Archean Chemical IPO opens today to raise Rs 1462-cr; should you subscribe to this chemical specialty player?

Archean Chemical IPO Launches Today: Archean Chemical Industries’ Rs 1462-crore IPO opened for subscription on Wednesday. The company has fixed price band in a range of Rs 387-407 per share. Investors who wish to subscribe can make a bid for a minimum of 36 equity shares and then in multiples thereof. The public issue will close for subscription on Friday, 11 November 2022. Up to 75 per cent of the allocation has been fixed for qualified institutional buyers (QIBs), 15 per cent for non-institutional buyers (NIIs), and the remaining 10 per cent of shares have been reserved for retail bidders. IIFL Securities, ICICI Securities, and JM Financial are the book-running lead managers to the issue, whereas Link Intime India will be the registrar to the issue. 

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Should you subscribe?

Geojit Financial Services: Subscribe

Archean Chemical Industries Ltd (ACIL) is a marine specialty chemical manufacturer focused on producing and exporting bromine, industrial salt, and sulphate of potash. The bromine global market size was US$3.13 billion in CY21, and the market is expected to grow at a CAGR of 6% between CY20 and CY25. The revenue has increased at a CAGR of 36% and the revenue from exports has grown at a CAGR of 29% between FY20 and FY22. The company has one of the lowest costs of production globally in both bromine and industrial salt. They have an EBITDA margin, PAT margin and ROCE of 41%, 17%, and 13%, respectively, in FY22. At the upper price band of Rs 407, ACIL is available at a P/E of 26x (FY22), which appears reasonably priced. “Considering its consistent top-line & bottom-line growth with cost efficiencies, industry leading position in a high entry barrier industry, expansion plans in product lines and capacities, we assign a ‘subscribe; rating on a short to medium term basis,” it said.

Reliance Securities: Subscribe

Based on FY22 earnings, the company is valued at 26.5x P/E, 12.4x EV/EBITDA and 5.1x EV/Sales, which is a discount to peers. The company has a leading market position and it is undergoing continued expansion in bromine and industrial salt. High entry barriers in the speciality marine chemicals industry bodes well for the company. “In view of market leading position, established infrastructure, integrated production with cost efficiencies, consistent financial performance, high entry barriers for competitors, an experienced management team and attractive valuation, we recommend ‘subscribe’ to the issue.

Hem Securities: Subscribe

Company is bringing the issue at a price band of Rs 386-407 per share at p/e multiple of 27x on FY22 basis. Company with its leading market position, expansion and growth in bromine and industrial salt has high entry barriers in the specialty marine chemicals industry. Company has established infrastructure and integrated production with cost efficiencies & has focus on environment and safety. Company being an Indian exporter of bromine and industrial salt with a global customer base has shown strong and consistent financial performance. “Hence, looking after all above, we recommend ‘subscribe’ on issue,” it added.

Choice Broking: Subscribe with caution

At a higher price band, ACIL is demanding an EV/Sales multiple of 3.8x, which is in-line to the peer average. The company’s operations are likely to get support from import substitution, lower exports from China and lower cost of operations. Thus the macros of ACIL are positive, but demanded stretched valuation is a concern. “Thus we assign a ‘subscribe with caution’ rating for the issue,” it said.

(The recommendations in this story are by the respective research analysts and brokerage firms. FinancialExpress.com does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)