Tatva Chintan Pharma Chem IPO -- Should you subscribe? Here’s what analysts are saying

• The Gujarat-based speciality chemical company, Tatva Chintan Pharma Chem IPO, opens on Friday and closes on July 20.
• The IPO has a price band of ₹1,073-1,083 while it is looking to raise ₹500 crore through the public issue.
• Most analysts have suggested subscribing to the IPO for the long term on strong growth opportunities in global markets.

Tatva Chintan Pharma Chem has opened its initial public offering (IPO) bidding window for all investors. This is the second speciality chemical industry IPO to get launched in July after Clean Science and Technology.

The IPO will include ₹225 crore of fresh equity shares by the company and ₹275 crore of offer for sale (OFS) by promoters and shareholders.

The company manufactures a range of products in specialty chemicals category and serves industries like automotive, petroleum, pharmaceutical, agro chemicals, paints and coatings, dyes and pigments, personal care and flavour and fragrances industries.

Here are the important details to note:

Most analysts have recommended subscribing to the IPO on attractive opportunities in global markets.


“The company earns 30% of revenue from pharmaceutical and agrochemical intermediates and other specialty chemicals, which are basically export orders shifted from China to India. With its superior product mix, established brand name, forward integration, strong relationships with multinationals, and adding capacities, we believe Tatva Chintan is likely to deliver healthy financial performance,” said a report by stock broking platform Investmentz. Hence it recommends subscribing to the issue from a long-term perspective.

In an interview with Business Insider ahead of the IPO, Mahesh Tanna, chief financial officer (CFO) at Tatva Chintan Pharma Chem highlighted that pharmaceutical and agrochemical intermediates and other specialty chemicals (PASC) segment is getting almost 30% of revenues from countries that have been looking for alternatives other than Chinese products.

The PASC category includes specialty chemicals which are used as intermediates, disinfectants, catalysts and solvents.

Many countries have started following China Plus One policy, which is the business strategy to avoid investing only in China and diversify business into other countries.

“India’s specialty chemical companies are gaining favour with global multinationals because of the geopolitical shift after the outbreak of covid-19 as the world looks to reduce dependence on China. Currently, China accounts for approximately 15-17% of the world’s exportable specialty chemicals, whereas India accounts for just 1-2%, indicating that the country has a large scope of improvement and widespread opportunity. It is anticipated that specialty chemicals will be the next great export pillar for India,” said Sharekhan in a report.

The overall global specialty chemical market stood at approximately $800 billion in 2019, and is expected to grow by 5-6% in the next five years, added the report.

Analysts at Reliance Securities believe the company has a robust earnings growth potential in the long-run led by strong market share, capacity expansion and long-standing relationship with the key customers.

“Moreover, the high valuations of the company’s issue price are justified given the high growth potential, dominant player, exposure to green energy, and strong balance sheet,” said a research report by Ventura Securities.

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