Tatva Chintan Pharma Chem (TCPC) is opening its initial public offering (IPO) today. The IPO worth Rs 500 crore is opening on July 16 and has strong recommendations from analysts to subscribe as a result of the company’s healthy financials and overall potential. TCPC was incorporated in 1996. It is a speciality chemical manufacturing company engaged in the manufacturing a wide range of Structure Directing Agents (SDAs), Phase Transfer Catalysts (PTCs), Electrolyte Salts and Pharmaceutical & Agrochemical Intermediates as well as Other Specialty Chemicals (PASC).
Tatva Chintan Pharma IPO: Issue Size, Price Band, GMP and Other Details
1) The Public Issue Overview: The IPO has a size of Rs 500 crore at present and lists a break-up of Rs 225 crore for its fresh issue along with an Offer for Sale (OFS) worth another Rs 275 crore as per reports. The offer will open on July 16. The bidding will continue till the close date which is set for July 20.
The proceeds from the fresh issue will go towards the expansion of the Dahej manufacturing facility and the upgrading of the Research and Development facility in Vadodara. The Tatva Chintan IPO was subscribed 1.01x times on Jul 16, 2021, at 11:07 hours. The public issue subscribed 1.99x in the retail category, 0.00x in the QIB category, and 0.05x in the NII category according to reports from Chittorgarh.
2) Price Band and GMP: The public issue has a fixed price band of Rs 1073 to Rs 1083 per equity share. It carries a face value of Rs 10 per equity share. The issue is running at a premium of Rs 690 on the Grey Market on July 16.
3) Listing and Allotment Date: The date for the basis of allotment is most likely to be on July 26, while the company may seek a listing date of July 29, for its IPO.
4) IPO Lot Size: The minimum lot size for the company’s public issue is listed as 13 shares at a rate of Rs 14,079. On the other end of the spectrum, the maximum lot size was listed as 182 shares with a going rate of Rs 197,106.
5) Company Financials: Tatva Chintan Pharma Chem has reported impressive financials in the past two years as per a note issued by Reliance Securities. The company’s revenue has gained around 21 per cent CAGR over FY19-FY21. The EBITDA and PAT recorded at 44 per cent and 60 per cent CAGR respectively, in the same timeframe. It should also be noted that the EBITDA margin expanded from 16.6 per cent in FY-19 to 23.8 per cent in FY21.
Over the FY18-21, the company’s revenue, EBITDA and Adj. PAT grew at a CAGR of 30 per cent, 42 per cent and 62 per cent with the support of a marginal expansion of 499 bps to 21.9 per cent, as well as the lowered taxed that the Dahej facility enjoyed during a tax holiday.
6) Tatva Chintan IPO GMP: Market analysts have noted that Tatva Chintan IPO GMP today stands at a healthy ₹710 to ₹720. This translates to Tatva Chintan shares being available at a premium of ₹710 to ₹720 in the grey market. It was also noted that as the IPO grey market premium stands at a robust 66 per cent, it holds as a good sign for the company’s promoters. This trend may attract extra bids on opening today.
IPO Analyst Recommendations
“The IPO is valued at 41.6x of FY21 earnings, which looks attractive considering peers’ valuations and unique presence in specialty chemical business segment. Further, the company’s return ratio is superior compared to peers, with RoE sanding at ~32% as of FY21. Further, current capacity utilization at 55-69% for both plants offers scope for sustained growth in the medium-term. We believe the company has a robust earnings growth potential in the long-run led by strong market share, capacity expansion and long-standing relationship with the key customers. Hence, we recommend SUBSCRIBE to the IPO,” said Reliance Securities in a note.
On the other side of the pond, Motilal Oswal of Financial Services said, “We like Tatva Chintan Pharma Chem due its leadership position, wide product portfolio, strong client relationship and high entry barriers. The company is expected to witness strong growth for next 2-3 years given its expansion plans. It is well placed to tap opportunity in the fast-growing specialty chemical space with increasing focus on green chemistry by leveraging its strong R&D capabilities. The issue is valued at 45.9x FY21 P/E on post issue basis, which appears reasonable compared to peers (avg. P/E of 59x), as it enjoys higher earnings growth (62% CAGR vs. avg. 38% CAGR for peers over FY18-21). Hence, we recommend Subscribe.”