Subscribe to Gwalior Chem IPO for medium term: Keynote
Published on Mon, Sep 11, 2006 at 14:38 | Source : Moneycontrol.com
Updated at Wed, Sep 13, 2006 at 11:45
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Subscribe to Gwalior Chem IPO for medium term: Keynote
Gwalior Chemical Industries is open for subscription with an initial public offering of equity shares aggregating to Rs 80 crore through a 100% book build process. Keynote Capitals says that investors should subscribe to this issue with a medium term view.
Gwalior Chemical Industries, a producer of niche chemical products for agro-chemicals, pharmaceuticals, dye, flavour and fragrance industries, is open for subscription with an initial public offering, IPO of equity shares aggregating to Rs 80 crore (Rs 800 million) through a 100% book build process.
The price band for the offer has been fixed between Rs 71 and Rs 85 per share. The issue closes on September 14, 2006.
The equity shares are proposed to be listed in BSE and NSE.
JM Morgan Stanley Private Limited is the sole book running lead manager to the issue.
The Keynote Capitals report on Gwalior Chemical Industries IPO:
Recommendation - Subscribe with a medium term view
Gwalior Chemical Industries, GCIL is a producer of niche chemical products, which are mainly supplied to agro-chemicals, pharmaceuticals, flavors and fragrance, dye and paint industries.
GCIL has ISO 9001:2000E, ISO 14001:1996 and OHSAS 18001:1999 certifications for its seven plants located at Nagda (MP) and Ankleshwar.
A leading supplier of Viscose Dye Pigments to Viscose Staple Fibre manufacturers in India, GCIL is also proficient in the production of Chlorotoluenes and Thionyl Chloride.
Strong in-house R&D has led to expertise in manufacture of complex chlorinated compounds and hazardous chemical entities.
Strong and diversified customer base that includes over 500 clients across 9 industries in 40 countries. Domestic customers include Bilag Industries, United Phosphorus, Grasim Industries, Gujarat Insecticides and Gharda Chemicals.
GCIL is not over-dependent on a few customers or industries. This, coupled with the growing contribution of exports to turnover (up from just 7% in FY04 to 28% in FY06) may help it maintain margins going forward.
GCIL has a stable and scaleable business model, as highlighted by the diversified product portfolio with strong client base and increasing export opportunities. In view of the valuation of 11.3x FY07 and 8.9x FY08, investors may consider this IPO with a medium term view.
Investment concerns
Grasim being the major supplier of Chlorine for the Nagda plant, any increase in price by Grasim can have adverse impact on profitability.
GCIL had negative cash flows for FY05 and three months period ended June 30, 2006.
The price band for the offer has been fixed between Rs 71 and Rs 85 per share. The issue closes on September 14, 2006.
