Chemspec Chemicals set to Raise Rs. 700 crores via IPO

On July 15 2021, Chemspec Chemicals filed preliminary papers with SEBI to raise Rs. 700 crores via an Initial Public Offering. As per its DRHP, the public issue will consist of an offer for sale by promoters and certain shareholders. 

Mitul Vora and Rushabh Vora will offer shares worth Rs. 233.30 crore each. The offer will also include the sale of shares worth Rs. 233.40 by BACS LLP.  

About Chemspec Chemicals 

Based in Mumbai, Chemspec Chemicals’ products are segregated into two divisions – FMCG and Pharmaceuticals. 

This company is engaged in the production of critical additives that are used in skin and hair products. Moreover, it manufactures intermediates for pharmaceutical APIs.

With a market share of 70%, it is the world’s largest manufacturer of an antibacterial ingredient, chemilide. Chemspec’s production takes place at its manufacturing unit in Taloja, Maharashtra. The production facility has been audited as well as approved by the US FDA. Accordingly, Chemspec has become one of the few US FDA-registered companies belonging to the FMCG and pharmaceuticals space.

Since this company has filed its DRHP, let’s look at some details concerning this IPO. 

How will the IPO help?

Here’s how the initial public offering can benefit Chemspec:

• Enhancement of brand image: As per the company, its brand image will improve significantly following the listing of its equity shares. 
• Increase visibility: After getting listed on stock exchanges, the company’s visibility will improve. 

Moreover, Chemspec Chemicals IPO will provide liquidity to the company’s existing shareholders. 

Essential IPO details 

For investors, it’s crucial to know the following information concerning Chemspec’s initial public offering:

Issue type: Yet to be announced

Listing: NSE and BSE

IPO price band: Yet to be announced

Face value: Yet to be announced 

Market lot: Yet to be announced

Minimum order quantity: Yet to be announced

Also, one must be aware of the basis of allotment across different investor categories. That said, the issuer is yet to provide information regarding share allocation. 

We’ll update all this information once the details are announced. 

• Qualified institutional buyers: Not yet known 
• Non-institutional investor: Not yet known
• Retail investor: Not yet known

Individuals must keep in mind that the share allotment depends upon the fresh issue and transfer of OFS shares from promoters and existing shareholders to bidders. 

Once you are familiar with all important details regarding the IPO, it’s imperative to look at the key highlights of the company. 

Key financial highlights 

Take note of the following pointers regarding Chemspec’s financials:

• This company’s revenue in fiscal 2021 was Rs. 505.91 cores. Whereas it recorded Rs. 596.61 crores in the preceding financial year. 
• Chemspec’s net profit stood at approximately Rs. 81 crores in comparison to Rs. 60.75 crores last year. 
• Chemspec Chemicals has recorded a 476.52% year-over-year increase in EBITDA. Also, during the same timeframe, its book net worth has surged 82.14%.

What are the key company strengths? 

The following are some of the strengths of Chemspec Chemicals:

• It has a strong foothold in the chemical intermediates segment, having been a part of the industry for more than 40 years.  
• Chemspec has a high client retention rate. Most of them have been associated with the specialty chemical maker for over two decades, owing to its high-quality products. 
• Chemspec Chemicals has expanded its global distribution network over the past three years. It is now spread across more than 40 countries, including Europe, North America, and the Middle East.

Should you invest?

While the company’s outlook remains positive, here are some concerns to take note of before investing: 

• This company’s profitability is highly dependent on raw material prices, which tend to be extremely volatile. If the cost of production increases, it will have a direct impact on Chemspec’s operating income.
• There’s a great deal of competition in the fragmented chemical industry. This limits pricing power and doesn’t allow companies to retain advantages of lower input costs.

The final word

Most of the information in relation to the Chemspec Chemicals is yet to be announced. Once the issuer discloses them, investors must check them thoroughly and analyse the company’s strengths, weaknesses, financials, etc., before making a decision. 

 

Frequently Asked Questions

• What is the debt-equity ratio of Chemspec Chemicals?

Chemspec has a debt-equity ratio of 0.58% at the time of writing. 

• How can one subscribe to the Chemspec IPO via Angel One?

Once the IPO is open for subscription, investors can apply via their Angel One account through UPI. New users can open their DEMAT account for free to subscribe. 

• Who is the registrar of Chemspec IPO?

The registrar of Chemspec IPO is not yet announced.