Chemcon Speciality Chemicals is set to debut on bourses on October 1 after its initial public offering got the second-highest subscription for an IPO this year after Happiest Minds Technologies.
The company, in consultation with merchant bankers, has fixed the final issue price at Rs 340 per share, the higher end of the price band.
Analysts largely expect Chemcon Speciality to list with a 100 percent premium over the issue price, given the strong demand from investors, the company being the leading chemical manufacturer for the pharmaceutical industry, high entry barriers in the specialty-chemical industry and expectations of good growth at home as well as exports.
Currently, Chemcon is available at around Rs 375-390 per share premium over IPO price in the grey market, people familiar with the development told Moneycontrol.
"Being the sole producer of HMDC (hexamethyldisilazane) & CMIC )chloromethyl isopropyl carbonate) products it enjoys a leadership position. Their products have a huge demand not only in India, but also have an opportunity for growth in exports which would drive revenue growth in the coming years," Manali Bhatia, Head-Research at Rudra Shares & Stock Brokers told Moneycontrol.
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Bhatia expects Chemcon to list at a more than 100 percent premium of around Rs 400-435.
According to Prashanth Tapse, AVP Research at Mehta Equities, Chemcon Speciality can provide a "spectacular listing" in the Rs 680-730 range, which will almost be double the issue price.
The Rs 318-crore IPO was subscribed 149.33 times during September 21-23, becoming the second most subscribed public issue this year after Happiest Minds Technologies, which saw a 151-time subscription.
Chemcon Speciality manufactures specialised chemicals such as hexamethyldisilazane and chloromethyl isopropyl carbonate, which are predominantly used in the pharmaceutical industry.
The company also manufactures inorganic bromides namely Calcium Bromide, Zinc Bromide and Sodium Bromide, which are used as completion fluids in the oilfields.
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It is the only manufacturer of HMDS in India and was the third-largest manufacturer of the chemical in the world.
The company earned around 65 percent revenue from the pharma sector and the rest from oilfields industry.
It has long-standing relationships with customers, having strong a customer base, healthy return ratios- return on capital employed (RoCE) and return on equity (RoE) at 37.92 percent & 34.23 percent for FY20, a favourable debt-equity ratio and stable PAT & EBITDA margins.
Moreover, at current valuations at a P/E of 22.12x, lower than the industry average, Chemcon is attractive to invest in for the long term, said experts.
Astha Jain, Senior Research Analyst at Hem Securities, expects a listing at 90-100 percent premium to the issue price.
The company raised Rs 165 crore via a fresh issue and the remaining Rs 153 crore will go to promoters who divested stake in the company.
It will utilise fresh-issue proceeds towards the expansion of manufacturing facility, working capital requirements, and general corporate purposes.Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.