CHEMPLAST SANMAR IPO

IPO Details:

Price Band: 530-541

Cutoff Price: 541

About Company:

Chemplast Sanmar (CSL) is a specialty chemicals manufacturer in India with a focus on specialty paste PVC resin and custom manufacturing of starting materials and intermediates for pharmaceutical, agro-chemical and fine chemicals sectors. CSL is one of India’s leading manufacturers of specialty paste PVC resin on the basis of installed production capacity, as of December 31, 2020. In addition, CSL is also the third largest manufacturer of caustic soda and the largest manufacturer of hydrogen peroxide in the South India region, on the basis of installed production capacity as of December 31, 2020 and one of the oldest manufacturers in the chloromethanes market in India. Pursuant to the CCVL Acquisition, CSL acquired 100.0% equity interest in CCVL that is the second largest manufacturer of suspension PVC resin in India and the largest manufacturer in the South India region, on the basis of installed production capacity as of December 31, 2020.

Competitive Strengths:

1. Well-positioned to capture favorable industry dynamics.

2. Leadership Position in an Industry with High Barriers to Entry.

3. Vertically integrated operations.

4. Quality Manufacturing Facilities with a strong focus on sustainability.

5. Operational excellence.

6. Strong Parentage and Experienced management team.

Strategies:

1. Focus on developing and improving our product portfolio.

2. Expanding our production capacities.

3. Improving financial performance through focus on operational efficiencies.

Financial Performance:

Revenues, Net Profit and EPS have shot up significantly in FY 21 despite of the pandemic, which makes us sceptical of this IPO. With EPS of 30.6, the company's P/E is 17.7.

Objects of the Issue:

The Net Proceeds from the Issue are proposed to be utilised in the following manner:

1. Offer for Sale

Competitors Comparison:

Chemplast S IPO seems to be undervalued based on the P/E ratio. Book Value of the company is negative and we can't compare price to book value with its competitors.

Grey Market Premium:

Our view: There is no GMP as such in this IPO. Also, FY21 numbers seem to be doubtful. I am avoiding this IPO.

Disclaimer: Views are shared for an educational purpose. Please consult your financial advisor or planner before taking any action based on the views or facts shared on this blog.

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