Clean Science and Technology, an Indian supplier to Bayer, has opened its IPO ⁠— and ‘subscribe’ is the unanimous call from analysts

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Clean Science and Technology, an Indian supplier to Bayer, has opened its IPO ⁠— and ‘subscribe’ is the unanimous call from analysts
  • Clean Science and Technology’s ₹1,546 crore IPO has opened for subscription and investors can apply till July 9.
  • The IPO has a price band of ₹880-900 per share.
  • The IPO is a complete offer for sale (OFS) by existing promoters and other shareholders to reduce their stake in the firm.
  • Most analysts have recommended subscribing to the specialty chemical manufacturer’s IPO on strong industry outlook and financials of the company.
Clean Science and Technology is said to be one of the largest manufacturers of certain specialty chemicals in the country. And it’s investors are trying to cash out of the Pune-based company through the initial public offering (IPO), from July 7-9, at a time when the tide is in favour of the entire sector.

The entire ₹1,546 crore share sale ⁠— priced at ₹880-900 a piece⁠ — will be from existing investors Ashok Ramnarayan Boob (₹244 crore), Krishnakumar Ramnarayan Boob (₹193 crore), Siddhartha Ashok Sikchi (₹40 crore) and Parth Ashok Maheshwari (₹75 crore).

Even though the company is not using the IPO money to expand its business, broking firms recommend that investors must subscribe.

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“We believe that the Indian specialty chemical industry is going to be one of the biggest beneficiaries of shifting of supply chains post the COVID-19 pandemic. Given the company’s financial performance, industry leading returns ratios and favourable outlook for the industry we recommend ‘subscribe’ to the IPO issue, said Angel Broking in a report.

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The pandemic has been a blessing in disguise for the specialty chemicals sector. The stalling of imports from China in the last year translated to more buyers in India, who were otherwise buying from China, leading to a 20% revenue growth for the company in the year ending March 2021.

“Since specialty chemicals come under essential services, there was not a very strong impact of the lockdown on our financials, but yes demand was impacted. For some products there was low demand and for some demand was significantly better. In fact, our revenues went up over 20% in FY2020,” Siddhartha Ashok Sikchi, promoter and wholetime director, told Business Insider in a recent interview.
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The disruption in global supply from China has also got them more buyers in other parts of the world.

ParticularsFY19FY20FY21
Revenue from operations393419512
Net profit97.7139.6198.4
(in crores)
Source: Report by Investmentz.com

The company manufactures critical specialty chemicals such as performance chemicals, pharmaceutical intermediates, fast moving consumer goods (FMCG) chemicals and other products.
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More than two-thirds of the company’s revenue comes from export clients in China, Canada, Europe, the United States of America, Taiwan, Korea, and Japan.

Some of the company’s key customers include:

CompanySegment
Bayer AG and SRFAgrochemicals
Gennex LabsPharmaceutical intermediaries
Vinati OrganicsMonomer products
Nutriad International NVAnimal nutrition products
Source: Hem Securities report dated July 6
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Some of the company's customers have also been associated with the company for over 10 years, the report added.

However, in the last three years, the company has reduced its dependence on top clients. Revenue from top 10 clients fell from over half of total revenue in the financial year 2019 to 47.9% at the end of March 2021.

The global specialty chemicals market is projected to grow at an annual compounded rate of 5% to reach $1.09 trillion by 2025. Some of the segments such as pharma APIs, agrochemicals, construction chemicals, home & personal care and additives are poised to grow at much higher rates than the overall industry, said Aditya birla Capital in a report dated July 5.
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No wonder, then, peer companies that are listed have given investors remarkable returns in the last one year.

StockLast 12 months change (From June 2020 to June 2021)
Vinati Organics80%
Fine Organic Industries49%
Atul98.9%
SRF108%
Camlin Fine Science 356%

SEE ALSO: A small hospital Assam is using AI to detect strokes in tea planters (businessinsider.in)

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