Archean Chemical IPO proposes to issue fresh equity shares worth Rs. 805 cr. (approx. 19778868 shares ), and an Offer for Sale of 16150000 equity shares (worth Rs. 657.31 cr.). The overall size of the issue is Rs. 1462.31 cr. The company has announced a price band of Rs. 386 – Rs. 407 per share of Rs. 2 each. Archean Chemical Industries a leading speciality marine chemical manufacturer in the country with focus on export of bromine, industrial salt, and sulphate of potash.
Bidding date
9th Nov – 11th Nov’2022
Issue
Issue Fresh
9,778,870 shares ( up to ₹805.00 Cr)
Issue OFS
16,150,000 shares ( up to ₹657.31 Cr)
Issue Size (Rs. Cr. )
1,462 Cr.
Issue Size (Shares)
35,928,869 Shares
Face Value in Rs.
2
Bid Lot shares
36 and multiples
Price Band
₹ 386 – 407
Issue Structure :
QIB
75%
NIB
15%
Retail
10%, 3.6 L shares, 146 Cr.
Appl. for 1x Retail
1 lac
About Archean Chemical
Archean Chemical Industries is a specialty marine chemical manufacturer & is focused on producing & exporting bromine, industrial salt & sulphate of potash to customers around the globe.
Archean Chemical Industries has an integrated production facility for bromine, industrial salt, and sulphate of potash.
The operations are located at Hajipir, Gujarat.
Main application of its products includes
Bromine is widely used in pharmaceuticals, agrochemicals, water treatment, flame retardant, additives, oil & gas, and energy storage batteries
Industrial Salt is the main material in chlorine and caustic soda production and is also utilized in the chemical and food and beverage industries.
Potassium Sulphate is a high-end, specialty fertilizer for chlorine-sensitive crops. It is also used for medical purposes to reduce plasma concentration of potassium in Hypokalemia.
Particulars
Revenue in Cr (FY22)
% to Total
Marine Chemicals Salt
512.9
45.37%
Bromine
605.29
53.54%
Sulphate of Potash
11.4
1.01%
Others
0.85
0.08%
Total revenue from operations
1130.44
100.00%
As of June 30, 2022, the company marketed its products to 18 global customers in 13 countries and to 24 domestic customers.
Particulars (Q1FY23)
%Export
%Domestic
Bromine
34.88%
65.12%
Industrial Salt
100.00%
0.00%
Sulphate of Potash
0.13%
99.87%
The company exported 100% of its industrial salt production to Japan and China.
Anchor Book: Archean Chemical IPO
Archean Chemical Industries raised Rs 658 crore from lead investors ahead of its IPO. The anchor book attracted total of 42 investors like SBI Mutual Fund, Nippon Life, ICICI Prudential, HDFC Mutual Fund, Goldman Sachs, DSP Small Cap Fund, Abu Dhabi Investment Authority, Kotak Mutual Fund, Government Pension Fund Global and Abakkus Emerging Opportunities Fund. part from these Aditya Birla Sun Life, Theleme India Master Fund, Tata Mutual Fund, BNP Paribas Funds, Segantii India Mauritius, Elara India Opportunities Fund, Edelweiss, Saint Capital Fund, Winro Commercial and Societe Generale also participated in the anchor book. anchor books.
Archean Chemical IPO : Financials
Particulars / (₹ Cr)
2022(03)
2021(03)
2022(12)
2021(12)
2020(12)
Consolidated
Standalone
Consolida ted
Standalone
Consolidated
Revenue from Operations
400.27
200.76
1,130.44
740.76
608.17
Revenue Growth (%)
99.38%
–
52.61%
21.80%
–
EBITDA
169.61
81.06
479.54
276.25
156.83
EBITDA Margin (%)
42.37%
40.38%
42.42%
37.29%
25.79%
Profit before Tax
112.85
24.82
251
90.47
-16.69
Net Profit
84.41
18.69
188.58
66.61
-36.22
Net Profit Margin (%)
21.09%
9.31%
16.68%
8.99%
-5.96%
Equity Share Capital
19.27
19.27
19.27
19.27
19.27
Net worth
345.44
90.99
261.07
72.38
5.99
EPS – Basic & Diluted (₹)
8.17^
1.81^
18.26
6.45
-3.51
RoNW (%)
24.44%
20.54%
72.24%
92.02%
-605.06%
NAV (₹)
33.45
8.81
25.28
7.01
0.58
ROCE (%)
11.71%
6.27%
34.62%
21.01%
11.24%
Debt Equity Ratio
2.65
10.9
3.53
13.52
155.24
Post Issue share Cap
24.61
FV in Rs.
2
IPO price
407
EPS post IPO FY22
15.33
PE
26.5
EPS post IPO FY23 ann
27.4
PE FY23 ann
14.8
Market Cap Rs. Cr.
5008
Market Cap/Sales
4.43
Salient Points: Archean Chemical IPO
India Resurgence Fund and Piramal Natural Resources Pvt. Ltd., are the investor selling holders and are partially offloading their stake in the company.
Post-issue, their stakes will fall to 11.20% and 4.16%, respectively, from 23.33% and 8.67%.
Post IPO promoter shareholding will stand at 55%.
As of June 30, 2022, Archean had 18 global customers and 24 domestic customers. In the 3 months ended June 30, 2022 and in Fiscal 2022, Fiscal 2021 and Fiscal 2020, their largest customer, Sojitz Corporation, contributed 19.29%, 20.56%, 30.51% and 31.94%, respectively, of their revenue from operations;
The Top-10 customers contributed 60.69%, 61.99%, 75.70% and 77.14%, respectively, of the revenue from operations.
The company is the largest exporter of bromine from India.
Its marine chemicals business is largely done on a B2B (business-to-business basis) both in India and globally.
Concerns
Bromine transportation is dangerous
Margins of the company are vulnerable to the volatility in global product prices and forex rate movement.
The company’s operations are exposed to the risk of excessive rainfall, which can adversely impact the quality of key raw materials as well as lead to an operational stoppage, impacting the scale of production.
The company debt was restructured in 2017, with certain banks.
Does not have long-term agreements with suppliers for raw materials.
Dependence on 3rd party transportation and logistics service providers.
Peers: Archean Chemical IPO
Name of the Company
CMP
Face Value
Tot Income (₹ Cr) FY22
NAV
PE TTM
RoNW %
Archean Chemical
407
2
1,143
25.28
20
72.24%
Tata Chemicals Ltd
1122
10
12,622
716.48
14.5
6.89%
Deepak Nitrite Ltd
2,333
2
6,845
244.77
31.9
31.95%
Aarti Industries Ltd
726
5
7,001
163.16
20
22.10%
Neogen Chemicals
1,413
10
488
176.12
74.17
10.16%
Archean Chemical IPO: Assessment
Archean Chemical is the largest exporter of bromine and industrial salt.
In FY21, Archean Chemical was India’s largest exporter of bromine and industrial salt.
The company has one of the lowest cost of production in both bromine and industrial salt globally.
Archean is only manufacturer of sulphate of potash from natural sea brine in India.
Archean Chemical Industries sells its products to 18 global customers in 13 countries as well as to 24 domestic customers.
It is setting up facility to make bromine performance derivatives products and to expand capacity of industrial salt.
Company is also into marine chemicals which has high entry barriers.
The transportation of bromine is dangerous and is done nickel and lead lined ISO containers. Archean ChemicalI has 228 containers either owned and leasedfor export business as of Jun’22.
Capex is planned though internal accruals.
It has reported good growth and profitability.
For FY2022, sales were up by 53% to Rs 1130 crore while OPM rose to 41.3% leading to 78% jump in operating profit to Rs 467.15 crore.
For Q1FY2023, sales were up by 99% to Rs 400 crore (yoy) . OPM increased by 30 bps to 40.2%
Debt level is bit high but should moderate after repayment of NCD’s from IPO proceeds.
The company enjoys relationships of more than five years with 7/10 top clients.
TTM EPS on post-issue equity works out to Rs 20.7 and thus P/E works out to 20x. PE based on annualizing Q1FY23 numbers translates to ~15.
Archean Chemical Industries OPM and ROE for FY 22 stood at 41.3% and 72.2% respectively, which are way above its listed peers. .
Compared to peers valuation looks reasonable.
I intend to apply in the Archean Chemical IPO
Archean Chemical IPO : Apply or Not
Risk : Very Low Expected Reward : Good to moderate profit Listing Gains : Looks likely Current GMP ~ Rs. 80 Hold for Medium Term: Looks good to me. Reasonable valuations. Subscription : Expected to be high. I am likely to apply for Archean Chemical IPO on Day 1 as and when DCX IPO ASBA gets released. Above are my views only. Please do your own diligence.
Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.
