Mumbai: Tatva Chintan Pharma Chem Ltd (TCPCL) had a bumper debut on the stock exchanges on Thursday, with its shares listing at nearly 95% premium over its issue price.
Its Rs500 crore initial public offering (IPO) was subscribed nearly 180 times last week. The price band for the issue was set at ₹1,073- ₹1,083.
At 10.05 am, the stock traded at ₹2,416.60 on the BSE. The scrip had opened at ₹2,111.80 and touched a high and a low of ₹2,399.70 and ₹2,111.80 so far today, respectively.
Analysts say the company recorded revenue growth of 21.7% CAGR in FY19-21 supported by higher volume growth across the segments. The company able to improve its margin along with better working capital management and operating leverage is likely to play out, it can aid free cash flow considerably over the years.
According to Brokerage firm Anand Rathi, the company is available at the upper end of the IPO price band at 45.9x its FY21 earnings. Further on the FY21 earnings basis, the company is trading below the industry average of 56.05x. Looking at the P/B ratio on the upper price band, book value and P/B are ₹82.6 and 13.11 multiple, respectively.
"We like TCPCL due to 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 opportunities 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 a 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", said Motilal Oswal in a note to its investors.
The offer comprised a fresh issue of ₹225 crore and an offer for sale of ₹275 crore by its existing promoters and shareholders.
ICICI Securities, JM Financial are the book lead managers to the issue.
Proceeds from the issue will be used for funding capital expenditure requirements for expansion of its Dahej Manufacturing facility and upgrading its R&D facility in Vadodara.
Tatva Chintan Pharma Chem is a specialty chemicals manufacturing company engaged in the manufacture of a diverse portfolio of structure-directing agents, phase transfer catalysts, electrolyte salts for supercapacitor batteries, and pharmaceutical and agrochemical intermediates and other specialty chemicals.
As of December 2020, the company had an installed production capacity of 280 KL and 13 Assembly Lines at its manufacturing facilities. According to the proposed expansion, it intends to enhance the installed capacity at its manufacturing facilities by 200 KL and 14 Assembly Lines.
