Tatva Chintan Pharma IPO Financial Analysis (Subscribe)

Key highlights of Tatva Chintan Pharma

  • Business verticals- Tatva Chintan Pharma has four main categories of its product portfolio; contributing 154 products as a whole. They are structure-directing agents, phase transfer catalysts, electrolyte salts for supercapacitor batteries and pharmaceutical and agrochemical intermediates, and other specialty chemicals.
  • Global presence with a wide customer base across various industries having high entry barriers- Customer base expands over 25 countries including USDA, UK, China, and Germany among others. Due to the process complexity of the products manufactured, entry barriers are high. 70% of the revenues were generated from exports for FY21. The Issuer has marquee customers such as Merck, Bayer AG, Asian Paints Ltd., Ipox Chemicals KFT, Laurus Labs Ltd., Tosoh Asia Pte. Ltd., SRF Limited, Navin Fluorine International Limited, Oriental Aromatics Ltd. among others.
  • Strong R&D Capabilities- Focused on the development of new products, improvement of existing production processes, adoption of advanced production technology, and improvement of the quality of existing products.
  • Green Chemistry Process- The Issuer is also engaged in improving processes and infrastructure to help reduce the impact on the environment and has accordingly undertaken various ‘green’ chemistry processes such as electrolysis.
  • Manufacturing Facilities- Modern and strategically located manufacturing facilities at Ankleshwar and Dahej in Gujarat.

Tatva Chintan Pharma Financial Review

    The financial performance of the Issuer is strong with robust profitability margins. Total revenue for FY21 increased 15.75% to Rs 306.29 crore as against Rs 264.62 crore in FY20. PAT increased by 38% to Rs 52.26 crore for FY21 when compared to FY20. The EBITDA and the net margins were 23% and 17% respectively for FY21.

    Return on net worth was 31.49% for FY21. The debt to equity ratio is low, being 0.54 as of 31st March 2021. Return on capital employed is 27%, 33%, and 34% for FY19, FY20, and FY21 respectively.

Table 1 - Financials and Ratios (Amount in INR Crore)
Particulars FY21 FY20 FY19
Total Revenue 306.29 264.62 206.8
PAT 52.26 37.79 20.54
EBITDA 71.64 56.34 34.29
Total Assets 314.8 248.94 187.51
Cash generated from operations 24.32 25.31 7.36
EBITDA Margin 22.76% 22.63% 18.29%
Net Margin 16.60% 15.18% 10.95%

Valuations and Peer Comparison

    With an EPS of 26.02 as of 31st March 2021, the Issue is valued at 41.62 times its earnings at the higher price band of Rs 1083 per share. P/BV is 13.1times at a net asset value of Rs 82.62. The average P/E of the sector is 56.05 which indicates that the Issue is reasonably priced.

    The peers of the Issuer are shown in the peer comparison details along with their key figures. However the peers are not closely comparable as all of them operate in their own niche segment. The product portfolio of the peers differs in the application as well as their formulation.

Table 1 - Comparative Analysis of Tatva Chintan Pharma with Competitors
Particulars Tatva Pharma Aarti Industries Navin Flourine Alkyles Amine Vinati Organics Fine Organics
Face Value per share 10 5 2 5 1 5
Total Income for FY21 306.3 4506.8 1258.4 1249.4 980.1 294.4
EPS 26.02 30.04 52.03 144.68 26.2 39.25
NAV per share 82.62 96.97 33.01 38.82 15.02 23.86
Return on net worth 31.49% 15.23% 15.76% 37.27% 17.45% 16.45%
P/E 41.62 29.07 73.12 25.62 77.41 75.01

Conclusion

    Specialty chemical companies have a distinguished and differentiated business model. Each player operates in a niche product segment and enjoys strong entry barriers and a higher level of product customization. This creates a business model with stable growth.

    Tatva Chintan Pharma is the largest and only commercial manufacturer of SDAs for zeolites in India. It also enjoys the second-largest position globally as per RHP. The 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. SDA and PTC products have various applications in green chemistry, which is pertinent considering the growing focus on green and sustainable technologies. The Issuer has strong financial performance with an increasing trend in profitability margins. Hence, one might subscribe to the Issue.

Reviewer recommends Subscribing to the issue.

Review By CA Priyanka Choudhary on 12th Jul 2021

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Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

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]

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.


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  2021-07-12T01:57:39+00:00






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