The Pune-based specialty chemical firm Clean Science and Technology (CSTL) will open its subscription today. It offers an initial public offering of Rs 1,546.62 crore and is up for sale by existing shareholders including promoters Ashok Ramnarayan Boob, Krishnakumar Ramnarayan Boob, Siddhartha Ashok Sikchi, and Parth Ashok Maheshwari.
The offer is entirely for sale and the cost is fixed at Rs 880-900 per share and the subscription closes on July 9.
The prime purpose is to uplift visibility, brand, provide liquidity to existing shareholders and achieve the advantages of listing shares on stock exchanges.
This global brand completely focused on forming newer technologies using in-house catalytic processes, enabling it to emerge as the largest 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 per annum and a 72 percent capacity utilization rate in FY21.
It enjoys a strong customer base with key customers like Bayer AG, SRF, Vinati Organics, etc. As of FY21, ~48 percent of its revenue is contributed from its top 10 customers.
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Arihant Capital Markets said, “At an upper price band of Rs 900, the stock is trading at a P/E multiple of 48(X) to its EPS of Rs 18.6,”, which recommended subscribing to the IPO for the long term as well as listing gains.
Geojit Financial Services assigned a ‘subscribe’ rating for the issue on a long-term basis considering its technical expertise, process innovation, consistent focus on research & development, positive industry outlook, superior margin profile, and healthy return ratios. At the upper price band of Rs 900, CSTL is available at a P/E of 48x (FY21) which appears to be fully priced in.
The brokerage said Clean Science’s ability to meet demand and the quality of its competitively priced products have resulted in strong and long-standing relationships with multinational corporations.
“Their in-house capabilities also enable them to optimize capital expenditure for their facility expansion activities. As a result, their asset turns are among the highest in the chemical industry,” said the brokerage.
The company was trading at a premium of 52 percent or Rs 470 in the grey market. "The company has a track record of strong and consistent financial performance. The issue is priced at 48 times P/E against the average industry P/E of 55 times. Considering, the stellar performance, the asking price does not look expensive. If such performance remains consistent, we may see the stock outperforming going ahead," said Manan Doshi, the co-founder at UnlistedArena.com.
The Reliance Securities recommends subscribing saying,” The IPO is valued at 42.2x of FY21 earnings, which looks to be reasonably priced. However, peers like Vinati Organics and Fine Organic trade at ~75x FY21 earnings, which offers valuation comfort for CSTL. CSTL’s RoE at 37 percent is superior to its peers, which along with a healthy asset turnover ratio at 3.8x FY21 and better OCF yield offer an edge. Further, strong growth prospects for domestic specialty chemical manufacturers on the back of China+ One strategy may eventually aid CSTL to sustain strong earnings momentum, going forward.”
The company possesses a healthy balance sheet and robust return 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 robust financial position, leadership in market share in some of its products, strong clientele and prospects of the chemical industry, we recommend 'Subscribe' on the issue both for listing gain and long term purposes.”
“Clean Science’s earnings growth outlook is robust given its strong market share (among the largest producers globally of functionally critical specialty chemicals), consistent focus on R&D, greater cost control, and strong long-standing relationships with key customers,” said Sharekhan.
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Marwadi Financial Services, which recommended subscribing to the IPO said,” Clean Science is going to list at a PE of 48.18X with a market cap of Rs 9,559.7 crore, while its peers namely Vinati Organics and Fine Organics are trading at 77.4X and 75.1X times, respectively.”
It further added that
the company is among the largest producers globally of functionally critical
specialty chemicals and is available at a favorable valuation as compared to
its peers.