Specialty chemical company Tatva Chintan Pharma Chem is expected to double investors' money on listing over the issue price. Experts feel the company's healthy financials with strong return ratios, diversified product portfolio, global presence with wide customer base and overwhelming response to IPO could drive up the listing price of the stock.
The company will list its equity shares on July 29. Its Rs 500-crore issue was subscribed 180.36 times during July 16-20, the second highest subscription seen among IPOs in 2021.
The response from all kind of investors surprised the Street as the qualified institutional buyers' reserved portion was subscribed 185.23 times and that of non-institutional investors 512.22 times. A part set aside for retail investors was subscribed 35.35 times.
"After the stellar rally of the recently listed IPOs, it looks like investors are keenly awaiting the listing of Tatva Chintan Pharma this week. The premium for the company has been constantly rising. Investors can expect more that 100 percent listing gains in this issue," Likhita Chepa, Senior Analyst at CapitalVia Global Research told Moneycontrol.
Currently, Tatva Chintan shares traded at a premium of Rs 1,140-1,150 in the grey market, the IPO Watch and IPO Central data showed.
This resulted into a trading price of Rs 2,223-2,233 per share, higher by 105.3-106.2 percent over issue price of Rs 1,083. "Small issue size and strong demand from informed investors has led to gain more grey market premium," said Prashanth Tapse of Mehta Equities.
Incorporated in 1996, Tatva Chintan Pharma Chem is a chemical manufacturing company that manufactures structure directing agents (SDAs), phase transfer catalyst (PTCs), pharmaceutical and agrochemical intermediates, and other specialty chemicals. 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.
The company recorded strong growth in revenues and profitability in recent years. Revenues have grown at a CAGR of 21.7 percent in last two years, while the EBITDA margin improved by 600bps to 23 percent over the same period. Profit grew at a CAGR of 59.50 percent during FY19-FY21.
Return ratios also remained strong with return on equity and return on capital employed for FY21 at 31.5 percent and 33 percent respectively. In FY21, total export contributed to 70.58 percent of total revenue from operations.
"Considering excellent response from QIB & HNI, we assume the listing would be above Rs 2,050 levels, which translates to more than 90 percent premium over the upper end of the IPO price Rs 1,083," said Prashanth Tapse, VP Research at Mehta Equities.
He further said, "Strong listing gains seems to be justified considering diversified product portfolio with high entry barriers in segments, global presence with a wide customer base focusing on 'green' chemistry processes and reasonable valuations. On valuations parse at Rs 1,083, the issue is asking for a market cap of Rs 2,400 crore with PE (FY21) 41x, which seems there is something left on the table for new investors coming in."
Astha Jain, Senior Research Analyst at Hem Securities also expects Tatva Chintan to list at almost 85-90 percent premium to issue price on listing day.Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.