Deepak Chemtex Limited

As per financial performance, Deepak Chemtex Limited has posted total income / net profits of Rs 29.72 Cr / Rs 2.63 Cr (FY21), Rs 54.43 Cr / Rs 4.23 Cr (FY22), Rs 47.83 Cr / Rs 6.31 Cr (FY23) and Rs 22.12 Cr / Rs 3.11 Cr (upto Q2 FY24). So as per previous financials data, company has shown zig-zag results, but sudden rise in net profit just before IPO is very surprising. Company has posted an average EPS of Rs 6.26 and average RoNW of 43.61% for last three fiscals. Issue is priced at a P/BV of 3.40 as per NAV of 23.55 as on 30.09.23. If we attribute latest earnings of FY22, FY23 and annualised FY24 on fully diluted equity post issue, then asking price is at a P/E of around 20.54, 13.77 and 13.97 respectively, which looks fully priced. As per RHP, comparison between listed peers is shown in above table. On BRLM's front, Hem Securities Limited is associated with this SME IPO and handled 32 SME IPOs in last 3 years. From last 10 IPOs, all opened above issue price or at par on the listing day. As of now from last 10 IPO, all are trading above issue price. ( As on 24.11.23 ) As per financials, Deepak Chemtex Limited has shown zig-zag result, RoNW is 40.17% and P/E is respectively 20.54, 13.77 and 13.97 as per FY22, FY23 and annualised FY24 earnings. So, issue looks fully priced. Also sudden jump in net-profit just before IPO is very surprising. Company is in business of manufacturing colorants, which is highly competitive and fragmented segment. Performance of BRLM is very good. So, we give NEUTRAL rating for this IPO. Readers must consult a qualified financial advisor prior to making any actual investment decisions.

• 1 Saurabh Deepak Arora
• 2 Trishla Baid