- The Chemcon Speciality Chemicals Ltd. IPO will launch on September 21, 2020. The intention with this IPO is to raise an amount in the region of Rs. 350-400 crores.

- There are two main types of IPOs — the fixed price offering and the book-building offering.

- The fixed price IPO, as the name suggests, brings the initial launch of shares at a fixed price. Any investor who wants to subscribe on such an IPO will have to pay the exact amount.

- The second type is the book-building offering. This type of IPO offers a price band to the investors. There is no one fixed price. Anyone who wishes to participate will have to submit their bid based on the price band. The final price is known only after the bidding has closed.

- This Chemcon IPO is of the book-building kind. The Chemcon speciality chemicals share price is given in a band, instead of a fixed value. It will be combination of a fresh issue and offer for sale. The company intends to receive only the proceeds from the fresh issue section of the offer.

- Fresh issue means these shares are being newly launched by the company. Nobody else has owned these shares before, and the proceeds from a fresh issue generally goes directly to the company.

- On the other hand, an offer for sale means an existing shareholder is simply choosing to sell their shares. Here, the shares are not being issued directly by the company and the proceeds from such a sale goes to the shareholder and not to the company.

- The amount received from the fresh issue of the Chemcon IPO will be utilised for expansion purposes. Examples include the expansion of the manufacturing facilities, working capital requirements, etc.

- The equity shares in the offer for sale section of the Chemcon IPO comes from the two promoters — Kamalkumar Rajendra Aggarwal and Naresh Vijaykumar Goyal. This segment will contain about 45 lakh equity shares.

- The table below summarises all the information about the Chemcon IPO. Questions like “What is Chemcon IPO?”, “When Chemcon IPO will open?”, “What is the lot size of Chemcon IPO?”, “When Chemcon IPO allotment?”, “When is Chemcon IPO listing date?” will be answered.

Total number of equity shares 93,52,940
Number of equity shares on offer 48,52,940
Equity for sale 45,00,000
Face Value of each share Rs. 10
Price Band Rs. 338 — Rs. 340
Size of each lot 44 shares
Subscription window September 21-23
Allotment date September 28
Listing date October 1

- After the Chemcon IPO is over, the shares are going to be listed on both the NSE and BSE.


- The company was originally incorporated in 1988 at Vadodara, Gujarat. At that time, it was known as Gujarat Quinone Private Limited.

- Chemcon Speciality Chemicals Private Limited was born in 2004, after a merger with Chemcon Engineers Private Limited.

- Chemcon primarily manufactures speciality chemicals.

- The company follows a B2B business model. This means, the clients and the customers that Chemcon services are all businesses, and not individuals.

- As for the promoters for Chemcon Speciality Chemicals Ltd., there is Kamalkumar Rajendra Aggarwal, Navdeep Naresh Goyal and Shubharangana Goyal.


- The business activities of Chemcon Speciality Chemicals Ltd. can be categorised into two main segments — pharmaceutical chemicals and oil-well completion chemicals.

- Apart from that, they also manufacture silane products and offer contractual manufacturing for customised chemicals.

- Two of the main products that they manufacture for the pharmaceuticals industry are the chemicals HMDS and CMIC. Chemcon is the one of the largest producer of Hexamethyldisilazane in India.

- Among the oil-well completion chemicals, Chemcon manufactures a range of inorganic bromides which are used in the process of oil and gas exploration. Calcium bromide, zinc bromide and sodium bromide are some of the compounds produced in this category.

- In FY2019, about 60% of Chemcon’s total revenue came from the manufacture of pharmaceutical chemicals and 35% came from the manufacture of oil-well completion chemicals.


- Chemcon’s clients include both domestic companies as well as others in the international markets.

- The company supplies to the USA, China, Japan, UAE, Russia, and other countries.

- Some of their clients in the pharmaceutical chemicals business are Aurobindo Pharma, Laurus Labs, Hetero Labs, Lantech Pharmaceuticals, Macleods Pharma, etc.

- Examples of clients in the oil-well completion chemicals business include Shree Radha Overseas, Universal Drilling Fluids, Water Systems Specialty and others.

- To name a few peer companies who also work in the same industry and have a similar business, we have Aarti Industries, Sudarshan Chemical Industries, etc.


- The table below lists out the existing shareholders in the company, along with their respective stakes.

Kamalkumar Rajendra Aggarwal 1,19,27,080 37.53
Navdeep Naresh Goyal &
Shubharangana Goyal
62,33,500 19.62
Naresh Vijaykumar Goyal 52,85,826 16.63
Navdeep Naresh Goyal 23,74,666 7.47
Rajveer Aggarwal 25,32,800 7.97
Shubharangana Goyal 19,78,888 6.23
Minal Kamal Aggarwal 14,40,000 4.53

- After the IPO, the promoter holding is going to reduce from 100% to 74.47%.


The table below contains a summary of the Chemcon speciality chemicals financials from the 2017 till 2020. All the figures stated below are in Rs. crores.

YEAR FY 2020 FY 2019 FY 2018 FY 2017
TOTAL REVENUE 266.07 304.32 158.47 89.99
TOTAL EXPENSES 191.79 243.11 117.92 85.56
TOTAL ASSETS 225.79 173.03 97.06 62.6
PROFITS AFTER TAX 48.85 43.04 26.38 2.82
LONG TERM DEBT 14.59 2.46 2.49 2.07

- Between 2018 and 2020, the total revenue earned by Chemcon showed a CAGR of 31.13%. In this same period, total assets grew at a CAGR of 37.81%.


- Now, coming to the profit, the net profit (Profits after tax) earned by the company showed a CAGR of 104%. This means, over this period, the net profit has more than doubled.

- It is interesting to note that the biggest growth in net profit came in 2018, and in 2019. The increase in profit in 2020 is negligible compared to the previous two financial years.


- Another point to note here is that a significant portion of the company’s revenue comes from the export of its products. In FY2020, almost 40% of the total revenue came from exports.

- Between 2018 and 2020, the total revenue earned from the export of products showed a CAGR of 17.57%.


- The world market for pharmaceutical chemicals was valued at $25 billion in 2017. This industry is expected to grow at the rate of 4% between 2018 and 2023.

- According to Varun Goyal, Head of Equity at Nippon India, speciality chemicals is predicted to become the next major export category for India.

- The main growth drivers in this industry, morbid though it may sound, is the increase in diseases around the world.

- According to an estimate by CRISIL, the Indian market for pharmaceutical chemicals is worth Rs. 30,800 crores as of 2018. Over the last decade, this industry has been growing at about 7%.

- As for the global market for chemicals used in oil-wells, that was valued at $820 million in 2018. It is expected to grow at a CAGR of 5% between 2018 and 2023.

- In India, the pharma chemicals industry is expected to grow at a CAGR of 7-9% over the next 5 years.

- Now, let us talk about the chemical HMDS. This is one of the main products of Chemcon.

- In FY2019, the revenue earned from HMDS accounted for 40.26% of the total operating revenue earned by Chemcon.

- The global size of this market is $345 million. This market is expected to grow at a rate of 5.6% till 2023.



- Out of that, China supplies about 42% of the market, and India takes up about 6.76% of the market. In the global market, Chemcon’s share was about 5.6%.

- The fact that Chemcon in the only producer of HDMS in India indicates a real opportunity for the company. Taking these factors in account, Chemcon is expected to grow at a rate of 20% for the next 5 years.

- The other main product of Chemcon is a chemical called CMIC, which is also used in the pharmaceutical industry.

- In FY2019, the revenue earned from the production of CMIC made up about 15.65% of the total operating revenue of Chemcon.



- In 2018, India accounted for 35.5% of the global market, and China supplied the remaining 64.5%. Out of this, Chemcon’s market share in the global CIMC market was about 28% in 2018.

- This industry follows a monopolistically competitive structure. The speciality chemicals industry does have a large number of small to medium sized players.

- There are significant barriers to entry and exit in this industry.

- The primary reason for this is that manufacturing companies require a significant investment to set up the various plants and manufacturing equipment.

- In fact, most of the proceeds from the sale of equity of the Chemcon IPO will be used to expand their manufacturing capacity.

- Because it is difficult to enter into the industry, the possibility of newer companies flocking into this market is low.


- The chemicals industry in India has been booming, and is expected to become a $100 billion industry in the next decade.

- While the overall chemical industry is fragmented and is characterised by a large number of players, the situation is slightly different if we talk about only speciality chemicals.

- The speciality chemicals make up about 22% of the total chemicals market in India.

- There are a large number of small-sized companies in this industry, however, over 50% of the market share is captured by the top 20 companies.

- Chemcon’s advantage lies in the fact that the main revenue drivers — HMDS and CMIC, are not produced by most of the other chemical manufacturers in the country.

- Chemcon is the only producer of HMDS in India, and one of the major producers of CMIC.

- This very niche category that Chemcon occupies is one of its primary competitive strengths.

- Another point to note here is that, any growth in the pharmaceuticals industry will also trickle down to the suppliers of the raw materials for that industry — namely, Chemcon.



- Chemcon is the only firm in India that manufactures HMDS. In terms of the global market, the company is the third largest producer of this chemical that is used in a range of pharmaceutical products.

- Not only that, the company is also a leading producer of CMIC, zinc bromide and calcium bromide, both in the domestic market and in the global market.

- Both these points indicate that Chemcon has already established itself as a leading player in the Indian market. It is also one of the largest providers of speciality chemicals in the world markets.

- Another interesting point to note here is that the ongoing trade war between the US and China, as well as the decision taken by many countries to reduce their dependence on Chinese products, works, indirectly as a boon for Chemcon.

- This is because India and China are the biggest producers of HMDS and CMIC, the chemicals used in pharmaceuticals.

- Because of the US’s worsening relation with China, there is a very high possibility of the demand pattern to shift in favour of India. If this situation manifests, Chemcon stands to benefit directly.


- One of the main weaknesses to be noted here is the fact that both the company’s product list and client list are highly concentrated. This means that Chemcon produces only a few selected products.

- While they do have a large number of clients, most of the income is generated from a handful of clients. As of 2019, more than 45% of the total revenue earned came from just the top five customers.

- The reason why this is noted as a weakness and a possible risk factor is that if any of these top clients choose to go with another company, that will have a huge impact on the income of Chemcon.

- Similarly, if other companies enter into the speciality chemicals business and start producing the same chemicals that Chemcon does, it will have an adverse effect on the market share of the company.

- Apart from that, much of the projected earnings and profits are based on the assumption that Chemcon will be able to increase their manufacturing facilities by using the proceeds from the Chemcon IPO. If this does not materialise, then the company will not be able to increase their plant size.

- Another important fact to note here is that most of the raw materials that are required for the production of these special chemicals comes from China.

- As the recent COVID-19 pandemic has proved, such international supply chains are not the most dependable and can break down without any warning. Worsening diplomatic relations between India and China can also impose additional strains on these supply chains.

- Further, the prices of these raw materials are extremely volatile, and sudden increase in costs will eat into Chemcon’s profit margin.


- The table below compares the key financial ratios of Chemcon with its peer group of companies in the same industry.

Chemcon - 22 22    
Aarti Industries 19,256.37 30.04 32.96 6.64 15.34
Vinati Organic 13,272.76 32.48 30.11 6.18 17.08
Sudarshan Chemicals 3,382.1 8.09 28.18 5.46 12.17
Paushak 1,348.12 113.27 31.23 2.35 11.22
Fine Organic 9,009.89 54.31 38.67 14.28 21.78
Neogen Chemicals 1,643.34 12.33 43.71 10.48 16.42

- The average P/E ratio in the chemical manufacturing industry is in the region of 36. In comparison, we can see that the P/E ratio of Chemcon is 22.

- The P/E ratio indicates the amount that investors are willing to pay for Rs. 1 of the earnings of the company. For example, if the P/E ratio is 10, then this means investors are willing to pay Rs. 10 to get Rs. 1 of the company’s earnings.

- When a company’s P/E ratio is lower than the average P/E ratio in the industry, then this is an indication of the fact that the company is undervalued in nature.

- Following this train of logic, we can therefore conclude that Chemcon IPO might be an undervalued company.

Therefore, after extensive analysis of the Chemcon speciality chemicals IPO review, we can say that it might be a good idea to subscribe to the Chemcon IPO.

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