Tatva Chintan IPO Analysis – All You Need To Know About IPO

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Company Overview:

Tatva Chintan Pharma Chem Limited produces structure directing agents (SDAs), phase transfer catalysts (PTCs), pharmaceutical and agricultural intermediates, and other speciality chemicals. It is one of India’s leading manufacturers of SDAs for zeolites.

Automotive, petroleum, agrochemicals, dyes & pigments, paints and coatings, pharmaceutical, personal care, and other industries are served by the company. Its products are sold not just in India, but also in more than 25 countries throughout the world, including the United States, Germany, South Africa, China, and the United Kingdom. Total export accounted for 76 percent of total revenue from activities in FY 2020.

It is India’s largest and only commercial producer of SDAs for Zeolites and stands at second largest company globally. Its more than 154 products are used in a variety of industries, including automotive, petroleum, agrochemicals, dyes and pigments, paints and coatings, pharmaceuticals, and personal care.

As of now company has two manufacturing facilities at Ankleshwar and Dahej in Gujarat. Among the company’s customers are Merck, Bayer AG, Ipox Chemicals, Laurus labs, Navin Fluorine International Limited, Atul Limited, Otsuka Chemicals, SRF Limited, Hawks Chemical Company, Firmenich Aromatics Prod Pvt Ltd, and Divi’s laboratories.

Company’s IPO

Tatva Chintan Pharma Chem Ltd. would issue a Rs 500-crore initial public offering to fund capital expenditures at its facility and for promoters to reduce their holdings. According to the red herring prospectus, the Vadodara-based company’s first offering includes a fresh issue of Rs 225 crore and a Rs 275 crore offer-for-sale by the promoter group. The IPO accounts for 20.8 percent of the company’s post-IPO equity.

Tatva Chintan intends to use the funds to meet capital expenditure requirements for its Dahej manufacturing plant, as well as to improve a research and development facility in Vododara, for a total of Rs 147.10 crore.

Tatva Chintan IPO Details

IPO Opening Date 16-Jul-21
IPO Closing Date 20-Jul-21
Issue Type Book Built Issue IPO
Face Value Rs 10 per equity share
IPO Price Rs 1073 to Rs 1083 per equity share
Market Lot 13 Shares
Min Order Quantity 13 Shares
Listing At NSE and BSE
Issue Size Rs 500 Cr ( at face value of Rs 10/share)
Fresh Issue Rs 225 Crore
Offer for Sale Rs 275 Crore

Tatva Chintan IPO Schedule

IPO Open Date 16 July 2021
IPO Close Date 20 July 2021
Basis of Allotment Date 26 July 2021
Initiation of Refunds 27 July 2021
Credit of Shares to Demat Account 28 July 2021
IPO Listing Date 29 July 2021

Tatva Chintan Peer Comparison

Company’s Strength:

  • Structure directing agents and phase transfer catalysts from a leading company.
  • Product portfolio with a wide range of options.
  • With a customer base spanning multiple industries, we have a global market presence.
  • An industrial complex in Gujarat that is strategically placed near the Hazira Port.
  • Team of expert promoters and managers.
  • A proven track record of financial success.

Company’s Risk

  • Three nations Germany, the United States, and China, account for 54 percent of total revenue, which might have an influence on operations.
  • Because it does not have long-term contracts with suppliers, an increase in raw material costs or the loss of a supplier could have a significant impact on operations.
  • Company does not have long term contracts with most of its customers.
  • Company has all its manufacturing plants in Gujarat – Ankleshwar and Dahej; so any social or natural disruptions can impact operations.
  • Manufacturing slowdowns or shutdowns that occur unexpectedly can have a negative impact on business, operations, and financial situations.

Financials:

In the last three financial years, Tatva Chintan’s revenue increased at an annualised rate of 21%. Exports contribute for 70.6 percent of its revenue, with Germany, the United States, and China contributing for 54.20 percent.

Revenues increased by 14% year over year in FY2021, while operating profit increased by 20% year over year (operating profit margin rose by 100 bps YoY at 22 percent). In FY21, reported PAT increased by 38% year on year to Rs 52 crore.

Tatva Chintan has a solid earnings track record, with a 60 percent PAT CAGR between FY19 and FY21, sales growing at a CAGR of 21.7 percent, and the earnings before interest, taxes, depreciation, and amortization (EBITDA) margin improving by 600 basis points to 23 percent.

Return on equity (RoE) and return on capital employed (RoCE) for FY21 were 31.5 percent and 33 percent, respectively, compared to 25.8% and 26.4 percent in FY19.

Trendy Invest Take on Tatva Chintan IPO

Tatva Chintan’s growth prospects are bright, thanks to its leadership position in various specialty chemical product categories and significant presence in export markets. Considering that company operates in segments that could see an increase in environmentally sustainable products, the growth potential is even higher,” says the company. Company’s Balance sheet is strong and well capitalised, with low external debt, and it is also at discounted valuation if we compare with company’s peers.

Investor must subscribe IPO, not only for listing gains but It also looks good for long term prospective.

 

Disclaimer:

All the data presented in this analysis were taken from Company’s Red Herring Prospectus. All presented analysis is given for educational purpose and should not be taken as advise. Investors must consult their financial advisers before making any investment decision.

 

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