Please refer to important disclosures at the end of this report
1
Incorporated in 1996, Tatva Chintan Pharma Chem Limited (Tatva Chintan) is a
leading manufacturer of Structure Directing Agents (SDAs) and Phase Transfer
Catalyst (PTCs) that have various applications in green chemistry. The company
also manufactures Electrolyte Salts for super capacitor batteries (SCB) and
Pharmaceutical & Agrochemical intermediates and other specialty chemicals
(PASC). Its Product have application industries like automotive, petroleum,
pharmaceutical, agrochemicals, paints and coatings, dyes and pigments, personal
care and flavor and fragrances industries. As of FY21, they offered 47 products
under their SDA, 48 products under the PTC, 6 products under the Electrolyte Salts
for (SCB) and 53 products under their PASC portfolios.
Positives: (a) Leading manufacturer of structure directing agents and phase transfer
catalysts, with consistent quality. (b) Global presence with a wide customer base
across various industries having high entry barriers. (c) Diversified specialized
product portfolio requiring strong technical know-how (d) Modern manufacturing
facilities with a focus on ‘green’ chemistry processes. (e) Strong R&D capabilities.
Investment concerns: (a) Outbreak of the COVID-19 could have a significant effect
on operations, and could negatively impact the business, revenues & financial
condition (b) Unplanned slowdowns or shutdowns in manufacturing operations
could have an adverse effect on business (c) Company is subject to quality
requirements and strict technical specifications and audits by institutional
customers. (d) Increase in the cost of raw materials.
Outlook & Valuation: Tatva Chintan’s is the largest player in India for PTCs and the
only manufacturer in India of SDAs for zeolites which have importance due to
preference for green technologies. The company has shown good revenue and
earnings growth and has healthy balance sheet with solid return ratios. It is raising
funds for Capex and R&D requirements as they believe that there is strong growth
opportunity available. Given the client additions, wide portfolio, its capabilities, and
favorable outlook for the industry, we believe that Tatva Chintan can maintain
healthy growth rates which justifies the ~46x FY21 EPS commanded by the
company. Hence, we recommend “SUBSCRIBE” to the issue.
Key Financials
FY2019
FY2020
FY2021
206
263
300
-
27.6
14.1
21
38
52
-
84.0
38.3
16.4
20.9
21.9
9.0
17.0
23.6
120.4
63.5
45.9
30.1
20.4
14.5
50.0
38.3
36.8
29.0
22.4
24.1
72.8
45.1
37.8
11.9
9.4
8.3
Source: Company, Angel Research.
Note: Valuation ratios at upper price band.
SUBSCRIBE
Issue Open: July 16, 2021
Issue Close: July 20, 2021
Offer for Sale: 275 cr
QIBs 50% of issue
Non-Institutional 15% of issue
Retail 35% of issue
Promoters 79.2%
Others 20.8%
Fresh issue: 225 cr
Issue Details
Face Value: `10
Present Eq. Paid up Capital: `20.1 cr
Post Issue Shareholding Patter n
Post Eq. Paid up Capital: `22.2cr
Issue size (amount): `500 cr
Price Band: `1,073-1,083
Lot Size: 13 shares and in multiple thereafter
Post-issue mkt. cap: * `2,380 cr - ** `2,400 cr
Promoters holding Pre-Issue: 100%
Promoters holding Post-Issue: 79.17%
*Calculated on lower price band
** Calculated on upper price band
Book Building
Jyoti Roy
+022 39357600, Extn: 6842
[email protected]
TATVA CHINTAN LIMITED.
f
IPO NOTE TATVA CHINTAN LTD.
July 15, 2021
Tatva Chintan Pharma Chem Ltd | IPO Note
July 15, 2021
2
Company background
Company was incorporated as ‘Tatva Chintan Pharma Chem Private Limited’ on
June 12, 1996. The company was promoted by Ajaykumar Mansukhlal Patel,
Chintan Nitinkumar Shah, and Shekhar Rasiklal Somani. Currently promoters hold
16,175,850 Equity Shares in aggregate, representing 80.53% of the issued,
subscribed and paid-up Equity Share capital of the company. As of FY21, PTC,
SDAs, and PASC accounted for 27%, 40%, and 30% of revenues from sale of
products, respectively.
Issue details
The issue comprises of offer for sale of upto `275 crore and Fresh issue of 225 Cr
in the price band of `1073-1083.
Pre and post IPO shareholding pattern
No of shares
(Pre-issue)
%
(Post-issue)
%
Promoter
20,087,500
100.0
17,548,256
79.2
Public
0
0.0
4,616,806
20.8
Total
20,087,500
100.0
22,165,062
100.0
Source: Company, Angel Research & RHP.
Objectives of the Offer
Funding capital expenditure requirements for expansion of the Dahej
Manufacturing Facility.
Funding capital expenditure requirements for upgradation at the R&D facility
in Vadodara, and
General corporate purposes.
Key Management Personnel
Chintan Nitinkumar Shah is the Managing Director on the Board and has over 24
years of experience. He is responsible for, among others, business development
and finance and information services, in the company.
Ajaykumar Mansukhlal Patel is the Whole Time Director on the Board and has over
26 years of experience. He is responsible for, among others, project engineering
and the development and implementation of new technology, in the company.
Shekhar Rasiklal Somani is the Whole Time Director on the Board and has over 24
years of experience. He is responsible for business development, production
controlling, quality, and supply chain management, in the company.
Mahesh Tanna is the Chief Financial Officer of the company. He has been
associated with the company since December 22, 2020 and has experience of
over 21 years
Subhash Ambubhai Patel is the Independent Director on the Board and has over
33 years of experience in accountancy and audit.
Tatva Chintan Pharma Chem Ltd | IPO Note
July 15, 2021
3
Exhibit 1: Consolidated Profit & Loss Statement
Y/E March (` Cr)
FY2019
FY2020
FY2021
Total operating income
206
263
300
% chg
-
27.6
14.1
Total Expenditure
173
208
235
Cost of materials consumed
118
146
151
Purchases of stock-in-trade
0
2
3
Changes In Inventories
(4)
(16)
(4)
Employee benefits expense
16
21
24
Other expenses
42
55
61
EBITDA
34
55
66
% chg
-
62.6
19.6
(% of Net Sales)
16.4
20.9
21.9
Depreciation& Amortization
4
5
7
EBIT
30
50
59
% chg
-
68.4
17.6
(% of Net Sales)
14.4
19.1
19.6
Finance costs
4
4
4
Other income
0
1
6
(% of Sales)
0.2
0.5
2.0
Recurring PBT
26
46
55
% chg
-
76.7
18.5
Exceptional item
(1)
-
-
Tax
7
10
8
PAT (reported)
21
38
52
% chg
-
84.0
38.3
(% of Net Sales)
10.0
14.4
17.4
Basic & Fully Diluted EPS (Rs)
9.0
17.0
23.6
Source: Company, Angel Research
Tatva Chintan Pharma Chem Ltd | IPO Note
July 15, 2021
4
Exhibit 2: Consolidated Balance Sheet
Y/E March (` Cr)
FY2019
FY2020
FY2021
SOURCES OF FUNDS
Equity Share Capital
8
8
20
Other equity
72
110
146
Shareholders’ Funds
80
118
166
Total Loans
77
91
90
Other liabilities
4
5
4
Total Liabilities
160
213
260
APPLICATION OF FUNDS
Property, Plant and Equipment
54
99
109
Right-of-use assets
12
12
12
Capital work-in-progress
6
5
10
Intangible assets
0
0
0
Non-Current Investments
-
-
-
Current Assets
114
133
184
Inventories
36
64
72
Investments
-
-
-
Trade receivables
41
50
91
Cash and Cash equivalents
16
11
5
Loans & Other Financial Assets
10
3
3
Other current assets
11
6
13
Current Liability
27
36
55
Net Current Assets
87
97
130
Other Non-Current Asset
0
0
0
Total Assets
160
213
260
Source: Company, Angel Research
Tatva Chintan Pharma Chem Ltd | IPO Note
July 15, 2021
5
Exhibit 3: Consolidated Cash flows
Y/E March (`cr)
FY2019
FY2020
FY2021
Operating profit
27
48
61
Net changes in working capital
(22)
(23)
(38)
Cash generated from operations
13
34
34
Direct taxes paid (net of refunds)
(6)
(8)
(10)
Net cash flow from operating activities
7
25
24
Purchase of Assets
(10)
(48)
(21)
Interest received
0
1
(0)
Others
(7)
7
0
Cash Flow from Investing
(17)
(40)
(21)
Repayment (long term borrowings)
13
13
(9)
Repayment (short term borrowings)
8
1
9
Proceeds from issue/repayment debentures
-
-
-
Interest paid
(4)
(4)
(4)
Interest on Lease liabilities
-
-
-
Others
(0)
(0)
(4)
Cash Flow from Financing
17
10
(9)
Inc./(Dec.) in Cash
8
(5)
(5)
Opening Cash balances
8
16
11
Closing Cash balances
16
11
5
Source: Company, Angel Research
Tatva Chintan Pharma Chem Ltd | IPO Note
July 15, 2021
6
Key Ratios
Y/E March
FY2019
FY2020
FY2021
Valuation Ratio (x)
P/E (on FDEPS)
120.4
63.5
45.9
P/CEPS
100.2
56.4
40.7
P/BV
30.1
20.4
14.5
EV/Sales
11.9
9.4
8.3
EV/EBITDA
72.8
45.1
37.8
Per Share Data (Rs)
EPS (Basic)
9.0
17.0
23.6
EPS (fully diluted)
9.0
17.0
23.6
Cash EPS
11
19
27
Book Value
36
53
75
Returns (%)
ROE
50.0
38.3
36.8
ROCE
29.0
22.4
24.1
Turnover ratios (x)
Receivables (days)
73
69
110
Inventory (days)
75
111
112
Payables (days)
47
55
74
Working capital cycle (days)
101
125
148
Source: Company, Angel Research
Tatva Chintan Pharma Chem Ltd | IPO Note
July 15, 2021
7
Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com
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