Clean Science, GR Infraprojects IPOs open today; which is better?

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Clean Science and Technology and GR Infraprojects hit the primary market on Wednesday with their initial public offers (IPO) to raise a little over Rs 2,500 crore cumulatively. These three-day share sale will conclude on July 9.

There are hopes that these companies to benefit from the equity market, which is already overwhelmed with liquidity and a sharp increase in the number of new retail investors. These IPOs hit the market after five companies Shyam Metalics and Energy, Sona BLW Precision Forgings (Sona Comstar), Krishna Institute of Medical Sciences, Dodla Dairy and Indian Pesticides launched their IPOs last month. These firms collectively raised Rs 9,923 crore through public issues.

Clean Science and Technology’s Rs 1,546.62-crore IPO is entirely an offer for sale (OFS) by existing promoters and other shareholders. Those offering shares in the OFS include Anantroop Financial Advisory Services, Ashok Ramnarayan Boob; Krishnakumar Ramnarayan Boob; Siddhartha Ashok Sikchi; and Parth Ashok Maheshwari. The specialty chemical manufacturer has fixed a price band of Rs 880-900 a share for its IPO.

Clean Science Technology manufactures functionally critical specialty chemicals such as performance chemicals, pharmaceutical intermediates and FMCG chemicals. Its products are used as key starting level materials, as inhibitors, or as additives, by customers, for products. The Pune-based company’s customers include manufacturers and distributors in India as well as other international markets including China, Europe, the United States of America, Taiwan, Korea, and Japan. Nearly two-thirds of the company’s revenues come from exports.

On the other hand, GR Infraprojects’ public issue will be a complete OFS of 1,15,08,704 equity shares by promoter and investor selling shareholders. The offer includes an employee reservation portion as well.

Those offering shares in the OFS include Lokesh Builders, Jasamrit Premises, Jasamrit Fashions, Jasamrit Creations Jasamrit Construction and India Business Excellence Fund.

GR Infraprojects, which has fixed a price band of Rs 828-837 a share for its IPO, will fetch 963.28 crore at the upper end of the price band.

The Udaipur-based firm is a leading integrated road engineering, procurement and construction (EPC) company with experience in design and construction of various road and highway projects across 15 states in India. It has recently diversified into projects in the railway sector.

The public issues being only an Offer for Sale, the two companies will not receive any proceeds from the offer.

Which is better?

Both of these offers have received a ‘Subscribe’ rating from market analysts. Commenting on Clean Science IPO, Astha Jain of Hem Securities said that they like the company due to its strong financial performance and robust clientele. “The company also has a track record of strategic process innovation through consistent R&D initiatives,” she added.

Brokerage Anand Rathi Share and Stock Brokers also gave a ‘Subscribe’ rating to the issue. “The company is available at the upper end of the IPO price band, it is offered at 48.2x its FY21 earnings, with a market cap of Rs 9559.7 crore. In comparison, Vinati Organics trades at 77.4 times its FY2021 EPS of Rs 26.2, Fine Organics Industries trades at 75 times its FY2021 EPS, Atul trades at 42.2 times its FY2021 EPS of Rs 221.6, SRF trades at 37 times its FY2021 EPS of Rs 202.2, Navin Fluorine International trades at 76.1 times its FY2021 EPS of Rs 49.9 and PI Industries trades at 62.2 times its FY2021 EPS of Rs 48.7. Further on FY21 earnings basis, the company is trading below the industry average of 55.4x,” the brokerage said adding the company possesses a healthy balance sheet and robust return ratio profile.

On the other hand, Reliance Securities has a ‘Subscribe’ rating on GR Infraprojects. “The IPO is valued at 10.4x of FY21 earnings at the parent level. Further, excluding Rs 1300 crore investment as equity in HAM projects so far, it is valued at 8.7 times of FY21 earnings, which appears to be attractive. Additionally, its RoE continues to be over 20% over the years, which offers comfort,” the brokerage said.

Phillip Capital is also positive on GR Infraprojects and believes that the risk-reward profile is in favour of the company.