Specialty chemical company Tatva Chintan Pharma Chem shares traded at more than 100 percent premium in the grey market on July 27, ahead of listing later this week.
The stellar IPO subscription, leading position in manufacturing of structure-directing agents for zeolites in India, healthy financials and return ratios, and high quality product portfolio could be key reasons for hefty grey market premium.
Tatva Chintan shares traded at a premium of Rs 1,000-1,100/share in the grey market, the IPO Watch and IPO Central showed. This resulted into a price of Rs 2,083-2,183, a premium of 92.3 percent - 101.6 percent over expected final issue price of Rs 1,083 per share.
The grey market is an unofficial platform, wherein IPO shares traded till the listing of a company on the bourses.
Equity shares will make a debut on the bourses on July 29.
The Rs 500-crore public issue of Tatva Chintan was oversubscribed by 180.36 times during July 16-20 following strong response from all kind of investors. Non-institutional investors have put in bids 512.22 times their reserved portion and qualified institutional buyers 185.23 times, while the portion set aside for retail investors was subscribed 35.35 times.
The offer comprised a fresh issue of Rs 225 crore and an offer for sale of Rs 275 crore by existing selling shareholders. The net proceeds from fresh issue will be utilised for expansion of Dahej manufacturing facility; and upgradation of R&D facility in Vadodara.
Also read: Tatva Chintan IPO share allotment; Here's how to check your application status
Tatva Chintan Pharma Chem manufactures structure directing agents (SDAs), phase transfer catalyst (PTCs), pharmaceutical and agrochemical intermediates, and other specialty chemicals. The company serves customers across industries i.e. automotive, petroleum, agrochemicals, dyes and pigments, paints and coatings, pharmaceutical, personal care, and others.
It is the largest and only commercial manufacturer of SDAs for zeolites in India and second-largest globally. Further, the company's key chemistries and products are gaining importance in the global market.
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Its products are not only sold in India but also export to 25+ countries all over the world such as the USA, Germany, South Africa, China, and the UK.
In FY2021, total export contributed to 70.58 percent of total revenue from operations. Its revenue, earnings before interest, tax, depreciation and amortisation, and profit after tax increased at a compounded annual growth rate of about 21 percent, 39 percent, and 60 percent, respectively over FY19-21, with a 499 bps margin expansion.
Return ratios seem healthy, with FY21 return on equity and return on capital employed at 31 percent and 27 percent, respectively, providing confidence to investors, said Parvati Rai of KRChoksey Research.
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