Chemplast Sanmar’s IPO was fully subscribed on the last day of subscription with retail investors and QIBs oversubscribing their portions.
Chemplast Sanmar’s IPO was fully subscribed on the last day of subscription. Investors have so far placed bids for 1.93 times the entire IPO. Chemplast Sanmar is looking to raise Rs 3,850 crore through the IPO, offering shares in the fixed price band of Rs 530-541 per equity share of face value Rs 5. Investors can bid for the issue till Thursday evening in a bid lot of 27 shares and multiples thereafter. Chemplast Sanmar is a specialty chemicals manufacturer with a focus on specialty paste PVC resin and custom manufacturing of starting materials and intermediates for pharmaceutical, agro-chemical and fine chemicals sectors.
Retail investors were the first category of investors to have fully subscribed to their portion of the issue. Retail investors have bid for 2.18 times their portion or for 1.58 crore shares so far. Non-Institutional Investors have bid for only 28% of the reserved portion, submitting bids for just 30.67 lakh shares against 1.08 crore on offer. Qualified Institutional Buyers (QIB) subscribed their portion on Thursday, subscribing their portion 2.68 times, bidding for 5.83 crore equity shares against the 2.17 crore shares on offer. Overall bids have been placed for 7.73 crore equity shares against 3.99 crore shares that are on offer for investors.
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In the grey market, shares of Chemplast Sanmar were trading at a weak premium of Rs 18-20 per share or just 3.7% of the IPO price. The grey market premium for Chemplast Sanmar has come down since the IPO opened for subscription. The IPO is a mix of a fresh issue of equity shares worth Rs 1,300 crore and an Offer for Sale (OFS) worth Rs 2,550 crore. Post-IPO, the promoter group shareholding in Chemplast Sanmar will drop to 55% from the current 100% while the public shareholding will increase to 45%.
Company is bringing the issue at price band of Rs 530-541 per share at P/E multiple of 24 on post issue FY21 EPS. Having a strong market position in speciality chemicals, the company is well-positioned to capture favourable industry dynamics. Also, industry in which the company enjoys leadership position has high barriers to entry. Hence looking after all the above, we recommend “Long Term Subscribe” on issue.
Marwadi Financial Services
Subscribe (With Caution)
Considering the FY-21 adjusted EPS of Rs 25.95 on a post-issue basis, the company is going to list at a P/E of 20.85 with a market cap of Rs 85,537 mn, while its peers namely PI Industries and SRF are trading at a P/E of 61.16 and 37.26 respectively. We assign a ‘Subscribe (With Caution)’ rating to this IPO as the company is well-positioned to capture favourable industry dynamics. The negative net asset value along with higher trade payable days keeps us cautious from a longer-term perspective.
Positive view from long term perspective
We believe that CSL is well-positioned to benefit from the industry growth trends given its diversified product portfolio which diminishes the risk associated with any particular product, vertically integrated manufacturing facilities and strong parental support. On the financial front, Its joint ventures and associate company are posting losses from last 3 years, which remains a concern. Nonetheless, we have a positive view on the company from long term perspective.
Key Risks: i) Its joint ventures and associate company are posting losses from last 3 years. ii) The company has high debt.