About the company
Archean Chemical Industries Limited, a renowned specialty marine chemical manufacturer produces and exports Bromine, industrial salt, and sulfate of potash as the main products. In Fiscal 2021, the firm was the leading exporter of industrial salt and bromine, and both products were among the products that have the lowest manufacturing costs in the world.
Archean Chemical Industries IPO
The specialty chemical manufacturer Archean Chemical Industries’ initial public offering (IPO) is set to open on November 9 and end on November 11. The IPO‘s price range was set at Rs. 386 to Rs. 407 per share. In addition to an offer for the sale of 657 crores by the promoters and current shareholders, Archean Chemical Industries intends to raise 805 crore through a fresh issue of shares through the IPO.
According to the firm, 75 percent of the issue is set aside for qualified institutional investors, 15 percent is allocated to non-institutional investors, and the remaining 10 percent is allocated to retail investors.
Purpose of the IPO
o The objective of the Offer for Sale (OFS) is to enable the selling shareholders to sell up to 1,61,50,000 equity shares, with the selling shareholders receiving the net proceeds.
o The company would use the net proceeds from the new issuance to redeem or redeem earlier, in full or in part, the NCDs it has issued totaling up to Rs 644 crore.
o Corporate general objectives.
Archean Chemical IPO – Details
|IPO Opening Date||09 November 2022|
|IPO Closing Date||11 November 2022|
|Issue Type||Book Built Issue IPO|
|Issue Size||₹1462.31 Crore|
|Face Value||₹2 per equity share|
|IPO Price||₹386 – ₹407|
|Market Lot||36 Shares|
|Min Order||36 Shares|
|Listing At||BSE NSE|
|Register||Link Intime India Private Limited|
|QIB Shares Offered||75%|
|Retail Shares Offered||10%|
|NII (HNI) Shares Offered||15%|
Strengths of the Company
The company has a competitive advantage since the industry in which it works has substantial entry barriers.
In Fiscal 2021, the company was India’s top exporter of industrial salt and bromine.
- The company has a skilled management team, promoters, financial investors, and stakeholders
- The company has built integrated manufacturing sites that have shown to be cost-effective for the company.
Risk and Concerns
- unfavorable government laws and regulations
- a delay in capacity growth
- failure in a bromine derivative venture
- client revenue concentration risk
- unfavorable sales-mix and sales realization
- Unfavorable changes in exchange rates and competition.
Financials in Brief
Its revenue increased by 36% and 78% during the course of FY20-22, while its EBITDA margin increased from 24.3% to 41.3%. The company recorded FY22 revenue of Rs11.3 billion, up 53% YoY, and FY22 EBITDA of Rs4.8 billion, up 78% YoY. In comparison to FY21’s PAT of Rs666mn and FY20’s net loss of Rs362mn, FY22’s PAT was Rs1.9bn. From 92% in FY21 to 72% in FY22, ROE has decreased. The business reported 2QFY23 sales of Rs 4 billion, up 99% YoY, EBITDA of Rs 1.6 billion (margin of 40.2%), and PAT of Rs 844 million, up 4.5 times YoY. In FY22, the company’s Net Debt/Equity ratio dropped from 11.4x in FY21 to 3x.
GMP, Listing & Allotment Date
Market observers report that the Grey Market Premium (GMP) for the Archean Chemicals IPO is now 70 per equity share.The shares will be allocated on November 16, 2022. On November 21, 2022, the Archean Chemical IPO is most likely to list on both NSE and BSE
Outlook & Valuation
In the calendar year 2021, the Indian chemicals industry was valued at US$178 billion, representing approximately 3- 4% of the value of the global chemicals industry, and with rapid industrialization, this market is expected to grow even more. Archean Chemical Industries Ltd. is a formidable player in the bromine, industrial salt, and sulphate potash industry. It has witnessed a significant improvement in its top-line and bottom-line performance in the last three years. Nevertheless, the high debt-to-equity ratio (3.25 based on March, FY 22 consolidated numbers), high product as well as key customer concentration, and restructuring of loans during FY 17-18 make us averse to the issue. Additionally, the 3 years of data is limited for concluding the sustainability of high growth and margins. In short, considering all the shortcomings, investors should consider this issue for listing gains only due to the company’s reasonable valuations and presence in the specialty chemical industry