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Clean Science IPO: Clean Science & Technology IPO Date, Price Band & More

Clean Science IPO: Clean Science & Technology IPO Date, Price Band & More

Last updated: 06 Jul, 2021 | 12:05 pm

Clean Science IPO: Clean Science & Technology IPO Date, Price Band & More

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 and Technology (CSTL), incorporated in November 2003, manufactures critical specialty chemicals like Performance Chemicals - Mono methyl ether of hydroquinone, Butylated hydroxyanisole, and L-Ascorbyl Palmitate, and many more.
  • Around 37% of their revenue comes from China, 31% from India, 13% from Europe and 11% from America and the rest from other regions.
  • Clean Science has 2 certified production facilities in India strategically located at Kurkumbh (Maharashtra). As of Dec 31, 2020, the plant had an aggregated installed production capacity of 29,900 MTPA.
  • The company’s products are used as performance chemicals, FMCG chemicals and used by pharmaceutical industries.

Clean Science IPO: Financials

  • The company's total revenue from the operation grew from Rs 393 cr in FY19 to Rs 512 crore in FY21 at a CAGR of 14.15%. 
  • In FY 2019, 2020, and 2021, revenue generated from their top 10 customers represented 50.5%, 44.7%, and 47.9% of their revenue from operations, with 13% coming from its largest client. 
  • Clean Science and Technology has delivered strong and consistent results in the past three fiscal years, the growth was completely organic based on their internal accruals.
  • EBITDA and Net profit margins are also increasing consistently on the back lower raw material cost which accounted for 26.9% of their total cost in FY21. The EBITDA margin has been in the range of 38% to 56% over the last three years. 
  • The net profit margin has also increased from 25% to 39% in FY21. Clean Science and Technology has reported robust return ratios, with RoNW in the range of 37%- 41% and RoCE between 51% and 74%. 
  • Clean Science’s asset turnover is among the highest in the chemical industry, highlighting their commitment to operationalize their manufacturing facilities in a timely and cost efficient manner.
  • Clean Science has been declaring and paying dividends consistently since Fiscal 2012. The company said that it will follow a prudent dividend policy going forward. 

Clean Science IPO: Peer Comparison

  • The listed peers of Clean Science and Technology are Vinati Organics Ltd, Fine Organic Industries Ltd, Atul Ltd, Camlin Fine Sciences Ltd, SRF Ltd, Navin Fluorine International Ltd, PI Industries Ltd.
  • Among its listed peers, the total income of the company is the lowest. The market cap of Clean Science and Technology is also expected to be lower, in-line with its revenues. All the listed peers are in the mid and large-cap category.
  • Although Clean Science has a small size, it is in a high growth and high return stage with the highest return on net worth. It has reported higher RoNW figures as compared to its peers. 
  •  CSTL ranks 1st in the world for various products that include MEHQ, BHA, 4-MAP and Anisole.

USP

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.

Growth prospects: 

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.

We are a SEBI registered investement advisor