Tatva Chintan Pharma Chem IPO: All You Need To Know

Bottles containing chemicals are used during sample tests in a laboratory. (Photographer: Stefan Wermuth/Bloomberg)

Tatva Chintan Pharma Chem IPO: All You Need To Know

Tatva Chintan Pharma Chem Ltd. will launch a Rs 500-crore initial public offering as the specialty chemical maker aims to fund capex for its facility and promoters look to pare holdings.

The maiden offer by the Vadodara-based company comprises a fresh issue of Rs 225 crore and a Rs 275-crore offer-for-sale by the promoter group, according to its red herring prospectus. The IPO constitutes 20.8% of the post-issue equity.

The company will sell shares at Rs 1,073-1,083 apiece, seeking a market value of Rs 2,400 crore at the upper end of the price band.

Issue Details

  • Issue opens on: July 16.

  • Issue closes on: July 20.

  • Issue size: Up to Rs 500 crore.

  • Bid lot: 13 shares and multiples thereof.

Prior to the IPO, the company raised Rs 149.99 crore from 22 anchor investors at the upper price band.

Objective

Tatva Chintan plans to use Rs 147.10 crore from the proceeds to fund capital expenditure requirement for its Dahej manufacturing plant, and Rs 23.97 crore to upgrade a research & development facility at Vododara.

The new facility is expected to be completed by the end of FY23. After completion of the capital expenditure, manufacturing capacity is expected to double for the company.

Business

The company manufactures structure-directing agents (used to make absorbents) and phase transfer catalysts, electrolyte salts for super capacitor batteries and pharmaceutical and agrochemical intermediates and other specialty chemicals at its two manufacturing units at Ankleshwar and Dahej in Gujarat.

Tatva Chintan, according to a Frost & Sullivan report, is the largest and only commercial manufacturer of structure-directing agents for zeolites in India, and the second-largest globally. It’s also one of the leading global producers of an entire range of phase transfer catalysts.

The company’s electrolyte salts are used to make super-capacitor batteries, used in automobile and other batteries.

During the fiscal ended March 2021, revenue from the sale of structure directing agents was Rs 120.24 crore. While that accounted for 40.03% of the company’s revenue from operations, sale of phase transfer catalysts formed 27.17%.

Financials

Tatva Chintan’s revenue grew at an annualised rate of 21% in the last three financial years. It earns 70.6% of its revenue from exports, with Germany, the U.S. and China together accounting for 54.20%.

  • Its top 10 customers constitute 59.9% of revenue.

  • The company’s profit after tax has seen a compounded annual growth rate of 59.50% in the last three years.

Peers

Tatva Chintan competes with Aarti Industries Ltd., Navin Fluorine International Ltd., Alkyl Amines Chemicals Ltd. and Vinati Organics Ltd.

Risks

  • Unplanned slowdown or shutdowns of manufacturing may impact business, operations and financial conditions.

  • Increase in raw material costs or loss of suppliers could materially impact operations as it does not have long-term contracts with suppliers.

  • Country concentration could impact operations as three countries — Germany, the U.S. and China account for 54% of the total revenue.

  • Inability to complete the capex on time could impact future revenue.

  • All manufacturing facilities located in Gujarat — Ankleshwar and Dahej —any social or natural disruptions can impact operations.

  • Does not have long-term contracts with most of its customers.

Watch the interview with Tatva Chintan's Managing Director Chintan Shah.

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