The public offer of specialty chemical manufacturer Chemplast Sanmar was subscribed 8 percent in the morning of August 10, the first day of bidding. Investors sent in bids for 33.61 lakh equity shares against an offer size of 3.99 crore shares, the subscription data on exchanges showed.
The offer size has been reduced to 3.99 crore equity shares from 7.11 crore equity shares after the company mopped up Rs 1,732.5 crore from several anchor investors at higher end of price band of Rs 530-541 per equity share.
Retail investors have bought 44 percent of shares of their reserved portion, while non-institutional investors' portion set aside was subscribed 2 percent.
The reserved portion of 2.17 crore shares of qualified institutional buyers has received bids for 1,836 equity shares.
Chemplast Sanmar is primarily focused on specialty paste polyvinyl chloride (PVC) resin and custom manufacturing of starting materials and intermediates for pharmaceutical, agro-chemical and fine chemicals sectors. It aims to raise Rs 3,850 crore through the issue.
The offer comprises a fresh issue of Rs 1,300 crore and an offer for sale of Rs 2,550 crore by promoters Sanmar Holdings and Sanmar Engineering Services.
Chemplast is a part of SHL Chemicals Group owned by Sanmar Holdings, one of the oldest corporate groups in south India. Since 2016, Fairfax India Holdings Corporation based in Canada has invested in SHL Chemicals Group through FIH Mauritius Investments.
"On the upper price band of Rs 541 and EPS of INR 30.6 for FY21, the P/E multiple works out to be 17.6x, which is at a significant discount compared to the industry average of around 31x. A leading manufacturer dominates primarily in South India with its efficient operational network and logistics," said KRChoksey Research.
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A healthy market share, limited opportunity for new entrants and stringent performance requirements by customers in the industry offers positive outlook for Chemplast in the medium term, the brokerage said.
“Based on a strong business model with long-tenured customer relations and discounted valuation compared to its peers, we recommend a 'subscribe' rating for listing gains," it said.
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Developments related to pledged shares—100 percent equity stake of CCVL—and viability of fundamental performance would be monitored in the near-term, it said.
Chemplast has experienced headwinds during FY09 to FY12 and delisted in June 2012. However, it strengthened its operations and remerged with CCVL as on March 2021 (demerged in FY18). With this, Chemplast's overall revenue stood at Rs 3,798.73 crore and profit at Rs 410.24 crore in FY21, increasing significantly from revenue of Rs 1,257.65 crore and profit of Rs 46.12 crore in FY20.
KRChoksey expects this amalgamation will benefit Chemplast to capitalise on growth opportunities available in the specialty chemicals and suspension PVC business.
"Similarly, Chemplast and CCVL can both take advantage of co-location and common raw material sourcing. The management is focusing to keep these both businesses distinct to pursue independent growth opportunities," it said.
Grey market investors were trading Chemplast Sanmar's shares at a premium of Rs 25-35 or 4.6-6.5 percent over the issue price of Rs 541, the IPO Watch and IPO Central data showed.
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