GMP, IPO Details; Should you Subscribe?

Archean Chemical IPO Opens Tomorrow: Specialty chemical manufacturer Archean Chemical Industries Ltd’s initial public offering (IPO) will open tomorrow, November 9, 2022. The IPO will remain open for bids till November 11.

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Archean Chemical IPO: Price Band

The price band has been fixed in the range of Rs 386 to Rs 407 per share for its initial share sale. At the upper end of the price band, the IPO is expected to fetch Rs 1,462 crore.

Archean Chemical IPO: Objective

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Archean Chemical IPO consists of a fresh issue of equity shares aggregating up to Rs 805 crore and an offer-for-sale (OFS) of up to 1.61 crore shares by the promoter and investors, including the India Resurgence Fund, a joint venture between the Piramal Group and Bain Capital. The company plans to use the net proceeds of the fresh issue for the redemption of non-convertible debentures (NCDs) issued by it.

Archean Chemical IPO: GMP Today

Ahead of its initial public offering opening (IPO) of Archean Chemical Industries to investors for subscription tomorrow, the shares are already commanding a premium of 17 percent in the grey market. With the price band fixed at Rs 386 to Rs 407 per share for the IPO, shares of the company have a grey market premium (GMP) of Rs 70, according to market observers.

The GMP of a stock can help serve as an indication of how the investor sentiment of an IPO may impact its performance. A strong GMP may indicate a higher likelihood of listing gains while a weak GMP may signal that shares of a company don’t list with any gains.

The shares of the company are expected to list on leading stock exchanges BSE and NSE on Monday, November 21, 2022.

Archean Chemical IPO: Should you Invest?

Brokerages and analysts remain mostly positive about the issue though warn to exercise caution due to its pricey valuation.

Based on FY22 earnings, the company is valued at 26.5x P/E, 12.4x EV/EBITDA and 5.1x EV/Sales, which is a discount to peers. The company has a leading market position and it is undergoing continued expansion, said Reliance Securities.

Reliance Securities recommended ‘subscribe’ to the issue in view of the company’s leading market position, integrated production, cost efficiencies, consistent financial performance, high entry barriers, an experienced management team and attractive valuation.

It is demanding an EV/Sales multiple of 3.8x, which is in line with the peer average. The company’s operations are likely to get support from import substitution, lower exports from China and lower cost of operations, said Choice Broking.

“The macros of the company are positive, but stretched valuation is a concern,” it added with a ‘subscribe with caution’ rating for the issue.

About Archean Chemical

Archean Chemical Industries is a leading manufacturer of specialty marine chemicals in India, and is focused on producing and exporting bromine, industrial salt, and sulphate of potash to customers around the world. It produces its products from its brine reserves in the Rann of Kutch, located on the coast of Gujarat, and manufactures products at its facility near Hajipir in Gujarat.

IIFL Securities, ICICI Securities and JM Financial are the book-running lead managers to the public issue. Link Intime India has been appointed as the registrar to the IPO.

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