Deepak Chemtex Limited IPO

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1. Core Business: The primary focus of the business is the manufacturing of colorants. These colorants are used in a wide range of applications, including food and beverages, pharmaceuticals, cosmetics, cleaning products, agriculture, and other industrial uses.

2. Product Range: The company produces a complete range of FD&C (Food, Drug, and Cosmetic) colors used in various consumables such as confectionery, bakery, desserts, beverages, dairy products, seasonings, pet foods, pharmaceuticals, cosmetics, and personal care products. They also manufacture salt-free dyes for the inkjet industry, pond dyes for ponds and lakes, and other colorants for diverse applications like car wash products, sanitation cleaners, detergents, fuels, oils, lubricants, smoke, seed treatment, crop protection, fertilizer indicators, floral dyes, etc.

3. Manufacturing Facilities: The manufacturing facility is located in Ratnagiri District, Maharashtra, equipped with glass-lined reactors, boilers, and stainless steel equipment. The facility undergoes regular audits by clients and employs various production processes to meet specific end-product and application requirements.

4. Quality Control: The company emphasizes quality control through a comprehensive framework, including shade testing, heavy metal detection, microbiological contamination tests, and particle size analysis. The manufacturing unit is ISO 9001:2015 certified for quality management, and it has received HALAL and KOSHER certificates, ensuring compliance with Islamic and Jewish dietary laws.

5. Environmental Concerns: To address environmental concerns, the company has developed an Effluent Treatment Plant to monitor and control COD (Chemical Oxygen Demand), BOD (Biological Oxygen Demand), TDS (Total Dissolved Solids), and pH levels before discharging effluent.

6. Global Presence: The company exports its products to various countries, including China, France, Kenya, Mexico, Europe, Japan, Australia, the United Kingdom, and the United States. This indicates a global market presence and potential exposure to international regulatory standards.

7. Product Portfolio and Revenue: The company has expanded its product portfolio and achieved revenue growth. The revenue is diversified across products, with the top 10 products contributing a significant portion to the total revenue.

8. Certifications and Standards: The company’s products sometimes secure EN 71 (European Standard) certification, highlighting adherence to European safety standards.

9. Flexible Packaging Options: The company provides flexible packaging options such as IBC Tank Packing, HDPE Drum Packing, Cardboard Drum Packing, Carton Packaging, and Container Stuffing to ensure the safety of products during transit.

10. Leadership and Subsidiaries: The company is led by its promoter, Saurabh Deepak Arora, who brings 26 years of experience in the colorant manufacturing business. The company operates through subsidiaries, including DCPL Speciality Chemicals Private Limited and South West Chemicals Corporation in New Jersey, USA, to further expand and facilitate operations.

Objects of the Deepak Chemtex Limited IPO:

The company intends to utilize the net proceeds from the issue towards the funding of the following objects: 1. Funding capital expenditure towards the installation of plant & machinery in our existing premises. 2. Investment in its subsidiary DCPL Speciality Chemicals Private Limited for financing its capital expenditure towards the installation of plant and machinery. 3. Funding to meet working capital requirements. 4. General Corporate Purpose.
RHP of Deepak Chemtex Limited IPO

Deepak Chemtex Limited IPO Details:

Open Date: Nov 29 2023
Close Date: Dec 01 2023
Total Shares: 2,880,000
Face Value: ₹ 10 Per Equity Share
Issue Type: Book Built Issue IPO
Issue Size: 23.04 Cr.
Lot Size: 1600 Shares
Issue Price: ₹ 76 - 80 Per Equity Share
Listing At: BSE SME
Listing Date: Dec 11 2023

Promoters And Management:

i. Saurabh Deepak Arora is the Chairman & Managing Director of the Company. He has been on the Board since incorporation. He is a visionary entrepreneur and has played a pivotal role in expanding business operations of the Company. He has a work experience of over 26 years in the Chemical and Colorant industry and has completed his Bachelor of Science from Ruia College, Matunga, Mumbai in the year 2001. He currently looks after the overall management of the Company. Under his guidance, the Company has witnessed continuous growth. ii. Trishla Baid is the Whole-time Director and CFO of the Company. She has been on the Board since January 2014. She has completed her degree in Bachelor of Arts in the year 1998 from Stela Maris College, Chennai. She has an experience of around 21 years in various sector including accounts and Finance. She is currently looking after the Accounts and Finance function of the Company. iii. Rajesh Kalikaprasad Tiwari is the Executive Director of the Company. He has an experience of around 23 years in the various fields including administration field. He has completed his Management Business Administration (MBA) from Shridhar University, Pilani (Rajasthan) in the year. He is currently looking after the operations of the Company.

Financials of Deepak Chemtex Limited IPO:

P&L (in Cr) 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Net Revenue 6.04 4.33 5.49 4.38 8.33 15.92 23.05 29.56 54.11 46
Cost of Materials Consumed 3.66 2.71 2.91 2.69 5.78 8.75 10.79 14.56 32.58 26.81
Purchases of Stock-in-trade 0 0 0 0 0 1.74 3.58 3.78 4.64 4
Changes in Inventories / Finished Goods 0.24 -0.15 0.16 0.05 -0.17 -0.04 -0.16 -0.08 0.14 -1.95
Employee Benefit Expense 0.69 0.53 0.68 0.59 0.72 1.3 1.37 1.65 1.93 2.22
Other Expenses 0.98 0.79 1.12 0.88 1.61 2.58 4.7 5.46 8.84 7.41
Total Operating Cost 5.56 3.88 4.88 4.2 7.94 14.33 20.29 25.37 48.13 38.49
Operating Profit ( EBITDA ) 0.47 0.45 0.61 0.18 0.39 1.59 2.75 4.18 5.97 7.51
OPM 7.78% 10.39% 11.11% 4.11% 4.68% 9.99% 11.93% 14.14% 11.03% 16.33%
Other Income 0.02 0.09 0.06 0.04 0.06 0.05 0.23 0.17 0.33 1.13
D&A 0.04 0.04 0.08 0.08 0.09 0.4 0.41 0.57 0.54 0.54
Finance Costs 0.18 0.2 0.13 0.1 0.14 0.21 0.32 0.08 0.09 0.06
PAT 0.28 0.11 0.46 0.01 0.22 0.71 1.62 2.67 4.22 6.31
NPM 4.64% 2.54% 8.38% 0.23% 2.64% 4.46% 7.03% 9.03% 7.80% 13.72%

Comparison With Peers:

Name of the Company Revenue (In Crore) PAT (In Crore) EPS ( in Rs) P/E CMP Mcap (In Crore)
Deepak Chemtex Limited 47 6 5.80 13.8 80 87
Vidhi Specialty Food Ingredients Limited 404 38 7.58 65 442 2,210
Vipul Organics Limited 134 2 1.46 91.8 133 172
Kiri Industries Limited 945 107 20.58 174 293 1,519

Recommendation on Deepak Chemtex Limited IPO:

Review and Recommendation of Deepak Chemtex SME IPO by IZ team is 5/10

Business Overview

1. Industry: Manufacturer of colorants used in various industries including Food, Drug, Cosmetics, Cleaning compounds, Agriculture, and others. 2. History: Started in 1997, evolving into manufacturing a complete range of FD&C (Food, Drug, and Cosmetic) colors. 3. Product Applications: Products used in confectionary, bakery, desserts, beverages, dairy, seasonings, pet foods, pharmaceuticals, cosmetics, personal care, inkjet industry, ponds, lakes, swimming pools, car wash products, portable sanitation cleaners, detergents, soaps, fuel, oil, lubricants, smoke, seed treatment, crop protection, fertilizer indicators, floral dyes, etc. 4. Manufacturing Facility: Located in Ratnagiri District, Maharashtra, equipped with specialized equipment and regularly audited by clients. 5. Production Processes: Includes Sulphonation, Condensation, Bromination, Oxidation, Reduction, High-pressure reactions, Purification, etc. 6. Quality Control: In-house quality checks, ISO 9001:2015 accredited, HALAL and KOSHER certificates. 7. Environmental Concerns: Developed Effluent treatment Plant for waste management.

Industry Served

1. Export Markets: China, France, Kenya, Mexico, Europe, Japan, Australia, United Kingdom, USA, etc. 2. Product Portfolio: Expanded from 50 products in 2021 to around 100 products in 2023. 3. Customer Base: Diverse, Indian and global customers, some securing EN 71 (European Standard) certification.

Financials

1. Revenue Growth: From Rs 2,688.89 lakhs in Fiscal 2021 to Rs 4,489.66 lakhs in Fiscal 2022, and Rs 3,747.56 lakhs in Fiscal 2023 (up to September 30, 2023). 2. Revenue Distribution by Industry Segment (2023): HI&I - 30.08%, Food - 9.82%, Cosmetics - 7.90%, Pharmaceuticals - 7.14%, Industrial - 14.77%, Agriculture - 18.99%, Others - 11.29%. 3. Key Financial Performance Indicators (As of September 30, 2023): Revenue from operations - ₹2174.40 lakhs, EBITDA - ₹411.38 lakhs with an EBITDA Margin of 18.92%, PAT - ₹311.18 lakhs with a PAT Margin of 14.31%, RoE - 18.05%, RoCE - 20.64%.

Valuations:

The IPO is coming at P/E of 14x based in FY23 financials, that looks fairly priced.

Lead Manager of Deepak Chemtex Limited IPO:

  1. Hem Securities Limited

Registrar of Deepak Chemtex Limited IPO:

  1. Bigshare Services Private Limited

Company Address:

Deepak Chemtex Limited Aawashi, 28/1A, A/P Adgul Aawashi, Lote, Ratnagiri - 415722 Phone: +91 88706 82632 Email: info@deepakchemtex.in Website: https://www.deepakchemtex.in/index

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