almost every peer group company near to high. So we give SUBSCRIBE rating to this IPO.
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