Clean Science and Technology IPO opens tomorrow; grey market premium strong, should you subscribe?

Clean Sciences and Technology’s Rs 1,546 crore initial public offering (IPO) will open for subscription on July 7.

Clean Science and Technology’s Rs 1,546 crore initial public offering (IPO) opens for subscription tomorrow, July 7. Investors can bid for the IPO in the price band of Rs 880-900 per equity share of face value Rs 1. Clean Sciences’ issue is entirely an offer for sale (OFS) by existing investors, including promoters of the company and does not involve a fresh issue. Post IPO, promoter and promoter group shareholding will drop to 78.51% from 94.65%. On the other hand, public shareholding in the firm will increase to 21.49% from the current 5.35%. The subscription window for Investors will remain open from tomorrow till the end of the week. 

Issue details

Investors can subscribe to the issue in multiples of 16 shares, translating to a minimum investment of Rs 14,400 at the higher end of the price band. A total of 1.71 crore equity shares are on offer. Of the total issue size, half or 85.92 lakh equity shares worth Rs 773 crore are reserved for qualified institutional buyers (QIB). Retail investors quota is fixed 35% of the total issue or 60.14 lakh equity shares, translating to Rs 541 crore. Non-institutional investors (NII) can bid for 15% of the entire issue or 25.77 lakh equity shares worth Rs 232 crore. The company will not receive any funds from the public issue as the IPO is entirely an offer for sale. 

Should you subscribe?

Clean Science and Technology manufactures specialty chemicals such as Performance Chemicals, Pharmaceutical Intermediates, and FMCG Chemicals. The firm had received SEBI’s nod last month. Analysts at Marwadi Shares and Finance and Aditya Birla Money have a ‘Subscribe’ rating on the issue. “The company is going to list at PE of 48.18X with a market cap of Rs.95,597 million, while its peers namely Vinati Organics and Fine Organics are trading at 77.4X and 75.1X times respectively,” Marwadi Shares said in an IPO note. “We recommend to “Subscribe” this IPO as the company is amongst the largest producers globally of functionally critical specialty chemicals and is available at favorable valuation as compared to its peers,” they added.

Meanwhile, analysts at Aditya Birla Money find the Indian specialty chemicals industry to be in an upswing on the back of several favourable factors such as  the China + 1 sourcing strategy. “CSTL is the leading manufacturer in several of its products using internally developed processes and catalysts. It has joined the sustainable chemistry bandwagon by eliminating the wastes and discharges from its manufacturing facilities. It enjoys healthy return ratios and margins through the creation of strong entry barriers,” they added.

Grey market premium strong

Ahead of the IPO, Clean Science and Technology is trading at a healthy premium in the grey market. “Shares of Clean Science and Technology are quoting a premium of Rs 480 per share,” Dinesh Gupta, Partner, UnlistedZone told Financial Express Online. This translated to a strong 53% premium over the higher end of the price band of the IPO.