Archean Chemical Industries Limited

Business Overview

The company specializes in producing and exporting bromine, industrial salt, and sulphate of potash to clients all over the world. It is a prominent specialty marine chemical manufacturer in India. The company is the top exporter of industrial salt and bromine, by volume according to the F&S report. The company's bromine is a primary ingredient in products used in pharmaceutics, agrochemicals, water purification, flame retardants, additives, oil & gas, and energy storage batteries. Industrial salt is a crucial raw material used in the chemical industry to create products including sodium sulphate (salt cake), sodium carbonate (soda ash), caustic soda, hydrochloric acid, chlorine, bleaching powders, chlorates, and sodium metal.

The company has 24 domestic customers, including multinational corporations, in addition to 18 overseas customers in 13 other countries.

Industry Overview

According to a survey commissioned by the company, the value of the Indian chemical sector in 2021 was estimated to be US$178 billion, and by 2025, it is anticipated to increase at a CAGR of 9.3%.

The bromine market is valued at US$3.13 billion in 2021 and is anticipated to expand at a CAGR of 5.8% between 2020 and 2025.

With a consumption of 173 million MT, the worldwide industrial salt market did not experience significant growth between 2017 and 2019. The global market is anticipated to increase from 157 million MT in 2020 to 185 million MT in 2025 at a CAGR of 2.8%.

Objects of the offer

1. Redemption or earlier redemption, in part or full, of NCDs issued by the Company.

2. General corporate purposes.

Financials

Between FY 2020 and FY 2022, the company's top line increased at a CAGR of almost 36%, and in fiscal 2022, the EBITDA margins were also on the rise, standing at 42.42%. In FY 2020 and FY 2022, respectively, the profit after tax increased significantly from (Rs. 365.19) million to Rs. 1885.83 million. The lower cost of raw materials used is what caused the profit to significantly increase.

Valuation

Tata Chemicals Limited, Deepak Nitrite Limited, Aarti Industries Limited, and Neogen Chemicals Limited are the company's four listed competitors.

The company is asking a PE multiple of 38 at the upper price range, although the industry average PE is also close to 38. If we were to compute the Price to book value the company is demanding the PBV of almost 12 times whereas if we compare it with the average of the industry it comes out to ~6. The issue appears to be reasonably priced, according to the PE.

IPO details

The IPO starts on 9^th November 2022 and is open till 11^th November 2022. The company is coming with a total issue of Rs. 1462.31 crores out of which fresh issue amounts to Rs.805 crores and offer for sale amounts to Rs.657.31 crores. The price band of the issue is Rs.386- 407 per share and a retail investor can apply for a maximum of 13 lots. As of releasing the blog, the GMP is ~21% and the overall subscription is 0.12 times.