Tatva Chintan Pharma IPO

Apply 0
Avoid 0

(i) They are a specialty chemicals manufacturing company engaged in the manufacture of a diverse portfolio of structure directing agents (“SDAs”), phase transfer catalysts (“PTCs”), electrolyte salts for super capacitor batteries and pharmaceutical and agrochemical intermediates and other specialty chemicals (“PASC”). Their Company is the largest and only commercial manufacturer of SDAs for zeolites in India. It also enjoys the second largest position globally. (Source: F&S Report)

(ii) In addition, Their Company is one of the leading global producers of an entire range of PTCs in India and one of the key producers across the globe. (Source: F&S Report) As a manufacturer of specialty chemicals, They focus on application of their products which form a key ingredient to their customers’ manufacturing and industrial processes. For instance, their SDA and PTC products have various applications in green chemistry, which is pertinent considering the growing focus on green and sustainable technologies.

(iii) They continuously strive to improve their processes and infrastructure to help reduce their impact on the environment and have accordingly, undertaken various ‘green’ chemistry processes such as electrolysis. Considering the wide application of their products, They serve customers across various industries, including the automotive, petroleum, pharmaceutical, agro chemicals, paints and coatings, dyes and pigments, personal care and flavour and fragrances industries. Apart from their customers in India, they also export their products to over 25 countries, including the USA, China, Germany, Japan, South Africa, and the UK. During the Fiscals ended March 31, 2018, 2019 and 2020, and in the nine months ended December 31, 2020, exports of products accounted for 64.99%, 69.57%, 76.74% and 70.72%, of their revenue from operations, respectively.

Objects of the Tatva Chintan Pharma IPO:

(i) Offer for Sale (275 Cr.) (ii) Fresh Issue (225 Cr.) and same will be used for following purpose: 1. Funding requirements for expansion of its Dahej Manufacturing Facility 2. Funding requirements for upgradation of its R&D facility in Vadodara 3. General corporate purposes.
DRHP of Tatva Chintan Pharma IPO

Tatva Chintan Pharma IPO Details:

Open Date: Jul 16 2021
Close Date: Jul 20 2021
Total Shares: 4616805
Face Value: ₹ 10 Per Equity Share
Issue Type: Book Building
Issue Size: 500 Cr.
Lot Size: 13 Shares
Issue Price: ₹ 1073-1083 Per Equity Share
Listing At: NSE,BSE
Listing Date: Jul 29 2021

Promoters And Management:

Chintan Nitinkumar Shah, is the Managing Director on Board. He holds a bachelor’s degree in engineering, with a  specialization in computer science from the Maharaja Sayajirao University of Baroda. He is responsible for, among others, business development and finance, and information services, in our Company. He has over 24 years of experience. Ajaykumar Mansukhlal Patel, is a Whole Time Director on Board. He holds a bachelor’s degree in engineering, with a specialization in chemical engineering from the Maharaja Sayajirao University of Baroda. He is responsible for, among others, project engineering and the development and implementation of new technology, in our Company. He has over 26 years of experience. He was previously associated with Sun Pharmac+eutical Industries Limited as Officer – Chemical Engineering. Shekhar Rasiklal Somani, is a Whole Time Director on Board. He holds a bachelor’s degree in pharmacy from the Maharaja Sayajirao University of Baroda. He is responsible for business development, production controlling, quality, and supply chain management, in our Company. He has over 24 years of experience. Manher Chimanlal Desai, is an Independent Director on Board. He holds a bachelor’s degree in science, a master’s degree in science (specializing in organic chemistry), and a doctorate in science from the University of Mumbai. He has previously been associated with Indian Dyestuff Industries Limited, Metrochem Industries Limited, Alaknanda Organics Limited, and Heubach Colour Private Limited. Subhash Ambubhai Patel, is an Independent Director on Board. He holds a bachelor’s degree in commerce from The Maharaja Sayajirao University of Baroda. He is a fellow of the Institute of Chartered Accountants of India. He has over 33 years of experience in accountancy and audit. He is currently a partner at M/s S.A. Patel & Co., Chartered Accountants.

Financials of Tatva Chintan Pharma IPO:

P&L Statement FY21 FY20 FY19
Income 306 264 206
Growth% 16% 28%
COGS 150 146 118
Change in Inventory -4 -15 -4
Employee Benefit 24 20 16
Other expenses 61 54 41
EBITDA 75 59 35
OPM 25% 22% 17%
Finance Cost 4 4 3
Depreciation 6 5 4
Other Income 5.9 1.3 2
PBT 60 47 27
PAT 52 37 20
NPM 17% 14% 10%
Equity Shares 2.21 2.21 2.21
EPS 24 17 9

Comparison With Peers:

Peer 3-year Revenue Growth 3-year PAT Growth EBITDA Margin (FY21) ROE  (FY21) Debt to Equity P/E 3 Years Return
Tatva 25% 47% 25% 32.11% 0.67 45 NA
Aarti Industries 3% 2% 22% 16.15% 0.71 59 41.45%
Navin Fluorine 6% 20% 26% 16.14% 0.00 78 81.57%
Alkyl Amines 14% 52% 35% 44.58% 0.06 63 141.10%
Vinati Organics -5% -2% 37% 19.08% 0.00 74 59.25%
Fine Organics 2% -4% 18% 17.82% 0.08 77 55.46%
 

Recommendation on Tatva Chintan Pharma IPO:

Review and Recommendation of Tatva Pharms IPO by IZ team is 6/10. Pros: 1. Tatva Pharma is a leading manufacturer of structure directing agents and phase transfer catalysts. Company is the largest and only commercial manufacturer of SDAs for zeolites in India. It also enjoys the second largest position globally. Company is one of the leading global producers of an entire range of PTCs in India and one of the key producers across the globe. 2. Global presence with a wide customer base across various industries having high entry barriers. 3. Strong R&D capabilities. experienced Promoters with a strong management team. 4. Debt is almost a debt free company with D/E of 0.76x. 5. P/E = 45x, whereas Industry P/E is 70x. So, good listing gain is expected in the company. Cons: 1. The company is not generating any free cash flow in the last 3 years. 2. CFO/EBITDA is very low as compared to peers which are in high 70%. 3. Debtor days are also increasing from 73 days to 107 days from FY19 to FY21.  And are high as compared to peers.

Lead Manager of Tatva Chintan Pharma IPO:

  1. ICICI Securities Limited
  2. JM Financial Consultants Private Limited

Registrar of Tatva Chintan Pharma IPO:

  1. Link Intime India Private Limited

Company Address:

Tatva Chintan Pharma Chem Limited Plot No. 502 / 17, GIDC Estate, Ankleshwar, Bharuch, Gujarat - 393002, India Phone: +91 75730 46951 Email: cs@tatvachintan.com Website: http://www.tatvachintan.com/

Discussion on Tatva Chintan Pharma IPO:

1 Comment

    The company is not able convert EBITDA into cash.

    1. EBITDA for FY21 = 75 Crores

    2. CFO = 25 Cr.

    That means conversion efficiency of just 33%. This is because of rising trade receivables.

    Peers

    Aarti Industries = 88%

    Fine-Organics = 66%

    Navin Fluorine = 76%

    Vinati Organics = 62%

    Reply

Leave a Reply