Please refer to important disclosures at the end of this report
1
CLEAN SCIENCE AND TECHNOLOGY LTD. (CSTL) is a globally focused entirely on
developing newer technologies using in-house catalytic. It manufactures
functionally critical specialty chemicals such as Performance Chemicals (MEHQ,
BHA and AP), Pharmaceutical Intermediates (i.e., Guaiacol and DCC), and FMCG
Chemicals (i.e., 4-MAP and Anisole). Within 17 years of incorporation, it has
grown to be the largest manufacturer globally of MEHQ, BHA, Anisole and 4-MAP,
in terms of installed manufacturing capacities.
Positives: (a) Track record of strategic process innovation through consistent R&D
initiatives (b) Experienced Promoters and senior management with extensive
domain knowledge. (c) Strong and long-standing relationships with key customers
(d) Automated manufacturing facilities with proven design and commercialization
capabilities and strong focus on EHS. (e) Strong and consistent financial
performance in the last three Fiscals.
Investment concerns: (a) Operations are dependent on R&D capabilities and an
inability to continue to design catalytic processes may adversely affect the business.
(b) Intellectual property may not be adequately protected, may have a material
adverse impact on the business (c) A significant portion of its revenue is generated
from certain key customers. (d) A significant proportion of revenues are derived
from sale of MEHQ & any reduction in the demand for MEHQ could have an
adverse effect on business.
Outlook & Valuation: CSTL’s revenue has grown at CAGR of 9.1% over FY19-21
on the back of strong 22% top line growth in FY21 despite the Covid 19 crisis.
Moreover the company has posted strong EBITDA and PAT CAGR of 23.6% and
26.3% respectively during the same period. Given strong financial performance,
industry leading margins and returns ratios CSTL should be able to command a
premium to peers. We believe that the India specialty chemical industry is going to
be one of the biggest beneficiaries of shifting of supply chains post the Covid-19
pandemic. Given CSTL’s financial performance, industry leading returns ratios and
favorable outlook for the industry we recommend “SUBSCRIBE” to the issue.
Key Financials
FY2019
FY2020
FY2021
393.3
419.3
512.4
-
6.6
22.2
97.7
139.6
198.4
-
43.0
42.1
34.7
44.2
50.5
9.2
13.1
18.7
97.9
68.5
48.2
35.1
27.9
17.7
35.9
40.8
36.8
43.4
48.3
43.3
70.1
51.6
36.9
24.3
22.8
18.6
Source: Company, Angel Research.
Note: Valuation ratios at upper price band.
SUBSCRIBE
Issue Open: July 07, 2021
Issue Close: July 09, 2021
Offer for Sale: 1.71-1.75 cr sh
QIBs 50% of issue
Non-Institutional 15% of issue
Retail 35% of issue
Promoters 78.5%
Others 21.4%
Fresh issue: 0 cr sh
Issue Details
Face Value: `1
Present Eq. Paid up Capital: `10.6 cr
Post Issue Shar eholding Pattern
Post Eq. Paid up Capital: `10.6cr
Issue size (amount): `1546.6 cr
Price Band: `880-900
Lot Size: 16 shares and in multiple thereafter
Post-issue mkt. cap: * `9347 cr - ** `9559 cr
Promoters holding Pre-Issue: 94.6%
Promoters holding Post-Issue: 78.5%
*Calculated on lower price band
** Calculated on upper price band
Book Building
Jyoti Roy
+022 39357600, Extn: 6842
[email protected]
Clean Science & Technology Ltd.
f
IPO Note Clean Science
July 06, 2021
Clean Science & Technology Ltd | IPO Note
July 06, 2021
2
Company background
Company was incorporated as ‘Sri Distikemi Private Limited’ on November 7,
2003 in Pune, Maharashtra. Name changed to ‘Clean Science and Technology
Private Limited’ with fresh certificate of incorporation, dated August 25, 2006. It
manufactures functionally critical specialty chemicals such as Performance
Chemicals & Pharmaceutical Intermediates. Company has grown to be the largest
manufacturer globally of MEHQ, BHA, Anisole and 4-MAP, in terms of installed
manufacturing capacities as of March 31, 2021.
Issue details
The issue comprises of offer for sale of upto `1546.63 crore in the price band of
`880-900.
Pre and post IPO shareholding pattern
No of shares
(Pre-issue)
%
(Post-issue)
%
Promoter
100,540,960
94.7
83,356,293
78.5
Public
5,678,000
5.3
22,862,667
21.5
Total
106,218,960
100.0
106,218,960
100.0
Source: Company, Angel Research & RHP.
Objectives of the Offer
To carry out the Offer for Sale of up to ₹1,546.6 Cr by the Selling
Shareholders.
Achieve the benefits of listing the Equity Shares on the Stock Exchange.
Key Management Personnel
Pradeep Ramwilas Rathi, is the Chairman and Non-Executive Director of our
Company. He holds a bachelor’s degree in science from University of Poona and
master’s degree of science in chemical engineering practice from Massachusetts
Institute of Technology, USA.
Ashok Ramnarayan Boob, is the Managing Director of our Company. He holds a
bachelor’s degree in chemical engineering from the Institute of Chemical
Technology, Mumbai. He has close to 25 years of experience in the chemical
industry and has previously worked as an executive director at Mangalam Drugs
and Organics Limited.
Siddhartha Ashok Sikchi, is a Wholetime Director of our Company. He holds a
master’s degree in science from the University of Manitoba, Canada and a
bachelor’s degree in technology from the Institute of Chemical Technology,
Mumbai. He has over fourteen years of experience in the chemical industry.
.
Clean Science & Technology Ltd | IPO Note
July 06, 2021
3
Exhibit 1: Consolidated Profit & Loss Statement
Y/E March (` Cr)
FY2019
FY2020
FY2021
Total operating income
393.3
419.3
512.4
% chg
-
6.6
22.2
Total Expenditure
257.0
234.0
253.5
Cost of materials consumed
178.61
127.98
137.86
Changes in inventories
-7.39
1.26
-14.28
Employee benefits expenses
24.86
31.01
43.56
Other expenses
60.88
73.76
86.33
EBITDA
136.3
185.3
259.0
% chg
-
35.9
39.8
(% of Net Sales)
34.7
44.2
50.5
Depreciation& Amortisation
11.0
13.7
17.2
EBIT
125.3
171.6
241.7
% chg
-
37.0
40.9
(% of Net Sales)
31.9
40.9
47.2
Finance costs
0.0
0.1
0.1
Other income
11.3
10.9
25.6
(% of Sales)
2.9
2.6
5.0
Recurring PBT
136.5
182.3
267.3
% chg
-
33.5
46.6
Exceptional item
-
-
-
Tax
38.9
42.7
68.9
PAT (reported)
97.7
139.6
198.4
% chg
-
43.0
42.1
(% of Net Sales)
24.8
33.3
38.7
Basic & Fully Diluted EPS (Rs)
9.2
13.1
18.7
Source: Company, Angel Research
Clean Science & Technology Ltd | IPO Note
July 06, 2021
4
Exhibit 2: Consolidated Balance Sheet
Y/E March (` Cr)
FY2019
FY2020
FY2021
SOURCES OF FUNDS
Equity Share Capital
1.4
1.3
10.6
Other equity (Retained Earning)
270.6
340.8
529.0
Shareholders’ Funds
272.1
342.1
539.7
Total Loans
2.6
2.7
0.3
Other liabilities
14.2
10.5
17.9
Total Liabilities
288.8
355.3
557.9
APPLICATION OF FUNDS
Property, plant and equipment
124.9
162.6
182.6
Capital work-in-progress
3.9
3.4
55.0
Right-of-use asset
1.9
2.7
3.0
Other intangibles assets
0.2
0.3
0.3
Current Assets
192.6
257.0
395.1
Inventories
37.0
34.6
52.9
Investments
75.2
133.0
232.1
Trade receivables
59.8
69.8
74.2
Cash and cash equivalents
9.4
9.2
9.3
Bank balances other than (iii) above
0.0
0.1
6.3
Loans
-
0.2
0.2
Other financial assets
4.4
6.1
9.5
Other current assets
6.7
4.0
10.5
Current Liability
38.6
74.6
102.0
Net Current Assets
153.9
182.5
293.2
Other Non-Current Asset
4.0
3.9
23.9
Total Assets
288.8
355.3
557.9
Source: Company, Angel Research
Clean Science & Technology Ltd | IPO Note
July 06, 2021
5
Exhibit 3: Consolidated Cash flows
Y/E March (`cr)
FY2019
FY2020
FY2021
Operating profit before working capital changes
141.2
189.4
273.7
Net changes in working capital
-20.9
13.1
-14.9
Cash generated from operations
120.3
202.5
258.8
Direct taxes paid (net of refunds)
-35.5
-42.4
-65.9
Net cash flow from operating activities
84.7
160.1
192.8
Bank deposits placed during the year
-0.3
-0.1
-21.4
Sale proceeds from property, plant and equipment
0.1
-
0.4
Others
-94.8
-106.2
-165.8
Cash Flow from Investing
-95.0
-106.3
-186.8
Long-term borrowings (repaid) during the year
-0.4
0.2
0.0
Proceeds of short-term borrowings (net)
2.5
-0.1
-2.4
Interest paid
0.0
-0.1
-0.1
Buyback of equity shares
-
-49.1
-
Tax on buyback of equity shares
-
9.1
-
Transaction costs of increase in share capital
0.0
0.0
-0.1
Other Financing activity
-12.8
-15.3
-3.3
Cash Flow from Financing
-10.8
-55.4
-5.9
Inc./(Dec.) in Cash
-21.1
-1.6
0.2
Opening Cash balances
29.5
9.4
9.2
Forex Difference
1.0
1.4
0.0
Closing Cash balances
9.4
9.2
9.3
Source: Company, Angel Research
Clean Science & Technology Ltd | IPO Note
July 06, 2021
6
Key Ratios
Y/E March
FY2019
FY2020
FY2021
Valuation Ratio (x)
P/E (on FDEPS)
97.9
68.5
48.2
P/CEPS
88.0
62.3
44.3
P/BV
35.1
27.9
17.7
EV/Sales
24.3
22.8
18.6
EV/EBITDA
70.1
51.6
36.9
Per Share Data (Rs)
EPS (Basic)
9.2
13.1
18.7
EPS (fully diluted)
9.2
13.1
18.7
Cash EPS
10.2
14.4
20.3
Book Value
25.6
32.2
50.8
Returns (%)
ROE
35.9
40.8
36.8
ROCE
43.4
48.3
43.3
Turnover ratios (x)
Receivables (days)
55.5
60.8
52.9
Inventory (days)
34.4
30.1
37.7
Payables (days)
20.7
31.1
43.4
Working capital cycle (days)
69.1
59.8
47.1
Source: Company, Angel Research
Clean Science & Technology Ltd | IPO Note
July 06, 2021
7
Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com
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