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Updated on: Tuesday, August 10, 2021, 11:59 AM IST

Chemplast Sanmar IPO opens today: All you need to know

Ahead of its IPO, Chemplast Sanmar has collected over Rs 1,732 crore from anchor investors | Freepik

Ahead of its IPO, Chemplast Sanmar has collected over Rs 1,732 crore from anchor investors | Freepik

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Specialty chemicals manufacturer Chemplast Sanmar Limited's Rs-3,850-crore initial public offering (IPO) comprising fresh issue of equity shares worth Rs 1,300 crore and an offer-for-sale of Rs 2,550 crore opens today - August 10, 2021 and will close on August 12.

The price band has been fixed at Rs 530-541 a share for its Rs 3,850-crore.

The offer for sale comprises the sale of Rs 2,463.44 crore by Sanmar Holdings Ltd and Rs 86.56 crore by Sanmar Engineering Services Ltd.

Anchor investors

Ahead of its IPO, the company has collected over Rs 1,732 crore from anchor investors, it said on Monday.

The company has decided to allocate 3,20,24,029 equity shares to anchor investors at Rs 541 apiece, valuing the transaction to Rs 1,732.5 crore, according to a circular uploaded on the BSE website.

SBI Mutual Fund (MF), Axis MF, ICICI Prudential MF, HDFC MF, HDFC Life Insurance Company, Abu Dhabi Investment Authority, Kuber India Fund, Goldman Sachs (Singapore) Pte, Nomura, Morgan Stanley Asia (Singapore) Pte Ltd and Citigroup Global Markets Mauritius among others have participated in the anchor book.

Specialty chemical manufacturer

Chennai-based Chemplast Sanmar is a leading specialty chemicals manufacturer with focus on specialty paste PVC (polyvinyl chloride) resin and custom manufacturing of starting materials and intermediates for pharmaceutical, agro-chemical and fine chemicals sectors.

Objectives

The company proposes to utilise the net proceeds from the fresh Issue towards early redemption of NCDs issued by the Company, in full and general corporate purposes.

The company said it would utilise an aggregate amount of Rs 1,238.25 crore from the net proceeds towards early redemption of the non-convertible debentures (NCDs) issued by it. In addition, funds will also be used for general corporate purposes.

"The early redemption of the NCDs in full will help reduce our outstanding indebtedness and debt servicing costs, assist us in maintaining a favourable debt-to-equity ratio and enable utilisation of our internal accruals for further investment in business growth and expansion," the company said in the red herring prospectus.

"In addition, we believe that our improved leverage ratio, consequent to such redemption of NCDs, will improve our ability to raise debt in the future to fund potential business development opportunities and plans," it added

A total of 75 per cent of the issue size has been reserved for qualified institutional buyers (QIBs), 15 per cent for non-institutional investors and 10 per cent for retail investors.

Investors can bid for a minimum of 27 equity shares and in multiple of 27 equity shares thereafter.

Chemplast Sanmar was delisted nearly a decade from the stock exchanges. It was delisted from BSE, NSE and MSE with effect from June 25, 2012, June 18, 2012 and June 25, 2012, respectively.

ICICI Securities Limited, Axis Capital Limited, Credit Suisse Securities (India) Private Limited, IIFL Securities Limited, Ambit Private Limited, BOB Capital Markets Limited and HDFC Bank Limited are the Global Co-ordinators and Book Running Lead Managers to the Offer. IndusInd Bank Limited and YES Securities (India) Limited are the Book Running Lead Managers to the Offer.

Brokerages weigh in

According to Marwadi Shares and Finance Limited, "Considering the FY-21 adjusted EPS of Rs.25.95 on the post-issue basis, the company is going to list at a P/E of 20.85 with a market cap of Rs.85,537 mn, while its peers namely PI Industries and SRF are trading at a P/E of 61.16 and 37.26 respectively. We assign a “Subscribe (With Caution)” rating to this IPO as the company is well-positioned to capture favourable industry dynamics. However, the negative net asset value along with higher trade payable days keeps us cautious from a longer-term perspective."

The promoter stake will shrink to 55 percent after the IPO from 100 percent reflecting the urgency to reduce debt. While business prospects look good, share pledges and group level debt would be an overhang. Investors therefore may look for an attractive price to enter in the secondary market based on the group debt level and servicing ability, said Himanshu Marfatia of Sunidhi Securities and Finance.

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Published on: Tuesday, August 10, 2021, 11:56 AM IST
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