The Chennai-based chemical company Chemplast Sanmar Ltd will raise around Rs 3,850 crore through its initial public offering (IPO). The price band of the offer is fixed at Rs 530- Rs 541 per share.
In 2012, the company got delisted from the capital market. But now it is back with an IPO which will open on August 10 and conclude on August 12. The IPO consists of a fresh issue of Rs 1,300 crore and an offer for sale (OFS) of Rs 2,550 crore. A large portion of the net proceeds from the fresh issue will be used for early redemption of non-convertible debentures issued by the company worth Rs 1,238.25 crore and the remaining funds will be used for general purposes. Ramkumar Shankar, Managing Director at Chemplast Sanmar stated the company’s debt will significantly reduce. The company had issued non-convertible debentures aggregating to Rs 1,270 crore. As of May 31, 2021, the outstanding NCDs aggregated to Rs 1,238.25 crore.
The company will be investing around Rs 620 crore in capital expenditure. Shankar added, “The company is investing around Rs 250 crore in specialty paste PVC. We will invest Rs 340 crore in custom manufacturing. We will be de-bottlenecking our existing capacities as well.” At present, the company operates manufacturing plants at Mettur, Tamil Nadu; Karaikal, Puducherry; and Berigai, Tamil Nadu.
In the specialty paste PVC resin space, it has a 45 per cent market share in India. Chemplast Sanmar (which has a capacity of 66 ktpa capacity) and another player Finolex are the only players in specialty paste PVC resin. Shankar explained that due to restrictions in technology, there is a high entry barrier.
Meanwhile, the total income of the company (on a consolidated basis) was at Rs 3,815.1 crore, Rs 1,265.5 crore and Rs 1,266.7 crore in FY 2021, FY 2020 and FY 2019 respectively. Shankar explained that the rise in income in FY 2021 was after Chemplast Cuddalore Vinyls Limited became a subsidiary of the company in FY 2021.
The company is a major manufacturer of specialty chemicals used for agro-chemical, pharmaceutical and fine chemicals sector. The company also produces other chemicals such as caustic soda, chlorochemicals, hydrogen peroxide, refrigerant gas and industrial salt. The revenue from the company’s top 10 customers constituted 38 per cent, 30 per cent and 31 per cent of its revenue from operations for FY 2021, FY 2020 and FY 2019 respectively.
Chemplast Sanmar is part of the Sanmar Holdings Limited (SHL) Chemicals Group, which in turn is a constituent of the Sanmar Group. Fairfax India Holdings Corporation (Fairfax), which is led by billionaire Prem Watsa has invested in the SHL Chemicals Group since 2016 through FIH Mauritius Investments Limited.
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