Chemplast Sanmar sees tepid debut, lists at 3% discount against issue price

Specialty chemical manufacturer, Chemplast Sanmar, made a tepid debut on the bourses on Tuesday with the company’s shares listing at Rs 525, a 3 per cent discount against its issue price of Rs 541 per share on the BSE. However, on the National Stock Exchange (NSE), the stock opened at Rs 550, a 2 per cent premium over its issue price, exchange data shows.

At 10:10 am, was trading at Rs 521.60, 4 per cent lower against its issue price on the BSE and NSE. The stock hit a low of Rs 510 in the intra-day trade on both the exchanges. In comparison, the S&P BSE Sensex was up 0.09 per cent at 55,603 points. A combined 6.9 million equity shares had changed hands on the counter on the NSE and BSE till the time of writing of this report.

The Rs 3,850 crore initial public offering (IPO) of had received a tepid response as the issue got 2.17 times subscription. The non-institutional investors and retail investor’s portion was subscribed by 1.03 times and 2.29 times, respectively, while the portion for qualified institutional buyers (QIBs) was subscribed 2.70 times, data shows.

The company is engaged in the manufacturing of specialty paste PVC resin, starting materials, and intermediates for agro-chemical, pharmaceuticals, agro-chemical, and fine chemical sectors. It also produces other types of chemicals such as caustic soda, chlorochemicals, hydrogen peroxide, refrigerant gas, and industrial salt.

It proposed to utilize net proceeding from the IPO for early redemption of non convertible debentures (NCDs) issued by the company in full and to meet general corporate purposes.

Earlier, was a listed entity on the bourses until 2012, but was delisted in June that year on facing financial headwinds.

According to analyst at Religare Broking, the demand for specialty paste PVC resin is expected to grow at a CAGR of 6-8 per cent between FY2022-25 driven by government initiatives, lack of substitutes and rising demand from the leather footwear market.

We believe high barriers to entry and limited competition are expected to benefit existing manufacturers of specialty paste PVC resin in India. In addition, the demand for custom manufacturing, caustic soda and suspension PVC resin is expected to grow at a CAGR of 12 per cent, 4-5 per cent and 7-8 per cent between FY21-25 respectively, the brokerage firm said in a IPO note.

Analyst believe that Chemplast Sanmar 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. Further, given the strong demand for its products, the company intends to increase production capacity. This will aid in generating higher revenue as well as de-bottlenecking, which would lead to better operating efficiencies, they say.

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