Chemcon Speciality Chemicals, an Indian specialty chemicals provider for pharma and oil well industries, issued a Rs 318 crore ($43.3 million) IPO which opened for subscription on Monday.
The Vadodara-based company is offering a fresh issue of equity shares, aggregating up to Rs 165 crore ($22.5 million) and offer for sale of up to 4,500,000 equity shares, to be sold in the Rs 338-340 ($4.6-4.63) price band.
Earlier on Friday, the company raised Rs 95.40 crore ($13 million) through allotment of 2.8 million shares to anchor investors at Rs 340 ($4.63) per share.
The company’s expansion plans to set up two new plants and one laboratory with a total volumetric reactor capacity of 251.00 KL, at existing manufacturing facility Manjusar, Vadodara, would significantly increase the capacity by 60%, total volumetric reactor at 625.85 KL. Also, it would enable to benefit from economies of scale in next few years.
The specialty chemicals industry in India has high entry barriers due to the involvement of complex chemistry in the manufacture of products, which is difficult to commercialize on a large scale and a long gestation period to be enlisted as a supplier with the customers.
Moreover, some of the raw materials that company use such as bromine, MCF and TMCS are highly corrosive and toxic chemicals. Therefore, handling these chemicals requires a high degree of technical skill and expertise, and operations.
Chemcon’s revenue grew at a CAGR of 29% during FY18-FY20, EBITDA nearly 25% and profit 36%. It has healthy balance sheet with stable cash flows, net debt is Rs 44 crore with D/E ratio of 0.3 in FY20.
In FY20, the company’s pharmaceutical chemicals segment collectively contributed Rs 167.05 crore ($22.7 million), amounting to 63.75% of total revenue, and oilwell completion chemicals segment contributed Rs 87.72 crore ($11.9 million), amounting to 33.47% of revenue.
Exports accounted for 39.78% to revenue in FY20, which have grown at a CAGR of 17.57% during FY18-FY20. In FY20, company supplied the oilwell completion chemicals largely to customers in India, the Middle East, Serbia and Russia. It is now aiming to expand oilwell sales in existing and new geographies including Nigeria, Malaysia, China and Ghana.