Chemplast Sanmar makes tepid stock exchange debut, shares list at 3% disocunt – Mint

MUMBAI: Chemplast Sanmar Ltd, backed by Canadian billionaire Prem Watsa, made a tepid debut on the stock exchanges on Tuesday, with its shares listing at a 3% discount to the issue price.  

The stock opened at Rs525 apiece on the BSE comnpared with the issue price of Rs541. It has so far touched a high and a low of Rs550 and Rs525 respectively. 

“We believe that the India specialty chemicals industry is going to be one of the biggest beneficiaries of shifting of supply chains post the Covid-19 pandemic, we have concerns over the company’s high debt and negative net worth. At the higher end of the price band, the stock will be trading at P/E multiple of 17.7xFY21 EPS which is at a discount to other chemical player.”, said Jyoti Roy, deputy vice president-equity strategist, Angel Broking Ltd.

As of FY21, the company had net debt of Rs1,187.58 crore.

The IPO, priced at ₹530-541, closed on 12 August, with the company raising Rs3,850 crore through the issue. Proceeds from the issue will be used for early redemption of non-convertible debentures (NCDs) worth Rs1,238.25 crore.

The NCDs worth Rs1,270 crore were issued by the company in multiple tranches in December 2019 at a coupon of 17.50% per annum, payable monthly and have a scheduled tenor of up to seven years from the deemed date of allotment.

“The early redemption of the NCDs in full will help reduce our outstanding indebtedness and debt servicing costs, assist us in maintaining a favorable debt to equity ratio and enable utilisation of our internal accruals for further investment in business growth and expansion,” it had said in a DRHP.

The company is part of the Chennai-based industrial conglomerate Sanmar Group, which has interests in chemicals, shipping and engineering. It manufactures paste PVC, chloro-chemicals, caustic soda, hydrogen peroxide, and refrigerant gases, and also has a contract manufacturing segment.

Rating firm Brickworks has revised its rating to negative from stable due to weaker than expected earnings in FY20 amid higher interest outgoes. It said, “Until 6MFY20(audited), the gearing and debt metrics were comfortable in view of the low level of debt. However, FY20 onwards, these were being impacted because of the additional debt by way of NCDs raised in December 2019 and higher coupon payments. The debt-equity ratio increased to 1.42 times for FY20 (0.18 times as on 31 March 2019).”

“In addition, we believe that our improved leverage ratio, consequent to such redemption of NCDs, will improve our ability to raise debt in the future to fund potential business development opportunities and plans,” the company added.

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