Chemcon Speciality Chemicals lists at 115% premium over issue price
With a price band at Rs338-Rs340 per share, its initial public offering was oversubscribed Rs149.30 times
Shares of Chemcon Speciality Chemicals Limited listed on the stock exchanges at Rs731, a premium of 115% over its issue price of Rs340 on Thursday. With a price band at Rs338-Rs340 per share, its initial public offering (IPO) was oversubscribed Rs149.30 times. The issue was open for subscription during 21-23 September.
The company aimed to raise Rs318 crore at the upper end of the band with a fresh issue of equity shares aggregating up to Rs165 crore and offer for share (OFS) by promoters of up to 4.5 million equity shares. The company intended to utilize net proceeds from the fresh issue towards capital expenditure towards expansion of manufacturing facility, to meet working capital requirements and towards general corporate purposes.
“At the higher end of the price band, the issue is valued at 25.5 times FY20 price to earnings (fully diluted), which is reasonable compared to peers," said Motilal Oswal Securities Ltd. It pointed out that client concentration, limited product portfolio and criminal proceeding against a member of promoter group are some risks for the company.
According to Angel Broking, none of the listed chemical companies has the same business as Chemcon. Its specialty chemical peers, such as Neogen Chemicals, Paushak, Atul and Aarti Industries, are currently trading at PE multiples of 57.0 times, 37.6 times, 29.6 times and 35.6 times respectively on FY20 earnings per share (EPS). “The company's return ratios and margins are better than most peers. We believe the company is clearly undervalued compared with its peers; a lot of value is left on the table," the brokerage firm said.
Chemcon is a manufacturer of specialty chemicals such as hexamethyldisilazane (HMDS) and chloromethyl isopropyl carbonate (CMIC) which are predominantly used in the pharmaceuticals industry. It also manufactures inorganic bromides used as completion fluids in the oilfield industry.
According to a Frost & Sullivan report, the company was the only manufacturer of HMDS in India and was the third largest manufacturer of the chemical in terms of production in 2019. It earned revenue from operations of Rs262.05 crore with Ebitda of Rs70.26 crore and profit after tax is Rs48.85 crore in FY 2020.
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