Tatva Chintan IPO - 6 Interesting Facts you must know

Tatva Chintan - Facts
IPO
15/07/2021

Tatva Chintan Pharma Chem IPO opens on 16 July and closes on 20 July. The IPO has been priced in the band of Rs.1,073-1,083 and will raise Rs.500 crore through a mix of fresh issue and offer for sale.

Here are 6 interesting facts about Tata Chintan that you must know -

1. Did you know that for a company with a market cap of just about Rs.2,400 crore, Tatva Chintan manufactures over 150 products. Surprised, here is the break-up. The company produces, 47 Structure Directing Agents (SDA), 48 phase transfer catalysts (PTC), 5 electrolyte salts and 53 pharmaceutical ingredients. That is surely a diverse portfolio.


2. Interestingly, Tatva Chintan is India’s largest producers of phase transfer catalysts (PTC) and among the top-3 in the world in producing PTC products. PTC products have huge applications in green chemistry, which is an important part of sustainable technologies.


3. Tatva Chintan has some very strong financial ratios. It is one of the few companies in India that enjoy ROE and ROCE of above 30%. While Return on Equity (ROE) is the return on capital to shareholders, the Return on Capital Employed (ROCE) is the return on capital to shareholders and lenders.


4. Tatva Chintan is the only Indian producer of Zeolites. Now, zeolites are SDAs which have huge applications as catalysts and absorbents. For example, automobiles use zeolites for emission control in automotive applications. This is likely to have huge applications in the coming years where the trend is towards eco-friendly automobiles.


5. Tatva Chintan services marquee clients like Merck, Bayer AG, Asian Paints, Laurus Labs, SRF, Divi’s Laboratories etc.


6. For a small company, Tatva Chintan services 508 customers with over 71% of its revenues coming purely from exports.

 

Check : Upcoming IPOs in July

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Tatva Chintan IPO is a reasonably good play on specialty chemicals story

Tatva Chintan IPO Details
IPO
15/07/2021

Tatva Chintan Pharma Chem is in an industry sweet spot. Specialty chemicals were in the limelight over the last few years as global demand was robust. However, the pandemic disrupted chemical supply chains as China decided to get tough with local companies on environmental norms. The result was a situation when most global buyers of specialty chemicals opted to spread their China bets by including India in their shopping list. It is in this background that the Tatva Chintan IPO must be viewed.

Also Read: Apply for Tatva Chintan Pharma IPO 

Key terms of the IPO issue of Tatva Chintan Pharma Chem

The total issue size of Rs.500 crore will consist of a fresh issue of Rs.225 crore and an offer for sale or OFS by promoters to the tune of Rs.275 crore. Tatva Chintan will use the new issue proceeds to expand its manufacturing facility at Dahej and also spruce up its R&D unit in Vadodara. It also has another manufacturing plant at Ankleshwar in Gujarat.

Key IPO Details

Particulars

Key IPO Dates

Particulars

Nature of issue

Book Building

Issue Opens on

16-Jul-2021

Face value of share

Rs.10 per share

Issue Closes on

20-Jul-2021

IPO Price Band

Rs.1,073 - Rs.1,083

Basis of Allotment date

26-Jul-2021

Market Lot

13 shares

Refund Initiation date

27-Jul-2021

Retail Investment limit

14 Lots (182 shares)

Credit to Demat

28-Jul-2021

Retail limit - Value

Rs.197.106

IPO Listing date

29-Jul-2021

Fresh Issue Size

Rs.225 crore

Pre issue promoter stake

100%

Offer for Sale Size

Rs.275 crore

Post issue promoters

79.17%

Total IPO Size

Rs.500 crore

Indicative valuation

Rs.2,400 crore

Listing on

BSE, NSE

HNI Quota

15%

QIB Quota

50%

Retail Quota

35%

Data Source: IPO Filings

 

Understanding the business model of Tatva Chintan Pharma Chem

Here is gist of the product and business highlights of Tatva Chintan Pharma Chem, a specialty chemicals player based out of Gujarat.

  • Tatva Chintan product portfolio is spread across four verticals. This includes structure directing agents (SDA), phase transfer catalysts (PTC), electrolyte salts and pharmaceutical intermediates. It counts the who’s who of pharma industry among its clients roster, both in India and abroad.
     

  • While pharma intermediates have been seeing a lot of stocking by pharma companies, PTCs have major applications in green chemistry and sustainable technologies. This can be a major asset in the post-fossil fuel scenario.
     

  • Tatva is a strong player in PTC, SDA and PASC in the domestic and also the global market. In fact, Tatva exports to over 25 countries including the US, China, Germany, Japan, South Africa and the UK.

Tatva Chintan – Financials are fairly alluring

The company has presented a strong growth story and has been largely a macro beneficiary of the robust performance of the specialty chemical stocks. Sales grew from Rs.206 crore in Fy19 to Rs.301 crore in FY21. If you look at the EBITDA in FY21, it has more than doubled over FY19 to Rs.72 crore resulting in the EBITDA margins expanding to 23.85%.

Tatva Chintan saw net profits growing by 2.5 times between FY19 and FY21 to Rs.52.3 crore, even as net margins doubled to 17.40%. Both the ROE and ROCE are above 31% and have gained nearly 600 bps in the last 2 years.

Take a macro investment view on Tatva Chintan

  1. With strong domestic demand and global companies hedging against China, Tatva Chintan IPO can be a good macro bet on chemicals as a medium to long term structural story. However, competition is likely to get stiffer in the coming years.
     

  2. The IPO price band values the stock at over 40X P/E ratio on FY21 EPS. However, if the company can even sustain half its EPS growth rate of 60%, this P/E can be justified. The industry average for specialty chemicals is closer to 70.

In a nutshell, look at Tatva Chintan as a macro play on specialty chemicals industry. That is surely a structural story for investors.

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Reliance may log in to local search engine, Just Dial

Reliance just dial
15/07/2021

Reliance is known for its penchant for aggressive inorganic growth. In the last one year, Reliance Industries became zero-net debt on the back of its mega rights issue as well as the placement with PE funds. With a war chest in place, Reliance may be about to announce a mega-deal to acquire a majority stake in Just Dial. While a formal announcement is expected over the weekend, Just Dial will be one more interesting addition to the digital ecosystem of Reliance. 

Read: Reliance AGM 2021

Promoted by VSS Mani more than 25 years ago, Just Dial is a market leader in the local search engine segment with 15 crore average quarterly unique visitors. For Reliance, the acquisition of Just Dial will give them the necessary bandwidth among customers and suppliers. For its mega digital plans as well as onboarding vendors and customers on the Retail platform, Just Dial will almost be a natural fit for Reliance Industries. 

The acquisition of Just Dial is likely to be done in two phases. In the first phase, Reliance will buy part of the promoter stake from VSS Mani and its family. The promoter family holds 35.5% in Just Dial, valued at Rs.2,388 crore. Subsequently, Reliance will also make an open offer to public shareholders of Just Dial to acquire another 26% from to comply with SEBI regulations. Just Dial is currently valued at Rs.6,900 crore, so it is estimated that Reliance could pay over Rs.4,100 crore for around 60% stake in Just Dial. Mani is expected to become a junior partner in the company.

Apparently, talks have been on since April, with Goldman Sachs advising on the deal.
 

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Wipro gives solid guidance, despite pressure on margins

Wipro Q1 number
16/07/2021

The big news was that revenue guidance for sequential growth in revenues was upped to 5-7%. We will come back to the guidance part later. First, the quarterly numbers! Net profits for the Jun-21 quarter were up 8.7% sequentially at Rs.3,232 crore with operating profits up 1.6% at Rs.3,472 crore. The one area of concern was operating margins lower by 170 basis points at 18.8%, nearly 600 bps lower than Infosys and TCS.

Check: TCS Share Q1 Results

The big story was on the revenues front. For the Jun-21 quarter, Wipro reported sales revenue growth of 12.2% on sequential basis at $2.42 billion. The revenue growth was largely led by the acquisition of Capco and Ampion, which added 8% to revenue growth. The erstwhile Wipro business grew at 4%; still better than the average sequential growth in last few quarters. The bigger story is on revenue guidance, which has been upgraded by 200 basis points to the 5-7% range. Full year revenue guidance was robust at above 11%.

Read: Mindtree Q1 Results

It was a mixed quarter for Wipro. On the risk perspective, operating margins contracted by 170 bps to 18.8%, nearly 600 basis points below Infy and TCS. Also, attrition was up sharply at over 13% for Wipro. But the good news was much more potent. The revenue guidance is indicative of the efficacy of the premium-client focused strategy adopted by the new CEO, Thierry Delaporte. That appears to be paying off, which is evident in the price. In the last one year, Wipro stock is up 145%, which also coincides with the tenure of the CEO. The focus on premium clients, digital rethink and the strong guidance; mean that Wipro may be poised for a new higher trajectory on stock performance!

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Tatva Chintan IPO elicits solid interest from retail investors

Tatva Chintan IPO - day 1
IPO
16/07/2021

If you go by the first day Tatva chintan IPO response trends, it does look like retail investors appear to be impressed by the issue. While the institutional response was tepid on Day 1 and HNIs managed to fill the book just once, it was the retail portion that got subscribed over 8 times at the end of the first day. The Rs.500 crore IPO of Tatva Chintan Pharmachem consists of Rs.225 crore of fresh issue and Rs.275 crore offer for sale to give partial exit to promoter shareholders. The IPO has been, priced in the band of Rs.1,073-Rs.1,083, opened on Friday 16 July and will close for subscription on Tuesday 20 July.

Out of the 32.62 lakh shares on offer in the IPO, Tatva Chintan saw applications for 1.47 crore shares at the end of Day-1 of the IPO, implying an overall subscription of 4.50 times. However, the granular break-up is a lot more interesting. The QIB portion got subscriptions for just 0.50X of the allocation quota, but that is normal as most QIB applications come in on the last day. Similarly, the HNI portion got subscribed just 1.13 times, but that is also the segment where typically the funded applications come in on the last day of the IPO. The real big story was the retail portion, which got subscribed 8.23 times at the end of the first day, showing tremendous retail investor traction.

On the first day, the QIB applications mainly came from FPIs and none from mutual funds. Among retail investors; out of the 16.31 lakh shares on offer, valid bids were received for 1.34 crore shares, of which bids for 1.01 crore shares were received at cut-off price.
 

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Zomato IPO closes with a bang, subscribed 38.25 times

Zomato IPO Day 3 Subscription
IPO
16/07/2021

There was not much of a surprise that the Zomato IPO saw substantial interest from the Qualified Institutional Buyers (QIBs). After all, we had seen the huge appetite for Zomato when the company did its anchor investment placement on Tuesday. We will come back to the more elaborate QIB portion later, but let us first look at the other portions. The retail portion got subscribed 7.45 times at the close of the IPO, not much of a change from the end of second day. Nearly 77% of retail bids came at the cut-of price. The HNI allocation of 19.43 crore shares saw bids for 640.56 crore shares, implying an oversubscription of 32.96 times.

Check: Upcoming IPO in July 2021

Let us come back to the QIB subscription. The Zomato IPO had a QIB allocation of 75%, while HNI had 15% and retail just 10%. However, the anchor investors got allocations worth Rs.4,196 crore implying that just about 38.88 crore shares were left in the QIB quota for IPO subscription. Against these shares on offer, Zomato elicited demand for 2014 crore shares, implying an oversubscription of the residual QIB portion by 51.79 times. While the FPIs were the most aggressive among the QIBs, domestic mutual funds and insurance companies also actively applied for the Zomato IPO.

The first signals of QIB appetite for the Zomato IPO was evident in the roadshows and later in the anchor placement on Tuesday. The anchor book, it may be recollected, was subscribed nearly 35 times. The anchor book allocation was made to marquee global investors like Government of Singapore, Morgan Stanley, Tiger Global, Ballie Gifford, Fidelity Funds, Canadian Pensions, New World Fund, Nomura, Goldman Sachs etc. Domestic anchor investors included UTI MF, HDFC MF, ICICI Pru MF, IIFL MF etc.