Last updated: 06 Jul, 2021 | 12:05 pm
Clean Science and Technology is set to raise up to Rs 1,546 crore via IPO which opens on 7th July, Wednesday. Here are the details:
About Clean Science IPO:
Clean Science IPO: Financials
Clean Science IPO: Peer Comparison
Strategic innovation: CSTL has set-up 2 dedicated in-house R&D centers and their R&D commitments, although small, are increasing. R&D costs increased from Rs. 0.5 cr in FY19 to Rs 0.8 cr in FY21. They have used R&D to reduce costs and increase their profit margins. This has led to them being the most cost-competitive producer and hence having the highest margins in the industry in India for FY20.
Diversified customer portfolio: The company has a diversified type of customers. The revenue generated from top 10 customers reduced from 50.5% in FY19 to 47.9% in FY21. Further, their customers are from various industries like paint, food, cosmetics, agriculture etc. CSTL has also diversified its revenue geographically.
Efficient operations: Clean Science has its own captive solar plants, which it uses to meet part of the power requirement of its facilities. In addition, its eco-friendly production processes have led to limited effluent discharge. As a result, CSTL did not receive any material observations from the pollution control board in India.
Growing market: The global chemicals market is expected to grow at a CAGR of 6.2% to US$ 6.7 trillion from 2019 to 2025 and China accounted for 40% of the market in 2019. CSTL is well positioned to capitalize on these opportunities in the specialty chemicals segment due to their lower cost of production in India as compared to imports from China, big presence in Chinese market and their established relationships with MNCs.
Leveraging R&D: Clean Science is focussed on identifying products with high demand that only limited manufacturers produce within India and globally. They also intend to continue to explore high margin product lines which have low competition and multiple applications. For example, they are engaged in developing raw materials for application in high-growth industries like paints and coatings, adhesives and sealants that are expected to be driven by growth in the infrastructure segment.
About the issue: Clean Science IPO price band, lot size, date
Clean Science IPO date: 7 July - 9 July 2021
CSTL price band: Rs 880 - 890 per share
Issue Size: Rs 1546.62 crore (Offer for sale of Equity Shares aggregating up to ₹ 1,546.62 Crore)
Post Issue implied market cap: Rs 9,347 – 9,560 Cr
Reservation: QIB 50%, Retail - 35%, NII 15%
Clean Science IPO lot size: 16 shares, and in multiples of 16 shares
Indmoney Recommendation: Clean Science IPO review
Clean Science and Technology has reported a steady growth in revenues, even as the bottomline has seen robust expansion (since FY19). The company has also reported healthy margins and return ratios.
At the higher end of the price band, Clean Science IPO is reasonably priced at a P/E ratio of 48.2 times FY21 EPS (fully diluted on post-issue). This is lower as compared to peers such as Fine Organics (76 times), and Vinati Organics (68 times).
The global chemicals market was valued at $ 4,738 billion in 2019 with China accounting for 40% of the market share. The global chemicals market is expected to grow at a CAGR of 6.2% from 2019 to 2025 and will be $ 6,785 in 2025. This gives a very good growth visibility for Clean Science and Technology.
Given factors such as strong growth in bottomline, healthy margins, robust return ratios, good growth visibility, diversified business, and reasonable valuations, we remain positive on the prospects of this issue.