Chemplast Sanmar Limited closed its first day of subscription for the company’s initial public offering (IPO) on Tuesday. The public issue saw an overall subscription of 0.16 times by the investor groups. The highest subscriber was the individual retail investor group, which had subscribed to the issue a total of 0.84 times. The non-institutional investors (NIIs) had subscribed to the issue 0.03 times. The qualified institutional investors (QIBs) had put in bids of 1,836 equity shares against their reserved shares of 2.17 crore shares. The company received bids for around 64.48 lakh equity shares against an offer size of 3.99 crore shares according to data provided on the exchanges by the end of the day on Tuesday.
The company managed to raise Rs 1,732.5 crore from its anchor investors the day prior to opening up the public issue. It managed this by issuing 3.2 crore shares at Rs 541 per share. The Chemplast Sanmar IPO opened on August 10 and is going to close its subscriptions on August 12.
In terms of investor reservations, the IPO had allotted the QIBs a reservation of 75 per cent. The NIIs had a 15 per cent reservation and the retail investor category had just a 10 per cent reservation of shares for the public issue. The lot size for the issue was 27 shares on the lower end with an accompanying application amount of Rs 14,607. On the higher end of the lot, stood 351 shares with an application cut-off amount of Rs 189,891. The retail investors for the issue are eligible to apply for up to 13 lots at the upper end of the lot size.
The IPO itself carries an issue price of Rs 3,850 crore. The issue consists of a fresh issue and an offer for sale (OFS). The fresh issue is worth Rs 1,300 crore and the OFS aggregates up to Rs 2,550 crore. The price band for the IPO was listed as Rs 530 to Rs 541 per equity share with a face value of Rs 5 per equity share.
The Chemplast Sanmar grey market premium (GMP) stood at Rs 30 on August 11. This indicated that the shares were trading on the unlisted market at Rs 560 to Rs 571 per equity share.
Should you Subscribe to the Chemplast Sanmar IPO?
The company was incorporated in 1985 and it has some competitive strengths that make it a strong choice for investment. For one, it is one of the largest manufacturers of speciality paste PVC resins in India in terms of installed production capacity. It is also the largest manufacturer of caustic soda and the largest manufacturer of hydrogen peroxide in South India. The company is also a part of the SHL Chemical Group with is a prominent conglomerate in South India. This, combined with the fact that it is a vertically integrated business model with a primary focus on manufacturing gives it a competitive edge.
HDFC Securities spoke on the company’s competitive strengths and said, “CSL is the largest manufacturer of specialty paste PVC resin in India, on the basis of installed production capacity as of December 31, 2020, and catered to 45% and44% of the demand for specialty paste PVC resin in India in Financial Years 2020 and 2019, respectively, with 82.0% and 84.0% market share of the specialty paste PVC resin manufactured and sold in India, respectively.”
Speaking on the future outlook of the company, Religare Broking said, “We believe that CSL is well-positioned to benefit from the industry growth trends given its diversified product portfolio which diminishes the risk associated with any particular product, vertically integrated manufacturing facilities and strong parental support.”
Religare Broking then went on to add, “On the financial front, Its joint ventures and associate company are posting losses from last 3 years, which remains a concern. Nonetheless, we have a positive view on the company from long term perspective.”
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