By: Rahul Koul
Last updated : May 13, 2021 9:58 am
Many leading Indian chemical companies tapped the IPO route to raise funds worth approximately Rs. 4,000 crores during FY 2020-21
Speciality Chemicals, Active Pharma Ingredients (API), pharmaceutical molecules, and pigments present a huge growth opportunity for the Indian chemical industry, believes Mukul Devnani, Director and Head of Chemicals, Materials and Nutrition Practice, Frost and Sullivan.
“These areas are extremely exciting from an investment standpoint. Surprisingly most of the Initial Public Offerings (IPOs) during the COVID-19 pandemic in the last year have been from chemical companies and they have done fantastically well. We can say that while the stock market has been doing well, the chemicals have contributed majorly to it," says Devnani.
Devnani is right. Many leading Indian chemical companies tapped the IPO route to raise funds worth approximately Rs. 4,000 crores during FY 2020-21. These include Rossari Biotech, Sigachi Industries, Chemcon Speciality Chemicals, Heranba Industries, Indigo Paints, Anupam Rasayan India, India Pesticides and Laxmi Organic Industries.
Rossari Biotech Limited, a speciality chemicals manufacturer, issued up to 30,12,046 equity shares of the face value of Rs. 2 each, on a preferential basis. Its Board of Directors determined a floor price of Rs. 996 per equity share or such a higher price, aggregating to Rs. 300 crore.
The Rs. 318 crore IPO of specialised chemical products manufacturer, Chemcon Speciality Chemicals, garnered a stellar response from the investors. The IPO was oversubscribed nearly 149.30 times, making it the second most subscribed public issue this year. The issue received bids for 976 million shares against the offered size of 6 million shares.
Leading speciality chemical manufacturer, Anupam Rasayan offered its IPO during March 2021 at a price band of Rs. 553.00 - 555.00 per equity share has raised Rs. 760 crore through its public issue which witnessed a massive subscription of 44 times. The company’s shares traded at a premium of Rs. 130-140 per share in the grey market, i.e. 23-25 percent higher at Rs. 685 - 695 against the expected final issue price of Rs. 555 per share.
The Rs. 600 crore IPO by Laxmi Organic Industries was sold between March 15 - 17, 2021, was a hit among investors, drawing 106.81 times subscription. The issue was priced at Rs. 129-130 per share but got listed at Rs. 150.20 per share. The speciality chemicals company is the largest manufacturer of ethyl acetate with over 30 percent market share in the Indian ethyl acetate market.
Gujarat-based agrochemicals manufacturer Heranba Industries’ Rs 625-crore initial public offering (IPO) opened for subscription between February 23 - 25, 2021. The company raised Rs. 187.51 crore by allotting 29.91 lakh shares to 18 anchor investors at Rs. 627 per share.
Sigachi Industries, one of the leading manufacturers of cellulose-based excipients based in Hyderabad, has filed its Draft Red Herring Prospectus (DRHP) to raise approximately Rs. 60 crore. The IPO is a fresh issuance of up to 28,41,500 equity shares of the face value of Rs. 10 each.
India Pesticides has filed its draft red herring prospectus (DRHP) to raise Rs. 800 crore via an IPO and has got an approval from SEBI. The public offer comprises a fundraise via a fresh issuance of shares amounting to Rs. 100 crore and Rs. 700 crore through an offer-for-sale by promoter and technocrat, Anand Swarup Agarwal aggregating to Rs. 281 crore and another selling shareholder the balance of Rs. 419 crore.
Indigo Paints Limited received bids of 64,57,90,130 shares against the offered 55,18,402 shares. The portion reserved for retail investors was subscribed 15.93 times. The Qualified Institutional Buyer and Non-Institutional Investor category were subscribed 189.57 times and 263.05 times respectively. The portion reserved for eligible employees was subscribed 2.50 times on the final day of issue closing. The bidding for the Rs. 1,170 crore IPO closed on January 22, 2021.
Notwithstanding its good financial performance in the stock market, Devnani points out that the chemical sector market size is US $182 billion, roughly 3% of a global business that is worth US $5 trillion plus.
“China with whom we are often compared retains close to 36% of the global share, especially the speciality chemical business which is a high growth sector for us. This shows there is huge headroom for Indian industry to grow and there are opportunities in few specific segments to make the Indian chemical industry more exciting,” opines Devnani.
Confident that implementation of Production Linked Incentive (PLI) scheme would help in import substitution for Key Starting Materials (KSM) and Active Pharmaceutical Ingredients (API) from China, he adds, “We need not look at India only as a consumer market but an exporting nation. I think companies need to catalyze the scheme and show what the industry is capable of.”