Clean Science & Technology IPO opens tomorrow; here’s everything you need to know

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The Rs 1,546.62 crore initial public offering (IPO) of specialty chemicals manufacturer Clean Science and Technology opens for subscription on July 7, 2021 (Wednesday). The three-day offering ends on July 9 and the company has fixed a price band of Rs 880-900 per equity share for the face value of Rs 1 each.

A retail investor can bid for a minimum of 16 equity shares and in multiples, thereafter, translating to a minimum bidding amount of Rs 14,400 at the higher end of the price band. A retail investor can at max apply for 13 lots or 208 shares for 1,87,200.

50% of the issue is reserved for qualified institutional buyers, 35% for retail investors, and 15% for non-institutional bidders.

Grey market premium

In the grey market, Clean Science & Technology shares were trading at Rs 1,380 implying a premium of Rs 480 or 53% over the IPO price on Tuesday.

“In FY21, PAT margins stood at 38.7%, EBITDA (earnings before interest tax depreciation & amortization) margins at 55.5% while ROCE (return on capital employed) & ROE (return on equity) were 73.89% and 36.76% respectively. This performance is excellent and admirable. The issue is priced at 48x PE (Price to Earnings) against the average industry PE of 55x. Considering the stellar performance, the asking price does not look expensive. If such performance remains consistent, we may see the stock outperforming going ahead,” commented grey market tracker Abhay Doshi, founder of Unlisted Arena.

Should you subscribe

Brokerages are gung-ho and have assigned subscribe rating to the issue. Here’s what they have to say.

Angel Broking | Rating: Subscribe

Angel Broking believes that the India specialty chemical industry is going to be one of the biggest beneficiaries of shifting of supply chains post the Covid-19 pandemic. “Clean Science & Technology’s revenue has grown at CAGR (compounded annual growth rate) of 9.1% over FY19-21 on the back of strong 22% top line growth in FY21 despite the Covid 19 crisis. Moreover, the company has posted strong EBITDA (earnings before interest tax depreciation & amortization) and PAT (Profit After Tax) CAGR of 23.6% and 26.3% respectively during the same period. Given the strong financial performance, industry leading margins and returns ratios the company should be able to command a premium to peers,” said the brokerage firm in a report.

GEPL Capital | Rating: Subscribe

According to GEPL Capital, the offer is well priced given Clean Science & Technology’s ability to meet the demand for, and quality of, their products, at competitive prices leading to long-standing relationships with various multinational corporations. “Their in-house capabilities also enable them to optimise capital expenditure for their facility expansion activities. As a result, their asset turns are among the highest in the chemical industry. They are well-positioned to capitalize on these opportunities in the specialty chemicals segment due to their lower cost of production in India as compared to imports from China,” noted the report.

Marwadi Shares & Financials | Rating: Subscribe

Even Marwadi Shares & Financials is of the opinion that the company is amongst the largest producers globally of functionally critical speciality chemicals and is available at a favourable valuation as compared to its peers. “It is going to list at PE of 48.18x with a market capitalisation of Rs 9,559.7 crore, while its peers namely Vinati Organics and Fine Organics are trading at 77.4x and 75.1x times respectively,” stated the report.

(Disclaimer: The recommendations in this story are by the respective research and brokerage firm. Money9 & its management do not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)