Archean Chemical Industries Limited IPO Review
About Archean Chemical Industries Limited
Archean Chemical Industries Limited is India’s largest exporter of bromine and industrial salt in Fiscal 2021. The company is the leading specialty marine chemical manufacturer in India and is focused on producing and exporting bromine, industrial salt, and sulfate of potash to customers around the world.
Archean Chemical Industries markets the products to 18 global customers in 13 countries and 24 domestic customers. The company was the largest exporter of industrial salt in India with exports of 2.7 million MT in Fiscal 2021.
Archean Chemical Industries Limited is the largest exporter of Bromine from India. Their bromine acts like key initial-level materials that are used in pharmaceuticals, agrochemicals, water treatment, flame retardants, additives, oil & gas, and energy storage batteries.
The company is the only manufacturer of sulfate potash in India. The company’s marine chemicals business is predominately conducted on a business-to-business basis both in India and internationally.
Industrial salt is considered an important raw material used in the chemical industry for the production of sodium carbonate(soda ash), caustic soda, hydrochloric acid, chlorine, bleaching powders, chlorates, sodium sulfate (salt cake), and sodium metal.
The company has an integrated production facility for the bromine, industrial salt, and sulfate of potash operations, located at Hajipir, Gujarat, located on the northern edge of the Rann of Kutch brine fields.
Archean Chemical Industries Limited IPO: Listed Peers
The company has many listed peers and includes some popular listed names. The listed peers include Tata Chemicals, Deepak Nitrite, Aarti Industries, and Neogen Chemicals. Below is its comparison with listed peers:
|Company||Total Revenue (31st March 22) (Rs. Cr.)||Return on Net Worth||P/E RATIO|
In terms of total revenue (FY22), Archean Chemical is towards the bottom of the table, only below Neogen Chemicals. Aarti Industries has the highest income among the listed peers for FY22.
The company has quoted a PE of around 16.78, which is lower than all the listed peers. From a valuation perspective, the lower PE makes it attractive.
Return on Net Worth (RoNW) is the highest for Archean Chemical among the listed peers.
Strengths of Archean Chemical Industries Limited
- Leading market position, expansion, and growth in bromine and industrial salt.
- High entry barriers in the specialty marine chemicals industry.
- Established infrastructure and integrated production with cost efficiencies.
- Largest Indian exporter of bromine and industrial salt with a global customer base.
- Strong and consistent financial performance.
- Focus on the environment and safety.
- Experienced management team, promoters, financial investors, and stakeholders.
Weakness of Archean Chemical Industries Limited
- Limited product offering: The company only has three products – two of its products generate 99% revenue for them.
- Exchange rate: As mentioned earlier, they are export-oriented businesses, and exchange rate fluctuations may adversely affect their results of operations as their sales from exports are denominated in foreign currencies.
- Dependency on top 10 customers: For FY22, FY21, and FY20, their top 10 customers contributed 61.99%, 75.70%, and 77.14%, respectively, of their revenue from operations. The loss of any top 10 customers will have a significant impact on the company’s financials.
- The major export country is China
Objectives of the IPO of Archean Chemical Industries Limited
• The fund raised with IPO will be used to redeem fully or partially non-convertible debentures. This will help the company to reduce its outstanding debts.
• The fund will be used for different business and corporate purposes including capital expenditure, administration, and maintenance.
Archean Chemical Industries Limited IPO: Date and Price
The ₹1,462 crores IPO of Archean Chemical Industries will open for public subscription on November 9. The price band of the offer has been fixed at ₹386 to ₹407 per share.
Bids can be made for a minimum of 36 shares and in multiples of 36 shares thereafter. The IPO comprises of fresh issue of shares aggregating up to ₹805 crores and an offer for sale of up to ₹657 crores. The offer will close on November 11.
Archean Chemical Industries Limited IPO: Grey Market Premium (GMP)
As per market observers, Archean Chemical shares are commanding a premium (GMP) of ₹75 in the grey market today. The shares of the company are expected to list on leading stock exchanges BSE and NSE on Monday, November 21, 2022.
Archean Chemical Industries Limited: Financial Information
|Period Ended||Total Assets||Total Revenue||Profit After Tax||Net Worth||Total Borrowing|
Why should you invest in the Archean Chemical Industries Limited IPO?
- The campaign ‘Make in India’ by the government is aiming to increase the contribution of the manufacturing sector from 18% in Fiscal 2020 to 25% by Fiscal 2025.
- After the adverse effect of the pandemic, India is now focusing on increasing R&D spending as it is significantly lower than in other countries.
- The global chemicals market is expected to grow at a CAGR of 6.2%. From US$5,027 billion in the calendar year 2020 to reach US$6,780 billion by the calendar year 2025, according to the Company Commissioned F&S Report.
Archean Chemical IPO Details
|IPO Date||Nov 9, 2022 to Nov 11, 2022|
|Listing Date||Nov 21, 2022|
|Face Value||₹2 per share|
|Price||₹386 to ₹407 per share|
|Lot Size||36 Shares|
|Issue Size||35,928,870 shares of ₹2|
(aggregating up to ₹1,462.31 Cr)
|Fresh Issue||19,778,870 shares of ₹2|
(aggregating up to ₹805.00 Cr)
|Offer for Sale||16,150,000 shares of ₹2|
(aggregating up to ₹657.31 Cr)
|Issue Type||Book Built Issue IPO|
|Listing At||BSE, NSE|
|QIB Shares Offered||Not less than 75% of the Offer|
|NII (HNI) Shares Offered||Not more than 15% of the Offer|
|Retail Shares Offered||Not more than 10% of the Offer|
|Company Promoters||Chemikas Speciality LLP, Ravi Pendurthi, and Ranjit Pendurthi are the company promoters.|
Archean Chemical IPO Lot Size
The Archean Chemical IPO lot size is 36 shares (₹14,652). A retail-individual investor can apply for up to 13 lots (468 shares or ₹190,476).