What are the highlights of the Archean Chemicals IPO?

Archean Chemical Industries, a specialty marine chemicals company, filed DRHP with SEBI to raise funds via IPO. It will be a combination of fresh issue and an offer for sale. The IPO of Archean Chemicals will comprise of a fresh issue of Rs.1,000 crore and an OFS of 1.91 crore shares. Major selling share holders include CS LLP 53 lakh shares, IRF-I 37.3 lakh shares, IRF-II 63 lakh shares and Piramal Natural Resources 37.3 lakh shares.

The fresh issue component will be predominantly used to reduce the debt of Rs.984 crore outstanding in the books of the company. Most of the fresh fund raising will be used to redeem the non-convertible debentures of the company. This will reduce the solvency risk of Archean Chemical Industries, soften its leverage ratio and enhance the interest coverage and the debt service coverage ratios.

A quick brief on the business of the company. Archean Chemical Industries is a leading specialty chemical companies with niche focus on marine specialty chemicals. The key products include bromine, industrial salt, and sulphate of potash and these are sold domestically but also to customers located in other countries. Most products are made from the brine reserves in Kutch and processed at a facility near Hajipir in Gujarat.

Archean Chemicals sells products to 13 global customers in 13 countries and a total of 29 B2B domestic customers. Archean Chemical Industries reported sales revenues from operations of Rs.741 crore for FY21; 21.9% higher on yoy basis. For FY21, the bottom line of Archean Chemicals turned around from a loss to a net profit of Rs.66.61 crore implying healthy net profit margins of 9% for the full fiscal year.

IIFL Securities, ICICI Securities and JM Financial will act as lead managers to the issue.