Chemplast Sanmar IPO: Issue subscribed 10% on Day 1 of offering

Chemical maker Chemplast Sanmar received a public offer subscription at a 10 per cent rate on August 10, at the first bidding. Investors gave away bids for 38.01 lakh equity shares compared to the offered size of 3.99 crore shares, the subscription data displayed.

Chemical maker Chemplast Sanmar received a public offer subscription at a 10 per cent rate on August 10, at the first bidding. Investors gave away bids for 38.01 lakh equity shares compared to the offered size of 3.99 crore shares, the subscription data displayed.

The offer size has been decreased to 3.99 crore equity shares from 7.11 crore equity shares just after the company retrieved Rs 1732.5 crore from other investors at a range of Rs 530-541 per equity share. Retail investors purchased 50 per cent of shares of their reserved chunk, whereas the non-institutional investors’ portion was subscribed at 2 per cent. The reserved portion of eligible institutional buyers of 2.17 crore shares got bids for 1,836 equity shares.

Chemplast Sanmar’ s primary aim is to draw Rs 3,850 crore through the issue of speciality paste polyvinyl chloride (PVC) resin and custom manufacturing materials for pharmaceutical, agro-chemical and fine chemicals areas. This offer consists of a fresh issue of Rs 1,300 crore with an offer for sale of Rs 2,550 crore.

“On the upper price band of Rs 541 and EPS of INR 30.6 for FY21, the P/E multiple works out to be 17.6x, which is at a significant discount compared to the industry average of around 31x. A leading manufacturer dominates primarily in South India with its efficient operational network and logistics,” added KRChoksey Research.

“A healthy market share, limited opportunity for new entrants and stringent performance requirements by customers in the industry offers a positive outlook for Chemplast in the medium term,” the brokerage indicated.

“Based on a strong business model with long-tenured customer relations and discounted valuation compared to its peers, we recommend a ‘subscribe’ rating for listing gains,” it added.

Developments related to pledged shares—100 per cent equity stake of CCVL—and viability of fundamental performance would be monitored in the near-term, it ascertained.

After battling the heavy winds, Chemplast’s overall revenue resulted at Rs 3,798.73 crore with a profit at Rs 410.24 crore in FY21, which rose the revenue of Rs 1,257.65 crore along with a profit of Rs 46.12 crore in FY20.

“Similarly, Chemplast and CCVL can both take advantage of co-location and common raw material sourcing. The management is focusing to keep these both businesses distinct to pursue independent growth opportunities,” Choksey said.

According to the latest issued by the IPO Watch and IPO Central, the grey market investors were trading Chemplast Sanmar’s shares at a premium of Rs 25-35 or 4.6-6.5 per cent in relation to the issue price of Rs 541.

Source Money Control
Subscribe to our newsletter
Subscribe to our newsletter
Sign up here to get the latest news delivered directly to your inbox.
You can unsubscribe at any time