Clean Science and Technology IPO: Key Points to Consider

The IPO market is gearing up for a busy season this month with Rs 240 bn worth of IPOs ready to hit the street.

The companies likely to come out with their offers this month include Zomato, Chemplast Sanmar, Vijaya Diagnostic, Glenmark Life, Utkarsh SFB, Shriram Properties, G R Infraprojects, Clean Sciences, Rolex Rings, Seven Islands Shipping, Tatva Chintan among others.

From the above, Clean Science's IPO will open this week on 7 July.

Here are the key details about this IPO...

Issue period: 7 July 2021 to 9 July 2021

IPO Size: Rs 15.5 bn

Price band: Rs 880 to Rs 900 per equity share

Bid lot: 16 shares and in multiples thereof

Face value: Rs 1 per equity share

Object of the issue: The object of the issue is to make an offer for sale (OFS) of equity shares worth Rs 15.5 bn and to achieve the listing benefits on the BSE and NSE.

Of the total issue size, 50% of the offer or approximately 8.6 m equity shares worth Rs 7.7 bn is reserved for qualified institutional buyers (QIB).

Retail quota is 35% of the total issue while non-institutional investors (NII) can bid for 15% of the entire issue.

Clean Sciences will not receive any funds from the public issue as the IPO is entirely an OFS.

The stock will get listed on exchanges by 19 July.

About the company

Incorporated in 2003, Clean Science and Technology is one of the leading chemical manufacturers globally.

It manufactures functionally critical specialty chemicals such as performance chemicals, pharmaceutical intermediates, and FMCG chemicals.

Product Segments

Product	Comprising
Performance chemicals	MEHQ, BHA and Ascorbyl Palmitate
Pharma intermediates	Guaiacol and DCC
FMCG chemicals	4-MAP and Anisole
Other products	Acetic acid, Ortho cresto and Para cresol

The company supplies its products to manufacturers and distributors in India as well as overseas markets i.e. China, Europe, USA, Korea, Taiwan, and Japan.

Bayer AG, Genex Laboratories, Nutriad International NV, SRF, Vinati Organics are a few of its customers.

Clean Science is among the few companies which is focused entirely on developing newer technologies using in-house catalytic processes.

This has enabled it to emerge as the largest manufacturer of certain speciality chemicals globally.

The company has two manufacturing facilities, both of which are located at Kurkumbh (Maharashtra).

It has also recently set-up a unit at its third manufacturing facility, adjacent to the existing facilities in Kurkumbh.

The financials

The company made a net profit of Rs 489 m in the financial year 2018. This increased to Rs 976.6 m in the following year and Rs 1.4 bn in the financial year 2020.

For the financial year 2021, the performance chemicals segment contributed 69.2% of the total revenues while the contribution of the pharma intermediates segment stood at 16.2%.

FMCG chemicals accounted for 12.3% of the total revenues during the same period.

Financial Snapshot

(Rs m)	FY19	FY20	FY21
Revenues	3,933	4,193	5,124
Revenue Growth	-	6.6%	22.2%
Expenses	2,680	2,479	2,708
Net Profit	977	1,396	1,984
Net Profit Margin (%)	24.8%	33.3%	38.7%
Net Worth	2,721	3,421	5,397
Return on Equity (ROE)	278.5%	245.1%	272%

Data Source: Company's Red Herring Prospectus (RHP)

The company's export revenue for all these years has been on an average 70% of the turnover.

It also has a consistent track record of paying dividends. The company has been paying dividends since fiscal 2012.

It has paid dividends at the rate of 750%, 900% and 20% for the past three years.

For more details, check out Clean Science and Technology's RHP.

Peer comparison

On listing, Clean Sciences Technologies will join peers such as Vinati Organics, Fine Organic Industries, Atul, SRF, Navin Fluorine, and PI Industries.

Comparative Analysis

Company	Total Income	Net Profit	Return on Net Worth (%)
Clean Science and Technology	5,381	1,984	36.8
Vinati Organics	9,801	2,693	17.5
Fine Organic Industries	11,503	1,200	16.5
Atul	38,345	6,560	17.1
SRF	84,545	11,980	17.5
Navin Flourine	12,584	2,580	15.8
PI Industries	47,019	7,380	13.8

Data Source: RHP, Equitymaster
Figures in Rs m and as on 31 March 2021

Impressive grey market premium

Even though the company is yet to open its initial share sale, its shares in the unlisted market are trading at a massive 50% premium.

The grey market is an unofficial platform, wherein trading starts after the announcement of IPO price band till the listing of IPO shares.

Clean Science shares are available at a premium of Rs 450.

The traded price comes to around Rs 1,350, which is 50% higher over the issue price of Rs 900.

Note that this will be the fourth IPO by a speciality chemical company in the past year after Rossari Biotech, Chemcon Speciality Chemicals and Anupam Rasayan.

All three are presently trading significantly higher than their issue prices.

Rossari Biotech is trading at Rs 1,198 compared to its issue price of Rs 425, up 182%.

Chemcon Speciality Chemicals is trading at Rs 507 compared to its issue price of Rs 340, up 49%.

Meanwhile, Anupam Rasayan is up 37% if compared with its issue price of Rs 555.

Given the rising demand for speciality chemicals, the outlook for the sector remains promising.

Indian manufacturers have benefited from a rise in demand from global customers who aim to reduce dependence on China.

The IPO of Clean Science is likely to witness good amount of subscription as market sentiment remains positive.

How Clean Science and Technology performs on listing day remains to be seen.

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