Choice Equity Broking IPO report on Archean Chemical Industries
Archean Chemical Industries Ltd. (ACIL), a specialty marine chemical manufacturer, is coming up with an IPO to raise around Rs. 1,460cr, which opens on 9th Nov. and closes on 11th Nov. 2022. The price band is Rs. 386 - 407 per share. India Resurgence Fund (under two schemes) and Piramal Natural Resources Pvt. Ltd., are the investor selling holders and are partially offloading their stake in the company. Post-issue, their stakes will fall to 11.20% and 4.16%, respectively, from 23.33% and 8.67%. The IPO is a combination of fresh and OFS issue. ACIL will not receive any proceeds from the OFS portion. Of the net proceeds from the fresh issue, around Rs. 645cr will be utilized for the redemption of non-convertible debentures and the residual fund will be used for general corporate purposes.
Valuation and Outlook
At higher price band, ACIL is demanding an EV/Sales multiple of 3.8x, which is in-line to the peer average. The company’s operations are likely to get support from import substitution, lower exports from the China and lower cost of operations. Thus the macros of ACIL are positive, but demanded stretched valuation is a concern. Thus we assign a “Subscribe with Caution” rating for the issue.
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