Deepak Chemtex IPO (BSE SME) Overview

Deepak Chemtex IPO plans to raise 23.04 crores. The issue is entirely a fresh issue of 28.8 lakh shares. Deepak Chemtex Limited is engaged in the business of manufacturing colorants for applications in Food, Drug, Cosmetics, Cleaning compounds, Agriculture, and other industries.

IPO opensNov 29, 2023
IPO ClosesDec 01, 2023
IPO Size (Rs.)₹23.04 Cr
IPO Size (shares)2,880,000 shares
BreakupFresh issue only
Face Value:₹ 10
IPO Price in Rs :₹76 to ₹80 
Minimum Lot1600 Shares
Listing AtBSE SME
QIB (includes anchor, Market Maker)~50 %
NII Quota~15%
Retail Quota~35%
 Lead ManagerHem Securities 
RegistrarBigshare Services
Market makerHem Finlease

About Deepak Chemtex;

  • They are primarily engaged in the business of manufacturing of colorants finding its application in Food, Drug, Cosmetics, Cleaning compounds, Agriculture and other industries.
  • Colorants are formulations of chemical intermediates, pigments or dyes and additives used to add colour to various consumables.
  • Deepak Chemtex commenced business in 1997 and have over the years evolved into manufacturing of a complete range of FD&C (Food, Drug and Cosmetic) colours used in the confectionary, bakery, desserts, beverages, dairy products, seasonings, pet foods, pharmaceutical products, cosmetics & personal care products. We also manufacture salt free dyes used in inkjet industry, pond dyes used in in ponds, lakes, swimming pools etc. and other colorants used in car wash products, portable sanitation cleaners, detergent & soap, fuel, oil & lubricants, smoke, seed treatment, crop protection, fertilizer indicators, floral dyes etc.
  • Deepak Chemtex manufacturing facility is situated at Ratnagiri District in Maharashtra and is equipped with glass lined reactors, boilers and stainless steel equipment and gets audited on a regular basis by our clients. They use various production processes like: Sulphonation, Condensation, Bromination, Oxidation, Reduction, High pressure reactions, Purification etc. which enables them to cater to niche and advanced requirements of a wider range of end-products and applications.
  • They manufacture colorants from unwanted salts and isomers.
  • With the growing environmental concerns we have developed Effluent treatment Plant and carry out a series of treatments to check the COD, BOD, TDS and PH levels of the effluent before we discharge the same to the Common Effluent Treatment Plant.
  • As of July 31, 2023, they had 88 employees on its payroll.
  • Saurabh Deepak Arora and Trishla Baid are the promoters of Company.

Financials: Deepak Chemtex

Particulars / Rs. In Lacs2023 (06) 202320222021
Total Income2,212.954,783.725,443.682,972.75
Profit after tax311.18630.2423.1263.47
Equity Share Capital798.449.949.949.9
Net worth1,879.901,568.88938.43516.51
Earnings per Share390%7.895.33.3
Net Asset Value23.5519.6511.756.47
Total Borrowings120.78136.8199.49158.12
Post issue Share Capital1,086   
IPO price80.0   
EPS Fy235.8   
PE Fy2313.8   
EPS Fy24 (annualized)5.7   
PE Fy24  (annualized)14.0   
Market cap in Lacs8,688.0   
Market Cap/sales1.8   

Anchor: Deepak Chemtex IPO

Deepak Chemtex IPO: Salient Points

  • Promoters and Promoter Group collectively hold 99.40% of the pre-issue paid-up Share Capital of our Company. This shall come down to 73.05% after the IPO.
  • The Indian chemicals industry stood at US$ 178 billion in 2019. It is expected to reach US$ 304 billion by 2025 registering a CAGR of 9.3%.
  • Customer segment split of Revenue from operations:
  • From the net proceeds from the IPO:
    • Towards installation of plant & machinery in company’s existing premises Company, it proposes to utilize Rs 54.50 lakhs.
    • Rs. 269.84 lakhs towards installation of plant and machinery in subsidiary DCPL Speciality Chemicals Private Limited.
    • ₹ 625.00 lakhs of the Net Proceeds in Fiscal 2024 and ₹ 625.00 lakhs in Fiscal 2025 for working capital requirements.
  • As of March 31, 2023, company’s product portfolio was sold to over 17 global customers spread in more than 10 countries as well as to 62 domestic customers.
  • They derive a significant portion of revenues from operations from export to countries like: China, France, Kenya, Mexico, Europe, Japan, Australia, United Kingdom, United States of America etc.
  • During the period ended on September 30, 2023 and Fiscal 2023, 2022, 2021 the revenues from exports amounted to ₹1009.32, ₹ 2,686.38 lakhs, ₹ 1,810.44 lakhs and ₹ 707.34 respectively, which constituted 46.42%, 57.52%, 33.46% and 23.93% respectively, of the total revenues from operations. Thus exports have overall seen a good uptrend.
  • Their top 10 customers contributed approximately 76.41%, 73.13% and 63.62% of our revenue from operations for year ended on 31st March 2023, 31st March 2022 and 31st March 2021 respectively.
  • They have successfully expanded their commercialized product portfolio from around 50 products in Fiscal 2021 to around 100 products in Fiscal 2023.
  • Peers:
CompanyFVCMP (₹)Revenue (cr)Net Profit (₹ cr)NPMPERONW(%)Mcap (cr)Macp/sales
Deepak Chemtex Limited108047.846.413.4%13.8(14)40.1786.881.8
Vidhi Specialty Food1437404.00389.4%6415.04%2,1785.4
Vipul Organics Limited10132134.0021.5%91.23.53%1711.3
Kiri Industries Limited10294945.0010711.3%1743.98%1,5191.6
  • Deepak Chemtex IPO is coming at a PE ratio of 13.8x(fy23 earnings) and14x (fy24 annualized earnings).
  • While revnues have not shown uptick, it has reduced expenses to increase profitability.
  • Now it is expanding manufacturing capabilities and company’s product portfolio.
  • I intend to apply in Deepak Chemtex IPO. Valuations look OK to me.
  • GMP as reported on social media has been around Rs. 32.
  • Hem secuities is the Lead Manager to the issue. The IPOs lead managed by them have given a good return to the investors. These include names like Paragon Fine And Speciality Chemicals, E Factor Experiences Limited, Arabian Petroleum Limited,Saakshi Medtech and Panels Limited, Kahan Packaging Limited, Asarfi Hospital Limited, Kaka Industries, Green Chef, Vasa Denticity, Chaman Mettalics, Hemant Surgicals, Labelkraft, Concord Control Systems Limited, Earthstahl & Alloys Limited, Silicon Rental Solutions Limited, Krishna Defence and Allied Industries, Prevest Denpro Limited etc.
  • SME IPO are more risky than mainboard IPOs.
  • Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational/ exploratory purpose only. Iam a postgraduate in engineering & Management . I have in the past cleared 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. Do check the data from company’s RHP and exchanges before making any decision. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.

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