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Archean posted total revenues of Rs 408.82 crore for Q1FY23 and PAT of Rs 84.41 crore for the same period. During FY22, the total revenues increased by 51% to 1142.83 crores from Rs 754.80 crore in FY21. PAT more than doubled to Rs 189 crore from Rs 67 crore in FY21 due to an increase in revenues. The EBITDA margins are robust being more than 35% since the last two last fiscals. Net margins are also strong for the Issuer as can be seen in the table.
The debt to equity ratio has remained high for the last 2-3 fiscals and in the latest for Q1FY23, it was 2.35x Return on equity.
Particulars | Q1FY2023 | Q1FY2022 | FY2022 | FY2021 | FY2020 |
Total Revenue | 408.82 | 201.77 | 1142.83 | 754.79 | 617.01 |
Revenue from Operations | 400.27 | 200.76 | 1130.44 | 740.76 | 608.17 |
PAT | 84.41 | 18.69 | 188.58 | 66.61 | -36.22 |
EBITDA | 169.61 | NA | 479.54 | 276.25 | 156.83 |
Total Assets | 1606.65 | 1459.25 | 1529.68 | 1432.43 | 1428.62 |
EBITDA Margin | 42.37% | 0.00% | 42.42% | 37.29% | 25.79% |
Net Margin | 21.09% | 9.31% | 16.68% | 8.99% | -5.96% |
The IPO is valued at 12.45x times with annualized EPS of 32.68for Q1FY23 calculated at the upper price band of Rs 407. However, with FY22 EPS of 18.26, P/E is 22.29 x as compared to industry average of 38x. Its listed peer, Tata Chemicals, Deepak Nitrite, AartiInd and Neogen are trading at P/E of 19.74x,28.69x and 26.53x and 93.28 respectively. Hence the Issue appears to be priced cheaper than majority of its peers. For listed peer related data and information, refer the Peer table comparison given below.
Parameters | Tata Chemicals | Deepak Nitrite | Aarti Industries | Neogen Chemicals | Archean Chemical |
Total Income for FY22 (Cr) | 1287.81 | 6844.80 | 7000.76 | 488.32 | 1142.83 |
EPS | 49.17 | 49.17 | 36.06 | 18.7 | 18.26 |
NAV Per Share | 716.48 | 244.77 | 163.16 | 176.12 | 25.28 |
Return on net worth | 6.89% | 31.95% | 22.10% | 10.16% | 72.24% |
P/E | 19.74 | 28.69 | 26.53 | 93.28 | NA |
Debt to equity ratio (in times) | 0.37 | 0.09 | 0.37 | 0.46 | 2.35 |
P/BV | 1.36 | 9.17 | 5.86 | 9.91 | NA |
CMP | 1114.3 | 2305.25 | 726.4 | 1512 | NA |
Archean ChemicalIPO (Rs 1462.31 crore) opens on 9th Nov- 11th Nov 2022 with a price band of 386-407 per share. The retail quota is 10% and investors can apply with a minimum bid of 36 shares (Rs 14,652). The maximum lot size is 468 shares (Rs 1,90,476). The issue is both a fresh issue (Rs 805 crore) and an offer for sale (Rs 657.31 crore) by promoter shareholder, ChemikasSpeciality and investor selling shareholder, India Resurgence fund, Piramal Natural Resources.Net proceeds would be used to repay the NCD’s (Rs 644 crore) and rest towards corporate purposes. The issue is expected to list on 21st Nov 2022.
ArcheanChemicals has a strong market position due to factors like long-standing relationships with global customers, established infrastructure, and access to brine reserves at the Rann of Kutch. The specialty marine chemicals industry in which the Issuer operates has high entry barriers and higher costs of production.
The Asia Pacific chemicals market is expected to grow at the fastest rate of 5-6% as per RHP. The Issuer has an approved annual capacity of 42.5 KT at its plant while actual production was 14KT in FY21. With this available capacity, Archean Chemical is likely to cement the leadership position. It also dominates the Indian Sulphate of Potash (SOP) market through its indigenous production from sea brine, liquid bromine, and industrial salt. It is among the top three cost-competitive producers of SOP globally.
The Issuer has a strong financial profile with robust profitability margins. However, its debt is on the higher side as compared to its peers but that would come down with the repayment from the net proceeds of the fresh issue. The valuations of the Issue appear to be priced attractively as against its listed peers, hence one may apply to the IPO.
Review By CA Priyanka Choudhary on 30th Oct 2022
About CA Priyanka Choudhary
Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.
Email: [email protected]
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