Will Be Right Decision to Invest in Tatva Chintan Pharma IPO? | Tatva Chintan Pharma Chem IPO Details

Tatva chintan ipo analysis
Tatva chintan IPO can be a good investment ipo as compared to Zomato IPO

Tatva chintan ipo analysis:

Hi, today we will talk about the Tatva Chintan Pharma IPO, its business, industry, pros and cons and details. Let us start by discussing the objectives of the IPO.

  • The first being to fund the CAPEX requirements of Dahej manufacturing facility
  • The second is to fund their CAPEX requirements for the R&D facility in Vadodra
  • with other general corporate purposes. 

About Tatva Chintan Pharma: 

Now let us discuss about the company, it was incorporated in 1996 and is Tatva Chintan Pharma Chem Ltd It is a chemical producing company. That manufactures products like SDAs, PTCs ith pharma and agrochemical intermediates with specialty chemicals. 

It is the largest and the only manufacturer of SDAs of zeolite in India and is the 2nd largest globally. The company manufactures a total of 154 products that can be divided into 4 categories. 

The first and the most important is Structure Directing Agents or SDAs and were responsible for 40% of the company's sales in FY21 SDAs help in the synthesis of zeolites and are used as catalysts, adsorbents and also used for emission control in the auto market. 

The second category is Phase Transfer Catalysts that facilitate the migration of reactants from one phase to the other when we work in a heterogeneous multi-phase system, they are mainly used in green chemistry applications to reduce residual waste and organic solvents and the company made 27% sales in FY21 from this segment. 

The next segment is Electrolyte salts for supercapacitor batteries and they are the largest manufacturers and are used in automobile batteries with some others. The company generated 1% of the total sales from this segment. 

The last segment is Pharmaceutical and agrochemical intermediates and specialty chemical. They are used in intermediates, disinfectants, catalysts and solvents. And the specialty chemicals are used in dyes, pigments, personal care, flavour, and fragrance sector 30% of the company's total revenue was from this segment in FY21. 

The company has international customers like Merck, Asian Paints, Ipox chemicals KFT, Laurus Labs ltd Tosoh Asia pvt ltd, Navin Fluorine intnl ltd, Oriental Aromatics ltd, Atul ltd, Otsuka Chemical Meghmani Organics, Divis Labs, Jiangsu Goati Super power new materials and Jade chem etc. 

As of March 2021, 47% of its customers have been associated for less than 5 years. But the rest 53% for more than 5 years. The company uses 4 main raw materials named tertiary amines, alkyl halides, general solvents, and general and fine chemicals. 

Tertiary amines are sourced from USA, Germany, and China all others are sourced domestically. The company has 2 manufacturing units in Dahej and Ankleshwar in Gujarat And has 2 wholly-owned subsidiaries in USA and Netherlands. 

From FY19-21, their installed reactor capacity grew from 160KL to 280KL Its assembly lines increased from 10 to 17 lines and its capacity utilization was 68.85% in FY21 for reactors and 54.5% for assembly lines. 

The company made 22 new products in FY19, 15 in FY20, and 16 in FY21 Now we will talk about the industry trained. I would like to talk that the growth of India's chemical industry is expected to reach $293 billion by 2024, with a CAGR of 12.1% and 10.1% for commodities chemicals and 11.25 for specialty chemicals. 

We can give credit to Make in India and China +1 strategy for the growth of the Indian chemical industry. The global PTC growth rate is expected to be with a CAGR of 5.2% that will make it $1.328 billion by 2024. The main drivers for this industry are the rise in demand for drugs and healthcare, focus on health and hygiene and in agrochemicals. 

Global Quartz and zeolites are also expected to rise with a CAGR of 6.8% leading to $1.339 billion by 2024. The main growth drivers are rise in demand for sanitizing, disinfecting, detergents, personal care rise in demand for paints due to rapid urbanization and rise in agrochemicals. 

The next is global super-capacitor that has an expected CAGR of 26% leading to $4.4 billion by 2024 The main drivers are the development of EVs, rising penetration of consumer electronics rise in demand for grid and renewable energy and rapid metro rail expansion in India. 

Why should invest tatva Chintan Pharma IPO:

Now let us discuss the pros, the first being the benefit from Make in India and China+1 and India is also emerging as a global chemical manufacturing hub. 

The company is a leading global maker of PTCs used in waste management and green chemistry. And rising environmental regulations, the need for material-efficient chemical processes And hence the demand for their products will increase in segments like agrochemical, pharma, and personal care. 

The company is the largest maker of electrolyte salts for supercapacitor batteries and this segment will also get a boost due to the push for EVs, renewable energy, and expansion of metro rail network. The growth momentum for pharma, agrochemicals, personal care, dyes, and pigments can benefit the company. 

Another pro is that 70.58% of the total sales come from exports to 25+ countries meaning they have a well-diversified sales. The company has 508 customers with 54% associated with them for more than 5 years which shows the long-standing relationships. 

The company's revenue and PAT has had a rising CAGR of 21.7% and 59.5% respectively since FY19. The company has shown good performance in terms of ROE at 31-32% in the last 2 years. 

Now let us discuss the investment cons: 

The first being cost of raw material is 57% of sales And the company doesn't have any long term supply contracts and due to which there is a volatility risk in the price of raw materials Similarly, the price of products is fixed at the time of purchase order and hence they cannot pass the rising costs of RM onto the customers. 

The top 10 customers of the company accounted for 47% of the sales meaning if anyone leaves it could be a major impact on the company. 

The company's business involves hazardous and dangerous processes that are not good for the environment And with the rising environmental regulations, this company can have problems in the future. 

Tatva Chintan Pharma IPO details:

The IPO opens on 16th July and closes on 20th July 2021 and is a book building issue With a market lot of 13 shares. The price band is 1073 to 1083 per share. 

The listing date is 29th July. The issue size is 500 Crs out of which 225 Crs is fresh issue and the rest 275 Crs is OFS. These article are only for educational purposes,it is no buying/selling recommendations.

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