Chemcon Speciality Chemicals is planning to launch its Initial Public Offering (IPO) on September 21 and is likely to raise around Rs. 350-400 crore. 

 

As per the Red Herring prospectus, the public issue consists of a fresh issue of Rs. 165 crore and an offer for sale of 45 lakh equity shares by promoters Kamalkumar Rajendra Aggarwal and Naresh Vijaykumar Goyal.

 

IPO money will be used to expand its manufacturing operations and production capacity. Chemcon is proposing to set up two new plants and one laboratory at its existing manufacturing facility at Manjusar, Vadodara. 

 

As of July 31, 2020, the total volumetric reactor capacity at the manufacturing facility was 374.85 KL. The company intends to build two additional plants with a total volumetric reactor capacity of 251 KL and one laboratory. These additional plants shall be utilised for the manufacturing of chemicals which are principally used in the pharmaceutical industry. 

 

With the completion of such expansion, the total volumetric reactor capacity at the manufacturing facility shall increase to 625.85 KL thereby enabling significant benefit from economies of scale. The company already has arrangements for regular power and water supply at its manufacturing facility together with provision for backup electric power including using a diesel generator set. 

 

For Fiscals 2020, 2019 and 2018, the revenue from operations was Rs. 2,620.52 million, Rs. 3,033.41 million and Rs. 1,576.42 million, respectively, growing at a CAGR of 28.93% between Fiscal 2018 and Fiscal 2020. 

 

The EBITDA for Fiscals 2020, 2019 and 2018 was Rs. 702.61 million, Rs. 660.83 million and Rs. 450.96 million respectively, growing at a CAGR of 24.82% between Fiscal 2018 and Fiscal 2020, while our profit after tax for Fiscals 2020, 2019 and 2018 was Rs. 488.53 million, Rs. 430.41 million and Rs. 263.81 million respectively, growing at a CAGR of 36.08% between Fiscal 2018 and Fiscal 2020.

 

In Fiscals 2020, 2019 and 2018, Pharmaceutical Chemicals contributed 63.75%, 63.14% and 62.18% of total revenue from operations respectively whereas Oilwell Completion Chemicals contributed 33.47%, 35.30% and 35.63% respectively of total revenue from operations.

 

Further, the company has recently acquired approximately 22,000 square metres of land next to its manufacturing facility, to enable future expansion of the manufacturing facility.Together with the existing land of approximately 29,000 square metres, the total and available for the manufacturing facility after this acquisition is approximately 51,000 square metres.

 

The company is the only manufacturer of HMDS in India and the third largest manufacturer of HMDS worldwide, in terms of production in calendar year 2019. The company is the largest manufacturer of CMIC in India and the second largest manufacturer of CMIC worldwide, in terms of production and capacity in calendar year 2019 (source: Frost & Sullivan Report). The company is the largest manufacturer of the Oilwell Completion Chemicals in India in calendar year 2019 (source: Frost & Sullivan Report).