InvestorQ : What are the highlights of the proposed IPO of Balaji Specialty Chemicals?
Debbie Mascarenhas made post

What are the highlights of the proposed IPO of Balaji Specialty Chemicals?

Arti Chavan answered.
1 month ago

Balaji Speciality Chemicals is a subsidiary of Balaji Amines Ltd, which is one of the leading listed players in the amines and specialty chemicals space. Now, Balaji Specialty Chemicals has filed the draft red herring prospectus (DRHP) with SEBI for its proposed IPO. Normally, the approval takes 2-3 months post after which the regulator gives its observations, which is equivalent to an approval for the IPO. The actual IPO process starts only after the SEBI approval. However, the timing of the IPO is not clear, considering the IPO markets.

In terms of the offer details, the DRHP has outlined that Balaji Specialty Chemicals will issue fresh equity shares to the tune of Rs250 crore. In addition, it will also do an offer for sale (OFS) of 2.60 crore shares. Since the pricing is not clear at this point of time, we do not know much about the size of the issue, including the OFS component. However, the parent company, Balaji Amines Ltd, has already confirmed that it will not be participating in the offer for sale. The fund raising plan was approved by the board in June 2022 itself.

Balaji Speciality Chemicals manufactures niche and focused chemicals like ethylene diamine (EDA), piperazine anhydrous (PIP), diethylenetriamine (DETA), aminoethyl ethanolamine (AEEA) and aminoethyl piperazine (AEP). It uses the mono-ethanol amine (MEA) process to manufacture these specialty chemicals. In terms of application, the specialty chemicals made by Balaji Specialty Chemicals finds application in industries like agrochemicals and pharmaceuticals. Investors have been favourably inclined towards this sector.

Balaji Specialty Chemicals had reported rather impressive financials for the latest fiscal year ended March 202. The company witnessed a 186% jump in operating revenues compared to FY21. For FY22, Balaji Specialty Chemicals reported revenues of Rs515.80 crore and net profit of Rs109.96 crore. This translates into a rather attractive net profit margin or NPM of more than 21% for the full year. Pressure on profit growth was visible and that can attributed to the 164% spike in raw material costs, which is an industry level problem.

Balaji Amines, the parent company, operates in 4 key business segments viz. Amines, specialty chemicals, derivatives and pharma excipients. The parent has long been a dominant manufacturer of Aliphatic Amines in India, although it has now shifted more to value added products like Methyl Amines and Ethyl Amines plus derivatives. Balaji Amines relies on an indigenously developed technology, which is the norm globally. Balaji Amines products are globally accepted and also has export quality status.

What to do with the IPO of Balaji Specialty Chemicals? At a macro level, the specialty chemical companies have been star performers. Even chemical company IPOs have done very well in the last one year. Demand for specialty chemicals has been booming after China curtailed output to improve environment focus. However, This has opened up a huge opportunity for Indian specialty chemical units. Post the pandemic, most of the global companies are looking at India to diversify their supply sources.