Chemplast Sanmar IPO comprises a fresh issue of Rs 1,300 crore and an offer for sale of Rs 2,550 crore by promoters Sanmar Holdings and Sanmar Engineering Services. hemplast Sanmar, with a price band at Rs 530-541 per equity share, will open its initial public offering on August 10 and will close on August 12. Chemplast Sanmar is primarily focused on specialty PVC resin and custom manufacturing of starting materials and intermediates for pharmaceutical, agro-chemical and fine chemicals sectors.
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Chemplast Sanmar IPO Details:
| Bid Opens | Tuesday, 10th August, 2021 |
| Bid Closes | Thursday, 12th August, 2021 |
| Issue Details | Fresh Issue of Equity Shares upto ₹ 1,300 Cr + OFS upto ₹ 2,550 Cr |
| Face Value (₹) | ₹ 5/- Per Share |
| Issue Size (₹ Cr) | ₹ 3,850 Cr |
| Bid Lot | 27 Shares |
| Price Band | ₹ 530 -541 |
| Issue Structure : | |
| QIB | 75% of the offer |
| NIB | 15% of the offer (₹ 577.50 Cr) |
| Retail | 10% of the offer ( 7,116,450 Shares, ₹ 385 Cr) |
| Applications for 1x Retail | 2.64 Lacs |
Updates :
- ANCHOR ISSUE: Ahead of its IPO, Chemplast Sanmar IPO garnered Rs 1,732.5 crore from anchor investors. The investors which participated in the anchor book were Abu Dhabi Investment Authority, Amundi Funds, Government Pension Fund Global, Best Investment, Corporation, Jupiter India Fund, Neptune Investment, Volrado Venture, Kuber India Fund, CLSA, Public Sector Pension Investment Board, Segantii India Mauritius, Copthall Mauritius, Moon Capital, Goldman Sachs, Tara Emerging Asia, Nomura, and Societe Generale. Domestic investors including SBI Mutual Fund, Axis Mutual Fund, Mirae Asset, ICICI Prudential, HDFC Life Insurance, HDFC Trustee, Nippon Life, Franklin India, Aditya Birla Sun Life, Sundaram Mutual Fund, IDFC, JM Financial, IIFL Special Opportunities Fund, and Edelweiss.
About Chemplast Sanmar IPO
- Chemplast Sanmar Limited (CSL) was incorporated in1985.
- The Promoter of the company is Sanmar Holdings Ltd .
- Chemplast Sanmar Limited is a part of the SHL Chemicals Group, which in turn is a constituent of the Sanmar Group.
- Fairfax India Holdings Corporation has invested in the SHL Chemicals Group since 2016.
- company products fall in 4 main categories:
- Suspension PVC. Accounts for 60% of revenues.
- Specialty paste PVC resin: 20% of company revenue
- Custom manufacturing of starting material and intermediates for exports:
- Caustic soda, hydrogen peroxide, chloromethanes
- CSL is the leading manufacturer of specialty paste PVC resin in India, on the basis of installed production capacity.
- CSL is the 3rd largest manufacturer of caustic soda and the largest manufacturer of hydrogen peroxide, in South India .
- On acquistion of Chemplast Cuddalore Vinyls Ltd (“CCVL”) , they acquired 100% equity interest in CCVL that is the 2nd largest manufacturer of suspension PVC resin in India
- CSL has 4 manufacturing facilities, of which 3 are located in Tamil Nadu and 1 is located in Puducherry.
Chemplast Sanmar IPO: Financials
| Particulars / (₹ In Cr) | 2021 | 2020 | 2019 |
| Revenue from Operations | 3,798.73 | 1,257.66 | 1,254.34 |
| Revenue Growth (%) | 202.05% | 0.26% | – |
| EBITDA as stated | 1,127.22 | 254.52 | 298.05 |
| EBITDA (%) as stated | 29.55% | 20.11% | 23.53% |
| Profit Before Tax | 547.19 | 71.7 | 193.4 |
| EO | 465.28 | ||
| Net Profit for the period | 410.24 | 46.13 | 118.46 |
| Net Profit (% )as stated~ | 10.80% | 3.67% | 9.44% |
| Equity Share Capital | 67.04 | 67.04 | 67.04 |
| Instruments entirely equity in nature | 34.32 | – | 637.5 |
| Reserves | -1,967.03 | 778.99 | 706.98 |
| Net worth as stated | -1,865.68 | 846.03 | 1,411.53 |
| EPS (₹ ) | 30.6 | 2.04 | 4.53 |
| RoNW (%) | – | 5.45% | 8.39% |
| NAV(₹ ) | -139.15 | 63.1 | 105.27 |
| FV | 5 | ||
| Equity Post IPO | 79.05 | ||
| IPO Price | 541 | ||
| EPS (excluding EO) FY21 | 3.90 | ||
| PE | 138.72 | ||
| Market Cap | 8553 | ||
| Market Cap / Sales | 2.3 |
Pros
- The largest manufacturer of specialty paste PVC resins in India in terms of installed production capacity.
- Company is the third largest manufacturer of caustic soda a
- It is the largest manufacturer of hydrogen peroxide in South India.
- one of the old and prominent corporate groups in South India.
- Products have good demand.
- Experienced managerial team.
Cons
- Operations generate pollutants and waste, some of which may be hazardous
- Company has high debt burden with negative net worth.
- Has pledged shares of a subsidiary.
- Group companies have been making losses.
Chemplast Sanmar IPO: Assessment
- The Demand for caustic soda is also expected to grow at a CAGR of 4-5% between FY2020-25
- The demand for suspension PVC resin is expected to grow at a CAGR of 7.5-8.5% between FY2020-25
- The company products enjoy considerable tailwinds and company is expected to do well going forward on this count.
- The company is proposing to expand its operations by increasing the installed production capacity of specialty paste PVC resin by 35 kt.
- It is also setting up a multipurpose facility with two blocks for its custom manufacturing operations; and increasing the installed production capacity of suspension PVC resin by 31 kt by de-bottlenecking the suspension PVC resin plant.
- The high barriers to entry and limited competition are expected to benefit existing manufacturers of specialty paste PVC resin.
- Major concerns are negative net asset value, higher trade payable days and debt issues.
- Company borrowings increased to Rs 2,024.5 crore in FY21 from Rs 1,254.4 crore in FY20 and Rs 192.7 crore in FY19.
- A major concern is Chemplast Sanmar’s ownership in CCVL is pledged to secure Rs. 1,220 cr term loan for the parent company Sanmar Engineering Services Limited. Any issue with parent company can have a bearing on Chemplast Sanmar Limited.
- Large sized OFS seems to prompted by groups debt issues. The company intends to do early redemption of NCDs issued by the company, in full.
- Chemplast Sanmar IPO was last reported to be commanding a GMP of about Rs. 15 but deals have been few.
- Excluding Extra ordinary income, Chemplast Sanmar IPO is offered at a PE of ~ 140 times its FY21 earnings. Resin maker Finolex industries trades at PE of 12.5.. Other Caustic soda manufactueres trade at much lower PE. Gujarat Alkalies and DCM Shriram. at < 20 PE, while much specilized chemical compnay SRF Ltd at PE of 37x. Thus the price being demanded seems quite high.
- Chemplast Sanmar had delisted from the stock exchanges in June 2012 due to weak financial conditions and high debt levels.
- At this stage I am less likely to apply in Chemplast Sanmar IPO. Even as the products are good, growth prospects are encouraging, exorbitant IPO price is being demanded and there are leverage issues with the group. This view will only change if there is good QIB response to issue at the last moment.
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.