Ducol Organics and Colours IPO opens on Jan 9, price set at ₹78 a share

• Ducol Organics and Colours will open its initial public offering (IPO) on January 9 and will close on January 11, 2023.
• The company’s ₹31.5 crore IPO is a complete fresh issue of 4.04 million shares, with no offer for sale (OFS) component.
• The IPO will be listed on the NSE SME exchange.
• The company’s net profit increased 74.7% to ₹4.91 crore in FY22, compared to the previous financial year.
  

Ducol Organics and Colours, a chemical manufacturer based in Mumbai, has opened its initial public offering (IPO) today on January 9 and it will be live till January 11, 2023. The price of the IPO is set at ₹78 per share.

The company’s ₹31.5 crore IPO is a complete fresh issue of 4.04 million shares, with no offer for sale (OFS) component. It will be listed on the NSE SME exchange.

The shares of the company are currently commanding a grey market premium (GMP) of ₹8 per share. GMP is the premium at which IPO shares are traded in an unofficial market before they are listed on the stock exchanges.

Ducol Organics was established in 1994 and it manufactures and sells pigment dispersions, preparations, concentrates, paste colorants and master batches. It offers a range of pigment dispersions for various industries like paints, inks, textile, detergent, paper, rubber and plastics.

Currently, the company operates two units in Taloja and a third manufacturing unit at Mahad, which is in the process of being established with trials currently being underway.

Ducol Organics and Colours intends to use part of its net proceeds from the IPO to fund its working capital needs worth ₹23.77 crore while ₹6.93 crore will be used for general corporate purposes and ₹80 lakh for issue related expenses.

The company’s net profit increased 74.7% to ₹4.91 crore in FY22, compared to the previous financial year.
Source: Red herring prospectus

Key business risks
In terms of risks, the company says that there are four tax-related proceedings outstanding against the company, with the amount involved being INR 47.85 lakh.

On the other hand, no defaults have been called by any financial institution or bank in relation to borrowings from financial institutions or banks.

In its red herring prospectus, the company also outlined that its top five clients accounted for 85.8% of its total revenues as of September, 2022.

“While we are constantly striving to increase our customer base and reduce dependence on any customer, there is no assurance that we will be able to broaden our customer base in any future periods or that our business or results of operations will not be adversely affected by a reduction in demand or cessation of our relationship with any of our major customers,” said the company in its red herring prospectus.

Additionally, the company noted that its customers generally do not enter into long-term contracts, which could impact its financial performance.


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