IPO Analysis: Clean Science and Technology Ltd

IPO Rating- Invest for Listing gains 

About the issue 

Clean Science and Technology Ltd (CTSL) is one of the leading chemical manufacturers globally. It is coming out with its Initial Public Offering (IPO) of equity shares of the face value of Rs 1 each. The public issue comprises a offer-for-sale (OFS) of up to Rs 1546.62 crores. The price band of the issue has been fixed at Rs 880 to Rs 900 per equity share. The IPO opening date is July 7, 2021, and the closing date is July 9, 2021. The issue will list on July 19, 2021. The IPO market lot size is 16 shares. A retail-individual investor can apply for up to 13 lots (208 shares or Rs 187,200). The objectives of the offer are to to make an offer for sale of equity shares aggregating to Rs. 1546.62 crore and to achieve the share listing benefits on the BSE and NSE.

About the company 

 Incorporated in 2003, Clean Science and Technology Ltd is one of the leading chemical manufacturers globally. It manufactures functionally critical specialty chemicals such as Performance Chemicals (MEHQ, BHA, and AP), Pharmaceutical Intermediates (Guaiacol and DCC), and FMCG Chemicals (4-MAP and Anisole). 

The company supplies its products to manufacturers and distributors in India as well as overseas markets i.e. China, Europe, USA, Korea, Taiwan, and Japan. Bayer AG, Genex Laboratories Limited, Nutriad International NV, SRF Limited, Vinati Organics are a few of its customers. In fiscal 2020, it generated 69% of revenues through exports. 

Clean Science has two production facilities at Kurkumbh (Maharashtra) with an aggregated installed production capacity of 29,900 MTPA as of Dec 31, 2020. 

Competitive strengths 

Globally leading supplier of certain chemicals; Ansole, 4-MAP, MEHQ, BHA, DCC, etc. 

Strategically located manufacturing facility with close proximity to JNPT port to export products. 

Strong long-term relationship with key customers. 

Consistent track record of financial performance. 

International presence with export to several countries i.e. China, USA, Korea, Japan, Taiwan, etc. 

 Financials 

The company earns 56 per cent of revenue from the export market and 44 per cent of revenue from the domestic market. On the financial performance front, on a consolidated basis, it has posted a turnover/net profit of Rs. 346.04 cr. / Rs. 43.92 cr. (FY19), Rs. 489.73 cr./ Rs. 70.70 cr. (FY20) and Rs. 655.38 cr. / Rs. 134.51. (FY21). PAT has increased at a CAGR of 43 per cent from the last 2 years.

Financials of Clean Science IPO: 

Recommendation: 

CSTL manufacture functionally critical specialty chemicals which is also widely used in anti-retroviral drugs, and FMCG Chemicals. Within 17 years of incorporation, CSTL has grown to the largest manufacturer globally of MEHQ, BHA, Anisole and 4-MAP, in terms manufacturing capacities along with the highest quality standards. CSTL’s products are used as key starting level materials, as inhibitors, or as additives by customers for products sold in regulated markets. Key customers include Bayer AG, SRF Ltd, Gennex Laboratories Ltd, Nutriad International NV and Vinati Organics Ltd. The company is in the process of setting up a new facility to expand capacities of some of their existing products and add capacities for some new products. The further expansion and up gradation of the manufacturing facility will enhance their margins going forward leading to better profitability. The company also consistently seeks to design more innovative processes through its R&D team in order to successfully expand its product portfolio. As it is present among the largest producers globally of functionally critical specialty chemicals which is further used across various industries and geographies thus resulting in a de-risked business model. Looking at the above positives, we believe that the company will keep growing its business at a healthy rate, and hence you can invest for a listing gain. 

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