Chemcon Speciality Chemicals IPO Day 2: Offer oversubscribed by 8 times, retail portion 15 times

The public offer of Chemcon Speciality Chemicals is witnessing strong response from investors on September 22, the second day of bidding.

The Rs 318-crore maiden public issue has received bids for 5.16 crore equity shares against offer size of 65.59 lakh equity shares (excluding anchor book), the subscription data available on the exchanges showed.

Retail paticipation remained strong in day 2. So far, their reserved portion has been subscribed 14.9 times, while the portion set aside for non-institutional investors has seen 1.93 times subscription. Qualified institutional buyers portion saw 0.12 percent subscription.

The Rs 318 crore-public issue consists of a fresh issue of Rs 165 crore and an offer for sale of 45 lakh equity shares (Rs 153 crore at higher price band) by promoters. Chemcon raised Rs 95 crore  from anchor investors on September 18.

Chemcon Speciality Chemicals IPO to open on Sept 21; 10 key things to know

The company has fixed price band at Rs 338-340 per share and the issue will close on September 23.

Chemcon Speciality Chemicals is a manufacturer of specialised chemicals, such as HMDS (hexamethyldisilazane) and CMIC (chloromethyl isopropyl carbonate), which are predominantly used in the pharmaceuticals industry.

Further, the company also manufactures inorganic bromides namely Calcium Bromide, Zinc Bromide and Sodium Bromide, which are predominantly used as completion fluids in the oilfields industry. It is the only manufacturer of HMDS in India and is the third-largest manufacturer of HMDS worldwide in terms of production.

Chemcon Speciality Chemicals IPO opens today: Should you subscribe?

Chemcon Speciality Chemicals will utilise fresh issue proceeds for capital expenditure towards the expansion of manufacturing facility, working capital requirements and general corporate purposes.

The company has recently increased its capacity for HMDS from 1,800 MT to 4,800 MT (around 600 MT high purity HMDS and rest normal HMDS). Further, the company also plans to utilise around Rs 41 crore from the IPO proceeds for the expansion of CMIC, which should likely expand the company’s processing capacity by around 60 percent.

ICICI Direct believes the company enjoys higher realisations in its pharma chemical business as compared to oil field chemicals and thus, it is evident that these two business verticals will likely grow at a decent pace going ahead on the back of import substitution. This should provide better operating profit margin visibility in the medium-term, said the brokerage which has a subscribe rating on the public issue.

Since CMIS goes into Tenofovir and with expectations of better growth outlook from the aforementioned drug over the period, one can expect better growth outlook for the company, ICICI Direct feels.