Most analysts have advised investors to subscribe to the Rs 500 crore initial public offering (IPO). The price band of the issue has been fixed at Rs 1,073-1,083 a share. Bids can be made for a minimum of 13 shares and in multiples thereafter.
The company is going to list at a PE of 41.62 times with a market-cap of Rs 24,00.47 crore, while its peers – namely Aarti Industries and Navin Fluorine International – trade at PE values of 59.54 times and 73.95 times, respectively.
“We recommend ‘subscribe’ rating on this IPO, as it is a niche global player in the specialty chemicals segment with SDAs at the centrestage, having a globally-renowned clientele and reasonable valuations compared with its listed peers,” said Marwadi Shares and Finance.
The company produces some of the essential chemicals used by pharma, automotive, petroleum and paint industries. The company’s key customers include Laurus Labs, Bayer AG, Hawks Chemical, Asian Paints, Divi’s Labs, SRF, Navin Fluorine and Merck.
Tatva Chintan said it exports its products to more than 25 countries, including the US, the UK and China. As much as 75 per cent of the revenue comes from exports.
The IPO comprises fresh equity shares worth Rs 225 crore and an offer for sale by the promoters and shareholders worth Rs 275 crore. The company will utilise the fresh issue of Rs 225 crore worth of shares to fund its capex plans like Dahej manufacturing plant and upgrade its Vadodara R&D facility.
Of the total shares on offer, 50 per cent shall be available for allocation on a proportionate basis to qualified institutional buyers (QIBs). Further, not less than 15 per cent of the offer shall be available for non-institutional bidders and the rest for retail investors.
Analysts said the company’s earnings per share (EPS) has more than doubled in the last two financial years, rising from Rs 10.23 in FY19 to Rs 26.02 in FY21. Ebitda margin and PAT margin have risen from 17 per cent to 24 per cent and 10 per cent to 17 per cent, respectively.
“The company’s shares are in great demand in the grey market or the unofficial market for unlisted shares,” said Dinesh Gupta, founder of UnlistedZone, a firm that deals in unlisted shares. The grey market premium stood at Rs 690, or about 64 per cent above the IPO price band. Just two days back, the premium was at Rs 525.
Yash Gupta, Equity Research Associate with Angel Broking, said he has a positive outlook on the IPO. Among the major risks of investing in the company are dependence on a limited number of suppliers for certain raw materials and reliance on the top 10 customers for a major chunk of revenue.
