The Pune-based specialty chemical firm Clean Science andTechnology (CSTL) will open its subscription today. It offers an initial public offering of Rs1,546.62 crore and is up for sale by existing shareholders including promotersAshok Ramnarayan Boob, Krishnakumar Ramnarayan Boob, Siddhartha Ashok Sikchi,and Parth Ashok Maheshwari.
The offer is entirely for sale and the cost is fixed atRs 880-900 per share and the subscription closes on July 9.
The prime purpose is to uplift visibility, brand, provideliquidity to existing shareholders and achieve the advantages of listing shareson stock exchanges.
This global brand completely focused on forming newertechnologies using in-house catalytic processes, enabling it to emerge as thelargest world manufacturer of certain chemicals such as performance chemicals,pharmaceutical intermediates, and FMCG chemicals.
It has two manufacturing facilities in Kurkumbh(Maharashtra), with a combined installed capacity of 29,900 metric tonnes perannum and a 72 percent capacity utilization rate in FY21.
It enjoys a strong customer base with key customers likeBayer AG, SRF, Vinati Organics, etc. As of FY21, ~48 percent of its revenue iscontributed from its top 10 customers.
Arihant Capital Markets said, “At an upper price band ofRs 900, the stock is trading at a P/E multiple of 48(X) to its EPS of Rs18.6,”, which recommended subscribing to the IPO for the long term as well aslisting gains.
Geojit Financial Services assigned a ‘subscribe’ ratingfor the issue on a long-term basis considering its technical expertise, processinnovation, consistent focus on research & development, positive industryoutlook, superior margin profile, and healthy return ratios. At the upper priceband of Rs 900, CSTL is available at a P/E of 48x (FY21) which appears to befully priced in.
The brokerage said Clean Science’s ability to meet demandand the quality of its competitively priced products have resulted in strongand long-standing relationships with multinational corporations.
“Their in-house capabilities also enable them to optimizecapital expenditure for their facility expansion activities. As a result, theirasset turns are among the highest in the chemical industry,” said thebrokerage.
The company was trading at a premium of 52 percent or Rs470 in the grey market. "The company has a track record of strong andconsistent financial performance. The issue is priced at 48 times P/E againstthe average industry P/E of 55 times. Considering, the stellar performance, theasking price does not look expensive. If such performance remains consistent,we may see the stock outperforming going ahead," said Manan Doshi, theco-founder at UnlistedArena.com.
The Reliance Securities recommends subscribing saying,”The IPO is valued at 42.2x of FY21 earnings, which looks to be reasonablypriced. However, peers like Vinati Organics and Fine Organic trade at ~75x FY21earnings, which offers valuation comfort for CSTL. CSTL’s RoE at 37 percent issuperior to its peers, which along with a healthy asset turnover ratio at 3.8xFY21 and better OCF yield offer an edge. Further, strong growth prospects fordomestic specialty chemical manufacturers on the back of China+ One strategymay eventually aid CSTL to sustain strong earnings momentum, going forward.”
The company possesses a healthy balance sheet and robustreturn ratios profile (FY21 RoE at 36.8 percent). We recommend a 'Subscribe'rating to this IPO said Anand Rathi
Hem Securities said,” On the back of the company’s robustfinancial position, leadership in market share in some of its products, strongclientele and prospects of the chemical industry, we recommend 'Subscribe' onthe issue both for listing gain and long term purposes.”
“Clean Science’s earnings growth outlook is robust givenits strong market share (among the largest producers globally of functionallycritical specialty chemicals), consistent focus on R&D, greater costcontrol, and strong long-standing relationships with key customers,” saidSharekhan.
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Marwadi Financial Services, which recommended subscribingto the IPO said,” Clean Science is going to list at a PE of 48.18X with amarket cap of Rs 9,559.7 crore, while its peers namely Vinati Organics and FineOrganics are trading at 77.4X and 75.1X times, respectively.”
It further added thatthe company is among the largest producers globally of functionally criticalspecialty chemicals and is available at a favorable valuation as compared toits peers.