Neogen Chemicals Ltd

About the Company:

Neogen Chemicals is one of India’s leading manufacturers of bromine-based, and lithium-based, specialty chemicals.

Company manufactures specialty organic bromine-based chemical compounds (Bromine Compounds) and other specialty organic chemical compounds as well as specialty inorganic lithium-based chemicals compounds (Lithium Compounds and together with the Bromine Compounds the Products).

Company had commenced the business operations in 1991, at Mahape, Navi Mumbai manufacturing facility with a few Bromine Compounds and Lithium Compounds.

Over the years company has expanded the range of products and, presently, manufacture an extensive range of specialty chemicals which find application across various industries in India and globally.

As on February 28, 2019, Neogen Chemicals manufactured an aggregate of 198 products comprising 181 organic chemicals and 17 inorganic chemicals.

In addition to manufacturing of standard products, Company also undertakes custom synthesis and contract manufacturing.

 

Company’s Manufacturing Facilities:

Neogen Chemicals Ltd operates out of their manufacturing facilities located in Mahape, Navi Mumbai in Maharashtra (Mahape Facility) and Karakhadi, Vadodara in Gujarat (Vadodara Facility).

 

Company’s Expansion Plans:

Company is presently, developing a green-field manufacturing unit in Dahej SEZ, in Gujarat (Proposed Dahej Facility) and are also proposing to expand their operations in Karakhadi, Vadodara (Proposed Vadodara Facility).

The manufacturing facilities in aggregate are spread across approximately 40 acres with an additional 12 acres of leased property in Dahej SEZ.

 

Break-up of capacity, across manufacturing units are given below: (Per Annum) 

 

Proposed Manufacturing Facilities:

 

Company’s Major Customers:

Over the last 25 years, Company has established a customer base of about 1,363 customers of which about 1,237 are domestic customers and 126 customers are international customers.

Company’s customers are spread across a wide array of application industries such as pharmaceutical, agrochemical, aroma chemical, electronic-chemical, specialty polymer, construction chemicals and VAM original equipment manufacturers.

Major customers include Austin Chemical Company Inc., USA, CBC Co. Ltd., Japan, Divi’s Laboratories Ltd., Laurus Labs Ltd., Solvay Specialties India Pvt. Ltd, Thermax  Limited and Voltas Limited.

 

 

What is Speciality Chemicals?

Specialty chemicals are those chemicals that impart different properties to a variety of products (i.e. the effect that specialty chemicals have varies based on the product) and have a high degree of value addition.

Specialty chemicals are, also generally, in the Indian context, manufactured in smaller volumes when compared to non-specialty chemicals.

Specialty chemicals, including bromine and lithium-based compounds, comprise pharmaceutical intermediates, agro chemical intermediates, engineering fluids, electronic chemicals, polymers additives, water treatment chemicals, construction chemicals and flavours and fragrances.

Specialty chemicals are widely used for specialized applications to meet industry-specific requirements and can be classified based on application industries. Additionally, certain specialty chemicals find application in multiple industries.

 

Break-up of Revenue from Operations from the sale of Organic and Inorganic chemicals: 

 

Competition in the Business:

Neogen Chemicals is one of the leading manufacturers of bromine-based, and lithium-based, specialty chemicals but they face competition from domestic and international  operators.

Company’s major competitors in India include Aarti Industries, Atul Ltd, Mody Chemi Pharma Private Ltd, NFIL and Pacific Organics Pvt Ltd.

 

Management Team:

  1. Mr. Haridas Thakarshi Kanani (Designation: Chairman and Managing Director)
  2. Mr. Harin Haridas Kanani (Designation: Joint Managing Director)

 

Objectives of the Issue:

  • Prepayment or repayment of all or a portion of certain borrowings availed by the Company.
  • Early redemption of 9.8% FRCPS.
  • Long term working capital.
  • General corporate purposes.

 

Positives For the Company:

Large and Diverse array of Products:

Company was setup in 1989 and started operations in 1991 manufacturing 4 products viz., lithium bromide, n-propyl bromide, potassium bromide and meta-phenoxy benzaldehyde.

As of February 28, 2019, Company manufactures an aggregate of 198 Products comprising 181 organic chemicals and 17 inorganic chemicals.

 

Diversified and Stable Customer Base:

Diversified Product range enables the company to cater to diverse customers across a wide array of user industries such as pharmaceutical, agrochemical, aroma chemical, electronic-chemical, construction chemicals, specialty polymer and VAM original equipment manufacturers.

 

Growth Led by Continuous Investment in R&D:

since the commencement of dedicated R&D department in December 2001, Company’s Product portfolio has grown from around 20 products in 2001 to 198 products at present (excluding the products developed under contract manufacturing).

 

Company’s Expansion Plans:

When completed the Proposed Dahej Facility will increase company’s inorganic chemicals manufacturing capacity by 1,200,000 kg per annum, which will double the total inorganic specialty chemical manufacturing capacity.

Company believes that the Proposed Vadodara Facility and the Proposed Dahej facility will enable them to significantly increase their product offering and also expect to benefit from the economies of scale.

 

Specialized Business Model with High Entry Barriers:

The specialty chemicals industry is highly knowledge intensive and Company’s Products are used for specialty applications in the pharmaceutical, agro chemical, aroma chemical, construction chemical, speciality polymer and electronic chemical industries where they are used to manufacture high value proprietary and specialized
products.

Further, where company’s Products are used, and such use has been formally recognized in filings with regulatory agencies, any change in the vendor of the product may require significant time and cost for the customer.These factors create significant entry barriers.

 

Benefits from Production Decline in China:

Company expects to derive the benefits of the general decline in manufacturing of specialty chemicals in China due to environmental concerns, which comprised a significant part of global specialty chemical market share.

 

Plans to Increase Contract Manufacturing Portfolio:

Company has plans to increase the size and scale of their contract manufacturing business over the next few years and are in discussions with various companies in Europe and Japan to develop their proprietary products for which company has already executed non-disclosure and secrecy agreements.

 

Financials of the Company:

(in Crores) FY 14 FY 15 FY 16 FY 17 FY 18 31st Dec 18
Revenue 80.31 92.48 109.0 121.77 164.6 159.7
Net Profit 3.6 5.0 5.18 7.68 10.5 12.2

 

Valuation of Peer Group Companies:

Company Name Face Value EPS PE Ratio RoNW NAV
Neogen Chemicals Ltd 10 5.30 40.95 22.98% 25.12
Aarti Industries Ltd 5 38.92 40.42 22.40% 186.37
Atul Industries 10 91.16 39.19 13.13% 740.87
Navin Flourine International 2 36.34 19.57 19.96% 196.55
Paushak Ltd 10 66.95 30.29 21.89% 352.75
Vinati Organics Ltd 2 27.93 58.86 19.49% 155.02

 

IPO Details:

Details Info
Issue Opens on 24th April 2019
Issue Closes on:. 26th April 2019
Issue Price Rs.212 – 215
Face Value Rs.10
Minimum Lot 65 Shares
Minimum Investment Rs. 13,975
Issue Constitutes 26.38%
Issue Size Rs.132.35 cr ($18.9 million)
Market Cap Rs. 501.9 cr ($ 72 million)
Listing at NSE & BSE
Equity Shares Offered (Fresh) 32,55,814
Equity Shares Offered (OFS) 29,00,000
Total Equity Shares Offered (Fresh + OFS) 61,55,814
Equity Shares Prior to the Issue 2,00,78,793
Equity Shares after the Issue 2,33,34,406

 

Important Dates:

Finalization of Basis of Allotment On or Before 3rd May 2019
Initiation of Refunds On or Before 6th May 2019
Credit of Equity Shares: On or Before 7th May 2019
Listing Date: On or Before 8th May 2019

 

Subscription Details: (Will be Updated)

(Subscription-Category-Wise (no. of times) Till time : 00:00) Shares Offered Day-1 Day-2 Day-3
QIB
NII
Retail
Employee
TOTAL

 

IPO Valuation Parameters:

Earnings Per Share (EPS) Price To Earnings ratio (PE) Return on Net Worth (RoNW) Net Asset Value (NAV)
5.30 40.95 22.98% 25.12

Also Read:  How to know whether IPO is a Good IPO or a bad IPO?

 

Grey Market Premium :

Date IPO Price Band Grey Market Price Kostak Rates
24/04/19 Neogen Chemicals Ltd Rs.212 -215 10- 12 200 – 230

 

Check IPO Allotment Status:

Link InTime Website (Click on the below Link)

https://linkintime.co.in/PublicIssue/

 

 

Company Contact Info:
Neogen Chemicals Ltd
1002, 10th Floor, Dev Corpora Building,
Opp. Cadbury Junction, Off Pokhran Road No 2,
Khopat, Thane West – 400 601,
Maharashtra, India
Tel: +91 22 2549 7300
Email: investor@neogenchem.com
Website: www.neogenchem.com

 

IPO Registrar Info:
LINK INTIME INDIA PRIVATE LIMITED
C-101, 1st Floor, 247 Park, L.B.S. Marg,
Vikhroli (West), 400 083,
Mumbai, Maharashtra, India
Telephone: +91 22 4918 6200
E-mail: neogenchem.ipo@linkintime.co.in
Website: www.linkintime.co.in