Following a spate of chemical players’ IPOs in recent months, the market is gearing up for more such offers. Latest to join is Pune-based specialty chemicals manufacturer Clean Science and Technology which has filed its draft red herring prospectus (DRHP) with SEBI. Clean Science and Technology IPO is likely to raise INR1,400-crore through an offer for sale (OFS) by existing shareholders. The offer will be managed by merchant bankers Axis Capital, JM Financial and Kotak Mahindra Capital Company.
Clean Science and Technology IPO: Export oriented specialty chemicals
The company is the largest manufacturer globally of specialty chemical products such as MEHQ, BHA, Anisole and 4-MAP and manufacture functionally critical specialty chemicals such as performance chemicals, pharmaceutical intermediates and FMCG Chemicals. These products are used as key starting level materials, as inhibitors, or as additives, by customers, for products.
These specialty chemicals have a wide range of applications that cater to a diverse base of customers across industries. These customers include manufacturers and distributors in India as well as other regulated international markets including China, Europe, the United States of America, Taiwan, Korea, and Japan. In FY2020, revenue from exports represented 68.8% of the company’s total revenue from operations.
Its key customers include Bayer AG, SRF Limited, Gennex Laboratories Limited, Nutriad International NV and Vinati Organics Limited.
Clean Science and Technology IPO: Production and Financial Performance
The company’s twin production facilities are located at Kurkumbh (Maharashtra), in close proximity to the JNPT port which helps in exports of its products. Each facility is zero liquid discharge facility and has an on-site R&D unit, quality control department, warehouse, and effluent treatment system. Combined installed capacity of the plants stood at 28,060 MTPA while capacity utilization was at 63% as of 31 March 2020.
Stable demand and essential nature of its products has helped the company in sustained revenue growth in the past and also in navigating tough business conditions.
The strong business performance of the company is reflected very well in its financial reporting. Revenues grew in each of the last three years, even during Covid-19 breakout. Clean Science and Technology has minimal debt on its books (debt-equity ratio of 0.23 in FY2020) which helps in boosting margins.
Just like revenues, its net profit margin has also gone up in these years, standing at a robust 37.1% as of 31 December 2021. Return on capital employed (ROCE) is another important metric and the company performs very well on this front with a figure of 40.8% for FY2020. This figure is higher than most of its listed peers in the specialty chemicals space.
Clean Science and Technology’s financial performance (INR crore)