Chemcon Speciality Chemicals, which earns around 65 percent revenue from the pharmaceutical industry, opened with a bumper 115 percent premium over issue price on October 1.
The stock listed at Rs 730.95 per shares on the BSE, against its issue price of Rs 340 per share, meeting analysts’ expectations.
On the National Stock Exchange, it started off the inning at Rs 731, a 115 percent premium.
After strong opening, Chemcon witnessed some profit booking at higher levels despite strong market trend, which could be due to high valuations.
At 10:02 hours IST, Chemcon was trading at Rs 614, up by Rs 274 or 80.59 percent over issue price, with volume of 4.17 lakh shares, but was down 16 percent from opening price on the BSE.
On the NSE, it was quoting at Rs 619, up 82 percent, with volumes of
21,08,512 shares, but it was down 15.3 percent from opening price.
Chemcon Speciality Chemicals with a small issue size of Rs 318 crore has seen stellar response from all categories of investors and was subscribed 149.3 times during September 21-23. Hence the listing premium seems to be clearly justified the demand witnessed during subscription.
It is the speciality chemicals manufacturer of pharma chemicals (HMDS, CMIC) and oilwell completion chemicals (inorganic bromides).
It is the only manufacturer of HMDS in India and 3rd largest globally. It is also the largest player of CMIC in India and 2nd largest worldwide. Additionally, Chemcon is the only manufacturer of zinc bromide and the largest of calcium bromide in India.
“We see Chemcon is well-positioned to substitute the imports from China and has an opportunity to grow and double its revenue as well as profits in 3-4 years. If we look at specialized chemicals as a sector it is been re-rated in last 3-6 month due to ongoing saga with Chinese but the concern remains on procurement of raw materials from China which accounts around 20 percent to its total expenditure,” Prashanth Tapse, AVP Research at Mehta Equities told Moneycontrol.
Company’s 40 percent of the revenues come from export which has grown at a CAGR of 18 percent over FY18-20.
Chemcon enjoys high entry barriers which leads to client stickiness and long standing relationships, said Motilal Oswal.
During FY18-20, Chemcon’s revenue/EBITDA/PAT grew at a CAGR of 29/25/36 percent, led by volume and price growth.
Its EBITDA margins are strong at 26.8 percent in FY20 given the leadership position and high complex nature products. Given continuous capex incurred over the last three years, the return ratios have tapered down, though healthy with ROE/ROCE at 40/33 percent in FY20, the brokerage said.
The maiden public issue comprised a fresh issue of Rs 165 crore and an offer for sale of Rs 153 crore by promoters.
Chemcon plans to set up two more plants for manufacture of Pharma Chemicals (capex of Rs 41 crore), which would increase its capacity from 375KL to 626KL (operational by FY22-end). This will help Chemcon expand its reach in India which is currently net importer of HMDS/ CMIC.
Chemcon also aims to expand its product portfolio and usage of its existing products to other industries.
