Chemplast Sanmar Limited went live with its initial public offering (IPO) on August 10 and plans to close the same on August 12. Any anchor bookings that took place would have happened on August 9, a day before the issue opened. The grey market premium (GMP) on Tuesday for the Chemplast Sanmar IPO was Rs 35, which indicates that shares were trading at a premium of Rs 565 to Rs 576 per equity share on the unlisted grey market. This is a significant rise in the GMP for the issue as it stood at Rs 0, on August 9.
The price band for the Chemplast Sanmar IPO is Rs 530 to Rs 541 per equity share. The issue also carries a face value of Rs 5 per equity share. The public issue has a lot size of 27 shares on the lower end, with a minimum application amount of Rs 14,607. On the higher end of the lot size, the issue carries 351 shares with a maximum application amount of Rs 189,891. Retail investors are allowed to apply for up to 13 lots for the issue at the upper limit of the lot size. The qualified institutional buyers (QIBs) have a 75 per cent reservation. The non-institutional investors (NIIs) have a 15 per cent reservation while the individual retail investors have a 10 per cent reservation for the issue.
The Chemplast Sanmar IPO has an issue size of Rs 3,850 crore. The issue is also made up of a fresh issue and an offer for sale (OFS). The fresh issue is worth Rs 1,300 crore, while the OFS clocks in at Rs 2,550 crore.
The company’s objective through this public issue is to garner enough funds to fulfil the early redemption of NCDs issued by the company in full. The rest of the funds that are raised through the issue will be allocated for general corporate purposes. In addition to this, the company also expects to achieve the benefits of getting its equity shares listed on the Stock Exchanges, in hopes of enhancing the brand name.
Speaking on the potential the company has for growth in its respective industry, HDFC Securities said in a note, “High barriers to entry and limited competition is expected to benefit existing manufacturers of specialty paste PVC resin in India in the medium term and the demand for specialty paste PVC resin is expected to grow at a CAGR of 6% to 8% between Financial Years 2022 and 2025. The demand for custom manufacturing catered by Indian manufacturers is likely to grow at a CAGR of approximately 12% between Financial Years 2020 and 2025, due to the higher penetration of pharmaceutical molecule, compound and active pharmaceutical ingredient manufacturing in India and India becoming a key supplier of non-commercially available molecules or monomers or polymers.”
Should You Subscribe to the Chemplast Sanmar IPO?
The company itself was incorporated in 1985. It currently stands as one of the leading speciality chemical manufacturers in India. It highly specialises in the manufacturing of PVC paste resin, starting materials, and intermediates for agro-chemical, pharmaceuticals, agrochemical, and the fine chemical sectors.
As far as financials go the company has posted an upward trend in the net profits it garnered, as the net profit for FY21 was Rs 410.24 crore. It has posted a turnover of Rs 3,815.11 crore for the same period. This is an increase from the net profit of Rs 118.46 crore and a turnover of Rs 1,266.77 crore that it posted for FY19. This growth comes in spite of the hindrances brought on by the pandemic.
The company is one of the largest manufacturers of speciality paste PVC resin in India in terms of the sheer installed production capacity. It is also the third-largest manufacturer of caustic soda and hydrogen peroxide in South India. It has a strong brand backing as it is part of the SHL Chemical Group, which is a prominent corporate group in South India. The company also has a vertically integrated business model that is focused on quality manufacturing.
“Chemplast Sanmar operates under the umbrella of the renowned Sanmar group, which is one of the most popular corporate groups in southern India. The largest manufacturer of paste PVC primarily focuses on its speciality chemicals business, with significant margins,” said Angel Broking on whether one should subscribe to the issue.
Angel Broking went on to add, “Considering the increasing demand for paste PVC in India, the company has tremendous potential for growth. Its market position is hard to ignore for investors looking to invest in this sector. Furthermore, the company has a highly experienced management team to deal with unfavourable changes in the dynamic economic environment. Hence, individuals might consider applying for the Chemplast Sanmar IPO.”
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