The initial public offering (IPO) of Chemcon Speciality Chemicals, which serves pharma and oil well industries, was subscribed 0.78 times on Monday as of 10.45 am.
The retail quota saw huge applications and was fully subscribed withing 45 minutes of the bidding process. Out of 65,59,173 shares on offer, the issue had received applications for 51,86,588 shares. Out of 32,83,580 shares on offer for retail investors, the issue had received application for 51,08,928 shares, meaning a subscription of 1.55 times.
Quota for non institutional investors or high net-worth investors was subscribed just 0.05 times while the QIB quota had received no applications yet.
The Vadodara-based company plans to raise Rs 318 crore and is offering a fresh issue of equity shares, aggregating up to Rs 165 crore and offer for sale of up to 45,00,000 equity shares, to be sold in the price range of Rs 338-Rs 340.
On Friday, the company raised Rs 95.40 crore through allotment of 28.06 lakh shares to anchor investors at Rs 340 per share.
In the grey market, the shares of the company were trading with a premium of Rs 275 per share, that is, 81 per cent more than the price band set for the IPO.
Analysts said that the issue is demanding an inexpensive valuation of 25.5 times FY20 earnings per share and that the company could gain from a shift in demand from China. But high client concentration, criminal proceeding against a promoter and limited portfolio are risks to the company.
Most brokers had ‘subscribe’ ratings on the stock. Choice Broking said that the company’s fundamentals look positive, but the promoter and promoter group’s corporate governance issue is making it cautious.
“Also, the specialty chemical sector got re-rated in the last 5-6 months. Before re-rating, the peers were available at lower valuations. Thus, considering the above observations, we assign a ‘Subscribe with Caution’ rating for the issue,” Choice said.