Chemplast Sanmar IPO GMP, Subscription, Company Profile. Should you Invest?

Chemplast Sanmar Limited closed its second day of subscription for its initial public offering (IPO) on Wednesday. The public issue saw its investors subscribe to it 0.26 times or 26 per cent on day 2 of the issue. The retail investors had subscribed the most to the issue with a subscription of 1.29 times that of their allotted shares. The qualified institutional investors (QIBs) had subscribed to the issue 0.02 times. Meanwhile, the non-institutional investors subscribed to the issue around 0.06 times or 6 per cent. The QIBs had put in bids for 3.14 lakh equity shares against their reserved portion of 2.17 crore equity shares. The company had also mobilised around Rs 1,732.5 crore from its anchor investors at the upper end of the IPO price band.

When it comes to reservations, the Chemplast Sanmar IPO had set aside a 75 per cent reservation for the QIB investors. The NII category got by on a 15 per cent reservation and the retail investors had a 10 per cent reservation for the issue. Speaking of retail investors, they were allowed to apply for up to 13 lots at the higher end of the lot size. The lot size on the higher end was 351 shares with an accompanying application amount of Rs 189,891. On the lower side of the lot size, there were 27 shares with a minimum application amount of Rs 14,607.

The grey market premium (GMP) of the Chemplast Sanmar IPO stood at Rs 15 on August 12. This indicated that the shares were trading at a premium of Rs 545 to Rs 556 on the unlisted grey market. This indicates a downward trend for the grey market shares as they were trading at Rs 560 to Rs 571 per equity share on August 11, with a GMP of Rs 30.

The IPO has an issue size of Rs 3,850 crore. It can be broken down into a fresh issue that is worth Rs 1,300 crore and an offer for sale (OFS) that is worth Rs 2,550 crore. The price band of the public issue stands at Rs 530 to Rs 541 per equity share with a face value of Rs 5 per equity share. The IPO is a book-built issue that opened on August 10 and looks to close on August 12.

Last Chance to Subscribe to the Chemplast Sanmar IPO. Should you Apply?

The company was incorporated in 1985 and is a leading specialty chemical manufacturer in India. The business specializes in paste PVC resin, starting materials, and intermediates for agro-chemical, pharmaceuticals, agro-chemical, and fine chemical sectors. So far it has four manufacturing facilities, all of which are in the South of India. Chemplast Sanmar has some defining qualities to its business. Apart from being the largest specialty paste PVC resins maker in India, it is also the third largest manufacturer of caustic soda and the largest manufacturer of hydrogen peroxide in South India.

Speaking on the industry scenario, Religare Broking said, “The demand for specialty paste PVC resin is expected to grow at a CAGR of 6-8% 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.”

Religare Broking added, “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.”

On a separate note, ICICI Direct recommended the subscription to the issue for a few reasons. For one, the company has a leadership position in an industry that has high barriers to entry, it is also a vertically integrated setup in terms of its production and manufacturing which makes the supply of material stable and makes for incremental revenues. Lastly, the company has a strong focus on quality manufacturing and better ecological practices such as its adoption of the “zero” liquid discharge.