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Home >Markets >Ipo >Tatva Chintan IPO: What grey market premium (GMP) signals ahead of listing

Specialty Chemical manufacturer Tatva Chintan Pharma Chem is expected to make its stock market debut on Thursday i.e., July 29. Its issue price was fixed at 1,073-1,083 apiece. The share allotment of the initial public offering (IPO), that had opened for subscription on July 16 and closed on July 20, was finalized on Wednesday.

The 500 crore IPO was subscribed nearly 180 times on the final day with the the retail segment subscribed 35 times, institutional segment 186 times and non-institutional 516 times.

A day prior to its listing on the leading Indian stock exchanges BSE and NSE, Tatva Chem shares are available at the premium (GMP) of 1,130 in the grey market, market observers noted, which they said indicates a strong listing on the bourses.

Incorporated in 1996, the company is engaged in the manufacture of a diverse portfolio of structure directing agents (SDAs), phase transfer catalysts (PTCs), electrolyte salts for super capacitor batteries and pharmaceutical and agrochemical intermediates and other specialty chemicals (PASC). The company operates through two manufacturing facilities situated at Ankleshwar and Dahej in Gujarat.

Many brokerages had recommended 'Subscribe' rating to the issue. Motilal Oswal in a note said, ''We like TCPCL due its leadership position, wide product portfolio, strong client relationship and high entry barriers. The company is expected to witness strong growth for next 2-3 years given its expansion plans. It is well placed to tap opportunity in the fast growing specialty chemical space with increasing focus on green chemistry by leveraging its strong R&D capabilities. The issue is valued at 45.9x FY21 P/E on post issue basis, which appears reasonable compared to peers (avg. P/E of 59x), as it enjoys higher earnings growth (62% CAGR vs. avg. 38% CAGR for peers over FY18-21).''

TCPCL is the largest and the only manufacturer of SDAs (40% of revenue) for Zeolites in India while it is the 2nd largest globally. In case of PTC (27%), it is the largest producer in India and one of the global leaders.

Another domestic brokerage firm HDFC Securities noted that the company is led by a well – qualified and experienced management team, which has demonstrated its ability to manage and grow its operations and has substantial experience in the sectors in which it operates. ''Its SDA and PTC products have various applications in green chemistry, which is pertinent considering the growing focus on green and sustainable technologies. The company has accordingly, undertaken various ‘green’ chemistry processes such as electrolysis,'' it said.

''The company focus on new products either through backward/forward integration, strong customer and opportunities on account China issues, will benefit the company in the medium term. Considering positive momentum in the chemical sector. We are positive on the long-term prospects of the Company,'' Anand Rathi said in a note.

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