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Why did Chemplast Sanmar list 3% low from its subscription price!

Aug 24, 2021
A representative image from a Chemical Lab. Image courtesy Moneycontrol

Chemplast Sanmar shares started off the first day of trade on a weak note as the stock listed at a 3 percent discount to the issue price of Rs 541 per share. It opened at Rs 525 on the BSE, and Rs 550 on the National Stock Exchange.

The public issue of specialty chemical company had seen a tepid response from investors though the issue sailed through. The offer was subscribed 2.17 times during August 10-12 as the retail portion was booked 2.29 times. The portion set aside for qualified institutional buyers was subscribed 2.7 times and that for non-institutional investors saw a 1.03 times subscription.

The company raised Rs 1,300 crore through its fresh isue and the remaining Rs 2,550 crore through offer for sale. The fresh issue money will be utilised for early redemption of non-convertible debentures (Rs 1,238.25 crore). Chemplast Sanmar is a specialty chemicals manufacturer primarily focused on specialty paste PVC (Polyvinyl Chloride) resin and custom manufacturing of starting materials and intermediates for pharmaceutical, agro-chemical and fine chemicals sectors. It is a part of SHL Chemicals Group owned by Sanmar Holdings, an oldest corporate groups in South India region.

CCVL (acquired by Chemplast as on March 2021) is second largest manufacturer of suspension PVC resin in India based on its installed production capacity as on December 2020. Additionally, the company deals in various other chemicals such as caustic soda, chloromethanes, refrigerant gas and hydrogen peroxide. it also manufactures intermediate products that are used as raw materials such as EDC, VCM, Chlorine and hydrogen.

The brokerages had given a subscribe rating to the issue of Chemplast that enjoys healthy market share in India for its businesses across various products.

“Based on a strong business model with long-tenured customer relations and discounted valuation compared to its peers, we recommend a ‘subscribe’ rating for listing gains. However, key developments related to pledged shares i.e. 100 percent equity stake of CCVL and viability of fundamental performance would be monitored in the near-term,” said KRChoksey Research.

With robust diversified product profile, dominant market positioning in key products and healthy outlook for business growth, Choice Broking had also assigned a ‘subscribe for long term’ rating for the issue.

Disclaimer: The views and investment tips expressed by investment expert on TheRightMag.com are his own and not that of the website or its management. TheRightMag.com advises users to check with certified experts before taking any investment decisions. ( with inputs from Moneycontrol)

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