Archean Chemical Industries Limited IPO
i. Archean Chemical is leading specialty marine chemical manufacturer in India and focused on producing and exporting bromine, industrial salt, and sulphate of potash to customers around the world. According to Frost & Sullivan, they are the largest exporter of bromine and industrial salt by volume in India in Fiscal 2021 and have amongst the lowest cost of production globally in both bromine and industrial salt.
ii. The company produces its products from its brine reserves in the Rann of Kutch, located on the coast of Gujarat, and it manufactures its products at its facility near Hajipir in Gujarat. As of June 30, 2022, they marketed their products to 18 global customers in 13 countries and to 24 domestic customers. Their bromine is used as key initial level materials, which have applications in the pharmaceuticals, agrochemicals, water treatment, flame retardant, additives, oil & gas and energy storage batteries. Industrial salt is an important raw material used in chemical industry for production of sodium carbonate (soda ash), caustic soda, hydrochloric acid, chlorine, bleaching powders, chlorates, sodium sulphate (salt cake) and sodium metal. Sulphate of potash is used as a fertilizer and also has medical uses.
iii. The balance of their bromine production is sold in the domestic market. Bromine is a highly corrosive, hazardous and toxic chemical and its handling requires a high degree specialized expertise which they have developed. The transportation of bromine is also dangerous and requires nickel and lead lined ISO containers, of which the company had 228 such containers (owned and leased) for its export business as of June 30, 2022. According to Frost & Sullivan, the bromine global market size was US$3.13 billion in CY2021, and the market is expected to grow at a CAGR of 5.8% between CY2020 and CY2025.
iv. In addition, plan to expand their product line into bromine derivative performance products in the next two-to-three years, in particular brominated flame retardants, clear brine fluids and bromine
catalysts used for the synthesis of pure terephthalic acid (“PTA”).
i. Leading market position, expansion and growth in bromine and industrial salt
ii. High entry barriers in the specialty marine chemicals industry
iii. Established infrastructure and integrated production with cost efficiencies
iv. Focus on environment and safety
Objects of the Archean Chemical Industries Limited IPO:
Archean Chemical Industries Limited IPO Details:
|Open Date:||Nov 09 2022|
|Close Date:||Nov 11 2022|
|Face Value:||₹ 2 Per Equity Share|
|Issue Type:||Book Built Issue|
|Issue Size:||1,462.31 Cr.|
|Lot Size:||36 Shares|
|Issue Price:||₹ 386-407 Per Equity Share|
|Listing Date:||Nov 21 2022|
Promoters And Management:
Financials of Archean Chemical Industries Limited IPO:
|Particulars (in Cr)||FY22||FY21||FY20|
|Cost of materials consumed||44||16||24|
|Stock in Trade||11|
|Change in Inventory||-5||-7||-35|
|Employee benefits expense||37||35||34|
|No. of Shares||12.305||12.305||12.305|
Recommendation on Archean Chemical Industries Limited IPO:
Review and Recommendation of Archean IPO by IZ Team is 5/10
1. Archean is a leading specialty marine chemical manufacturer in India and focused on producing and exporting bromine, industrial salt, and sulphate of potash to customers around the world. And, they have amongst the lowest cost of production globally in both bromine and industrial salt. 2. The bromine which company manufactures is used as key initial level materials, which have applications in the pharmaceuticals, agrochemicals, water treatment, flame retardant, additives, oil & gas and energy storage batteries. Almost 50% of revenue comes from Bromine and 44% of that goes to China. 3. They have a manufacturing unit in Hajipir in Gujarat. 4. Handling and transportation of bromine is very risky and company has now gained expertise in the same. The transportation of bromine is also dangerous and requires nickel and lead lined ISO containers, of which they had 228 such containers (owned and leased) for the export business as of June 30, 2022. 5. The revenue of the company has grown from 617 Crores in Fy20 to 1142 Crores in Fy22. Showing decent growth in the top-line. 6. The IPO is coming at price of 407 per share and P/E based on Fy22 financials is 27x which looks reasonable.