Chemplast Sanmar Ltd. will sell shares at Rs 530-541 apiece in its three-day initial public offering starting Aug. 10 as the South India-based speciality chemical firm joins peers in tapping the markets during a record year for maiden offers.
Objective
The company plans to use proceeds from the fresh issue to redeem non-convertible debentures of up to Rs 1,238.3 crore within 90 days of its close.
It had issued NCDs aggregating to Rs 1,270 crore of seven-year tenure and interest rate of 17.5% per annum. The NCDs are held by Goldman Sachs India AIF Scheme -1, Apollo Credit Holdings Ii Pte and Standard Chartered Bank (Singapore).
Total borrowings of the company as on March 31 stood at Rs 2,110.2 crore.
Business
The company focuses on specialty chemicals, especially specialty paste PVC resin, and custom manufacturing of starting materials and intermediates for pharmaceutical, agro-chemical and fine chemicals sectors.
Among other products, it manufacturers specialty paste PVC resin. It is also the third-largest manufacturer of caustic soda and the largest maker of hydrogen peroxide in South India.
Chemplast Sanmar used to manufacture suspension PVC resin till FY18, following which the entity that made the resin, Chemplast Cuddalore Vinyls Ltd., was demerged and sold to the parent, Sanmar Group. In FY21, it acquired this division from the parent for Rs 300 crore.
It has four manufacturing facilities, of which three are located in Tamil Nadu—at Mettur, Berigai and Cuddalore—and one at Karaikal in Puducherry.
It's currently in the process of undertaking capital expenditure for its custom manufacturing unit—for overseas clients and PVC facilities—which is expected to come onstream by 2024.
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Financials
The company has a negative net worth as a result of negative capital reserves amounting to Rs 3,230.7 crore in FY21. It recognised losses on account of acquisition of Chemplast Cuddalore Vinyls Ltd. business worth Rs 3,313 crore in FY21.
Peer Comparison
Risk Factors
It operates manufacturing facility on land parcels that are held on lease and free-hold basis. In addition, its lease for a salt field at Vedaranyam in Tamil Nadu has expired.
The company has incurred significant debt and lenders have imposed restrictive conditions on it under financing arrangements.
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