Clean Science and Technology not to use IPO money to expand as it has enough cash in hand

• Specialty chemicals company Clean Science and Technology looks to raise ₹1,546 crore through the public issue.
• The company has net cash of ₹192 crore as of March 31, 2021 from operating activities.
• Another lockdown might not be a concern for the company as it comes under essential goods.

Pune-based specialty chemicals company Clean Science and Technology is getting closer to listing its shares on the exchanges as the bidding process of the company starts on Wednesday (July 7).

The company is looking to raise ₹1,546 crore through the initial public offering (IPO), which is completely an offer for sale (OFS) by existing promoters and other shareholders wherein the company will not receive any proceeds from the offer and all of it will go towards the selling shareholders and promoters.

In an interview with Business Insider ahead of the IPO, the company’s promoter and wholetime director of the company, Siddhartha Ashok Sikchi shared how the company holds enough cash in hand and is not looking to raise any primary capital.

“The IPO is a 100% OFS. At company level we are not raising any primary capital as we have ₹250 crore cash on board” he said.

The company’s promoters who are selling shares include Ashok Ramnarayan Boob (₹244 crore), Krishnakumar Ramnarayan Boob (₹193 crore), Siddhartha Ashok Sikchi (₹40 crore) and Parth Ashok Maheshwari (₹75 crore).

The company has net cash of ₹192 crore as of March 31, 2021 from operating activities.

Moreover, the company says it has performed well even during the initial difficult lockdown phase last year.

“Since specialty chemicals come under essential services, there was not a very strong impact of the lockdown on our financials, but yes demand was impacted. For some products there was low demand and for some demand was significantly better. In fact, our revenues went up over 20% in FY2021,” said Sikchi.

The company gets a significant portion of revenues from exporting to China.

The company manufactures critical specialty chemicals such as performance chemicals, pharmaceutical intermediates, fast moving consumer goods (FMCG) chemicals and other products.

The company derives majority of its revenue from the sale of MeHQ (hydroquinone monomethyl ether), primarily involved in the manufacturing of acrylic fibers, paints and inks, adhesives and also in the agriculture industry.

In the financial year ended March 2021, revenue from the sale of MeHQ amounted to ₹246.36 crore, which is almost half of the company’s revenue from operations.

Its revenue grew at an annualised rate of 14.2% between financial year 2019 and financial year 2021. Its profit after tax witnessed a compound annual growth rate (CAGR) of 42.5% during the period.

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