Of the 28 initial public offerings in India in 2021, Tatva Chintan Pharma Chem’s was subscribed 180 times, the second-highest level, behind MTAR Technologies, which was subscribed 200 times.
Here’s why the Tatva Chintan IPO was so attractive:
Popular IPOs are often oversubscribed because traders and investors want to make listing gains. The premium of Tatva Chintan shares in the grey market was a hefty Rs 770 on July 20, the last day of the IPO, an indicator of why there was such an overwhelming response from investors.
Each share was offered in a price band of Rs 1,073 to Rs 1,083, with a minimum order quantity of 13 shares.
Superior business model
Tatva Chintan is the only commercial manufacturer of structure-directing agents for zeolites in India. It is also the second-largest such company globally, according to F&S Report.
Zeolites have varied applications, including as catalysts and adsorbents. When combined with metals such as copper and iron, they are active for selective catalytic reduction, a way of emission control in automotive applications.
The company is one of the leading global producers of an entire range of phase transfer catalysts.
It has strong customer relationships with companies such as Merck, Bayer AG, Asian Paints, Ipox Chemicals KFT, Laurus Labs, Tosoh Asia, SRF and Navin Fluorine.
The company’s products have applications in green chemistry, which is relevant given the growing focus on sustainable technologies and solutions.
Tatva Chintan’s revenue, earnings before interest, tax, depreciation and amortisation, and profit after tax increased at a compounded annual growth rate of about 21 percent, 39 percent, and 60 percent, respectively over FY19-21, with a 499 bps margin expansion. Return ratios seem healthy, with FY21 return on equity and return on capital employed at 31 percent and 27 percent, respectively, providing confidence to investors.
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Given the wide application of its products, Tatva Chintan serves customers across various industries and geographies, providing diversification benefits. A high-quality product portfolio, strong R&D capabilities, strategically located manufacturing facilities and focus on green chemistry processes bode well for the company. A stable financial performance and better growth opportunities provide visibility for the long term. Considering all these factors, we rated the IPO ‘subscribe’ for the long term.
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