IPO analysis: Chemplast Sanmar Limited
IPO rating: Invest for long-term
About the issue:
Chemplast Sanmar Ltd (CSL) is a leading speciality chemical manufacturer in India. The company is coming out with its initial public offering (IPO) of equity shares with a face value of Rs 5 per equity share. The issue size of the company is Rs 3,850 crore, with a fresh issue comprising Rs 1,300 crore while the remaining include the sale of shares worth Rs 2,550 crore by existing investors, according to its red herring prospectus. The price band of the issue has been fixed at Rs 530 to Rs 541 per equity share. The IPO opening date is August 10, 2021, while it will close on August 12, 2021. It will be listed on the Exchanges on August 24, 2021. The IPO market lot size is 27 shares. A retail-individual investor can apply up to a maximum of 13 lots (351 shares or Rs 1,89,891). The net proceeds generated from the IPO will be utilised towards the early redemption of NCDs issued by the company in full as well as for meeting other general corporate purposes.
Chemplast Sanmar IPO details:
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IPO opening date
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August 10, 2021
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IPO closing date
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August 12, 2021
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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 5 per equity share
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IPO price
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Rs 530 to Rs 541 per equity share
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Market lot
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27 shares
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Min. order quantity
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27 shares
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Listing at
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BSE & NSE
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Issue size
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[.] equity shares of Rs 5
(aggregating up to Rs 3,850.00 crore)
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Fresh issue
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[.] equity shares of Rs 5
(aggregating up to Rs 1,300.00 crore)
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Offer for sale
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[.] equity shares of Rs 5
(aggregating up to Rs 2,550.00 crore)
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About the company:
The company is engaged in the manufacturing of speciality paste PVC resin, starting materials, and intermediates for agrochemical, pharmaceuticals & fine chemical sectors. It also produces other types of chemicals such as caustic soda, chlorochemicals, hydrogen peroxide, refrigerant gas, and industrial salt.
It has four manufacturing facilities, among which, three are situated at Mettur, Berigai & Cuddalore in Tamil Nadu while one is in Puducherry at Karaikal. CSL is the largest manufacturer of speciality paste PVC resin in India on the basis of installed production capacity as of December 31, 2020.
Incorporated in the year 1985, Chemplast Sanmar Ltd is a leading speciality chemical manufacturer in India.
Competitive strengths:
The largest manufacturer of speciality paste PVC resins in India in terms of installed production capacity.
Third-largest manufacturer of caustic soda and the largest manufacturer of hydrogen peroxide in South India.
A part of SHL Chemicals Group, which is one of the most prominent corporate groups in South India.
A vertically integrated business model with a focus on quality manufacturing.
Highly experienced managerial team.
Company financials:
The sales of the company grew more than 200 per cent on a YoY basis for the period ending FY21. PAT also surged more than 8 times on a YoY basis for the same period and stood at Rs 410.24 crore.
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Amount (in Rs crore)
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31-Mar-21
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31-Mar-20
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Mar-19
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Total assets
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4,486.09
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4,107.54
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3,801.56
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*Total revenue
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3,815.10
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1,265.51
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1,266.77
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Total expense
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3,401.60
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1,128.15
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1,037.95
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Profit after tax
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410.24
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46.12
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118.46
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Recommendation:
CSL is also the third-largest manufacturer of caustic soda and the largest manufacturer of hydrogen peroxide, each in South India, on the basis of installed production capacity as of December 31, 2020. It is also one of the oldest manufacturers in the chloromethane market in India. The company is focussing on developing and improving its product portfolio. It is also looking further to expand its production capacities and focus on improving financial performance through operating efficiencies. The industry has high entry barriers; thus, it can maintain its leadership position for a longer period of time without any threats from the new entrants. The demand for custom manufacturing catered by Indian manufacturers is likely to grow at a CAGR of approximately 12 per cent between the financial years 2020 and 2025, due to the higher penetration of pharmaceutical molecule, compound & active pharmaceutical ingredient manufacturing in India and India becoming a key supplier of non-commercially available molecules or monomers or polymers (REFRAME). Further, custom manufacturing for agrochemical sectors is also likely to witness a boost with discovery chemistry pertaining to the agricultural sector gaining more traction. Demand for caustic soda is also expected to grow at a CAGR of 4 per cent to 5 per cent between the financial years 2020 and 2025, led by increasing demand from the alumina & chemical industries. The company is well-positioned to capture favourable industry dynamics, going forward. Owing to the above reasons, we recommend investing in the company’s IPO for the long term.
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