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IPO Opening Date
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09-Nov-22
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IPO Closing Date
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11-Nov-22
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Issue Type
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Book Built Issue IPO
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Face Value
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Rs 2 per equity share
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IPO Price
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Rs 386 to Rs 407 per equity share
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Min Order Quantity
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36 Shares
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Listing At
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BSE, NSE
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Issue Size
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35,928,870 shares of FV Rs 2*
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(Aggregating up to Rs 1462.31 Cr) *
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Fresh Issue
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19778870 shares of FV Rs 2*
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(Aggregating up to Rs 805 cr) *
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Offer for sale
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16,150,000 shares of FV Rs 2 *
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(Aggregating up to Rs 657.31 cr) *
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QIB Shares Offered
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Not less than 75% of the Offer
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Retail Shares Offered
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Not more than 10% of the Offer
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NII (HNI) Shares Offered
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Not more than 15% of the Offer
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*At Upper Price Band
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Objects of the Issue
The selling shareholders will be entitled to their respective portion of the proceeds of the offer for sale.
The company proposes to utilise the net proceeds of the fresh issue towards funding the following objects:
1. Redemption or earlier redemption, in part or full of NCDs issued by the company.
2. General corporate purposes.
Promoter holding
The pre issue shareholding is 65.58 per cent, Post the IPO the promoter stake will be 53.41 per cent.
About the company:
Archean Chemical Industries Ltd. (ACIL) is a significant speciality marine chemical firm in India, producing and exporting bromine, industrial salt, and potassium sulphate to customers worldwide. ACIL is India's leading exporter of bromine and industrial salt by volume in Fiscal 2021, and it has one of the lowest production costs in both bromine and industrial salt internationally.
The company makes items at its facility near Hajipir in Gujarat using brine sources in the Rann of Kutch, which is located on the coast of Gujarat. It marketed items to 18 global clients in 13 countries and 24 local customers as of June 30, 2022. Bromine from ACIL is employed as a crucial initial-level material in medicines, agrochemicals, water treatment, flame retardants, additives, oil and gas, and energy storage batteries.
It exported 34.88 per cent, 44.88 per cent, 46.10 per cent, and 39.79 per cent of its bromine production abroad in the three months ended June 30, 2022, as well as in Fiscal 2022, Fiscal 2021, and Fiscal 2020, respectively. The remaining bromine output is sold on the domestic market.
Bromine transportation is hazardous, necessitating the use of nickel and lead-lined ISO containers, of which ACIL has 228 (owned and leased) for export business as of June 30, 2022. According to Frost & Sullivan, the global bromine market was worth US$3.13 billion in CY2021, and it is predicted to increase at a 5.8 per cent CAGR between CY2020 and CY2025.
Furthermore, Frost & Sullivan predicts an increase in demand for bromine and bromine performance derivatives due to a variety of variables such as increased demand for flame retardants, increased consumption of oil well chemicals, and increased use of hydrogen and zinc bromide in flow batteries. In response to growing demand, the business intends to, and is already in the process of, boosting bromine manufacturing capacity. In addition, in the next two to three years, the product line will be expanded into bromine derivative performance products, specifically brominated flame retardants, clear brine fluids, and bromine catalysts utilised in the manufacture of pure terephthalic acid ("PTA").
Because of the variety of applications in the oil and gas business, chlor-alkali industry, and de-icing chemical sector, industrial salt is in great demand. ACIL is India's sole producer of potash sulphate from natural sea brine. The company aspires to be India's leading producer and supplier of sulphate potash. Its marine chemicals business is mostly performed on a business-to-business basis, both in India and beyond. ACIL is an export-oriented company, with export sales accounting for 66.74 per cent, 70.32 per cent, 74.4 per cent, and 78.41 per cent of revenue from operations in the three months ending June 30, 2022, as well as in Fiscal 2022, Fiscal 2021, and Fiscal 2020.
China, Japan, South Korea, Qatar, Belgium, and the Netherlands are among the primary markets to which it sends products. Sojitz Corporation, which is also a shareholder in the company, Shandong Tianyi Chemical Corporation, Unibrom Corporation, Wanhau Chemicals, and Qatar Vinyl Company Limited are among its significant customers. Its production facility had an installed capacity of 28,500 MT per annum of bromine, 3,000,000 MT per annum of industrial salt, and 130,000 MT per annum of potash sulphate as of June 30, 2022. ACIL had 250 employees and approximately 400 contract workers as of June 30, 2022.
Financial
On the financial performance front, the company has reported standalone data only for FY21, while it has shown consolidated data for FY20 and FY22 and for Q1 of FY23. As per the information given in the offer documents, it has posted a turnover/net profit (loss) of Rs 617.01 crore / Rs - (36.22) crore for FY20 (consolidated), Rs. 754.79 crore / Rs 66.61 crore for FY21 (standalone), and Rs 1142.83 crore/ Rs 188.58 crore for FY22 (conso.). On a consolidated basis, for Q1 of FY23, it earned a net profit of Rs 84.41 crore on a turnover of Rs 408.82 crore. Thus it has posted remarkable performance for the last 15 months. According to the management, the loss for FY20 is attributed to one-time special provisioning and amortizations.
For the last three fiscals, ACIL has posted an average EPS of Rs 10.70 and an average RoNW of - (34.05 per cent).
The topline of the company is growing at a 3-year CAGR of 26 per cent. The FY22 revenue for the company stands at Rs 1130 crore. The operating margins and the net profit margins of the company are consistently improving. In FY22 the operating margin was 41.3 per cent and the net profit margin was 16.7 per cent. Because of the variety of applications in the oil and gas business, chlor-alkali industry, and de-icing chemical sector, industrial salt is in great demand.
The issue is priced at a P/BV of 12.17 times based on its NAV of Rs 33.45 as of June 30, 2022, and at a P/BV of 4.34 times based on its post-IPO NAV of Rs 93.76 (at the upper cap). If we annualize FY23 earnings and attribute it to the fully diluted post-IPO paid-up equity capital, then the asking price is at a P/E of around 16.78 times. Due to strong sectoral performance, demand outlook, and attractive valuation we advise investors to invest in this IPO for the long term.