Tatva Chintan Pharma IPO opens; firm raises Rs 150 cr from anchor investors, should you subscribe?

The Rs 500-crore IPO of Tatva Chintan Pharma will open for subscription today.

Tatva Chintan Pharma Chem has managed to raise Rs 150 crore from anchor investors ahead of its initial public offering (IPO). Marquee domestic and global names such as Goldman Sachs, HSBC Global, Nomura, SBI, HDFC and ICICI Prudential are some of the investors who have picked up a stake in the company through the anchor book portion. The Rs 500-crore IPO of Tatva Chintan Pharma will open for subscription today. Specialty chemicals maker Tatva Chintan is looking to raise Rs 225 crore through a fresh issue of shares, while the remaining Rs 275 crore will be an offer for sale (OFS).

Tatva Chintan Pharma has sold 13.85 lakh equity shares to anchor investors. Goldman Sachs, HSBC, Axis Mutual fund, Malabar India Fund, Nippon Life India, Abu Dhabi Investment Authority and Nomura Funds have each bought more than 6% of the anchor book portion. Of the total anchor investment, 47% or 6.46 lakh equity shares have been sold to seven domestic mutual funds. These include ICICI Prudential, HDFC AMC, Axis Mutual Fund, Aditya Birla Sun Life, SBI, Nippon India and Mirae Asset Hybrid.

Issue details

From today investors can bid for Tatva Chintan Pharma in the price band of Rs 1,073-1,083 per share in a bid lot of 13 shares. The minimum investment will be Rs 14,079. The issue will close next Tuesday on Jul 20, 2021. While 50% of the issue is reserved for Qualified Institutional Buyers (QIB), Non-institutional Investors (NII) can bid for 15% of the total issue size. Retail investors can bod for 35% of the total issue. The promoter stake in the company will come down to 79.2% post issue while public shareholding will increase to 20.8%.

The company plans to the net proceeds from the fresh issue towards funding capital expenditure requirements for expansion of Dahej Manufacturing Facility, funding the up-gradation of R&D facility in Vadodara, and general corporate purposes. The firm was trading at a grey market premium of Rs 690 per share till Thursday, according to people dealing in the unlisted space. 

Should you subscribe?

Established in 1996, Tatva Chintan Pharma is one of the leading companies engaged in the manufacturing of green chemicals. At the offer for sale price of INR 1,083, the stock is valued at 31.3X FY24 earnings, said analysts at Ventura Securities. They believe the high valuations are justified high growth potential, dominant producer status, exposure to green energy, and strong balance sheet. “Upcoming expansion plan will increase the company’s aggregate capacity by 200 kilo liters (71.4%), which is a significant expansion and could impact profitability and return ratios in the next 2-3 years. We recommend a SUBSCRIBE for listing gains,” they added.

The company has no exact peers listed on the bourses, said Choice Broking. The brokerage firm added that at the higher price band of Rs 1,083, Tatva Chintan Pharma is demanding a P/E valuation of 45.9x (to its restated FY21 EPS of Rs. 23.6). Choice Broking has a ‘Subscribe’ rating for the issue, banking on the growth opportunities for the company.