The excitement surrounding the Zomato IPO is yet to subside, however, investors are optimistic about another upcoming IPO, Tatva Chintan Pharma Chem. The Gujarat-based Speciality Chemical company has opened for IPO on 16th July 2021.
SHAREHOLDING PATTERN
OBJECTIVE OF THE ISSUE
The primary goals are to fund capital expenditures for the expansion of the Dahej manufacturing facility and the upgrade of Vadodara’s R&D facilities. The funds left over will be put to general corporate purposes.
COMPANY OVERVIEW
Tatva Chintan is a specialty chemicals manufacturer that produces a wide range of products. They focus on the applications of specialty chemicals.
They serve customers in the personal care, petroleum, agrochemicals, automotive, pharmaceutical, paints and coatings, dyes and pigments, and flavour and fragrances industries, among others.
They manufacture more than 154 products which are spread across 4 categories:
FINANCIALS
The borrowings of the company are under control. Cash flows are positive. Working capital is also increasing with the growth in the business.
PEER COMPARISON
| Company | Market Cap | Price to Earnings (P/E) | ROE% | Industry Price to Earnings (P/E) |
| Tatva Chintan | 2,400 | 45.9 | 31.5 | 30.3 |
| Aarti Industries | 31,043 | 59.3 | 16.5 | 30.3 |
| Alkyl Amines | 19,433 | 65.8 | 44.6 | 30.3 |
| Navin Fluorine | 18,931 | 73.5 | 16.2 | 30.3 |
| Vinati Organics | 19,754 | 73.3 | 19.1 | 30.3 |
Source: News Reports and Tavaga Research
BALANCING ACT: STRENGTH AND WEAKNESS
ANCHOR INVESTORS
Tatva Chintan raised ₹150 crores from 22 anchor investors. Goldman Sachs, HSBC Global, Abu Dhabi Investment Authority, Axis MF, Aditya Birla Sun Life, etc.. were among the top anchor investors.
GREY MARKET PREMIUM
In the grey market, Tatva Chintan shares were available at a premium of Rs 620-690. This culminated in a price per share of Rs 1,703-1,773, a premium of 57.2 % -63.7 % over the higher issue price of Rs 1,083.
Tatva Chintan IPO was fully subscribed within the first hour of its launch, which was largely supported by retail investors.
THE ENDING NOTE
The outbreak of Covid-19 caused some geopolitical shift, India’s specialty chemical companies are gaining favour with global MNCs as the world looks to reduce its reliance on China. Currently, China exports 15-17 percent of the world’s exportable specialty chemicals, while India only exports 1-2 percent, indicating that India has a lot of room for growth and opportunity. It is expected that specialty chemicals will be India’s next major export pillar.
Tatva Chintan has recorded great revenue growth and improved its working capital. The cash flows have also been great. But there is huge competition in the sector and the fresh issue proceeds will be used for the proposed expansion of the Dahej facility & the up-gradation of the R&D centre which can lead to the risk of cost overruns.