About the Company:
Archean Chemical Industries Ltd is a leading specialty marine chemical manufacturer in India and focused on producing and exporting bromine, industrial salt, and sulphate of potash to customers around the world.
Company is the largest exporter of bromine and industrial salt by volume in India in Fiscal 2021 and have amongst the lowest cost of production globally in both bromine and industrial salt.
Company produce our products from our brine reserves in the Rann of Kutch, located on the coast of Gujarat, and we manufacture our products at our facility near Hajipir in Gujarat.
As of June 30, 2022, company marketed its products to 18 global customers in 13 countries and to 24 domestic customers.
Company’s position in the bromine Exports:
Company command a leadership position in Indian bromine merchant sales (traded bromine in the market) by volume in Fiscal 2021, and is the largest exporter of Bromine from India by volume in Fiscal 2021.
In the three months ended June 30, 2022 and in Fiscal 2022, , company exported 34.88%, 44.88% respectively, of bromine production abroad, mainly to China. The balance of bromine production is sold in the domestic market.
Company’s Revenue from Bromine and Industrial Salts used:
In the Fiscal 2022, company’s sales of bromine constituted 53.54%, and sales of industrial salt constituted 45.37%, respectively, of company’s revenue from operations.
Transportation of Bromine:
Bromine is a highly corrosive, hazardous and toxic chemical and its handling requires a high degree specialized expertise which company has developed over the years.
The transportation of bromine is also dangerous and requires nickel and lead lined ISO containers, of which company has 228 such containers (owned and leased) for the export business as of June 30, 2022.
Where is Bromine and Industrial Salts used?
Bromine is used as key initial level materials, which have applications in the pharmaceuticals, agrochemicals, water treatment, flame retardant, additives, oil & gas and energy storage batteries.
Industrial salt is an important raw material used in chemical industry for production of sodium carbonate (soda ash), caustic soda, hydrochloric acid, chlorine, bleaching powders, chlorates, sodium sulphate (salt cake) and sodium metal.
Key players in the Indian bromine industry:
Key players in the Indian industrial salt industry:
While there are umpteen small traders and exporters from India only few top exporters from India having export volumes more than 1 million MT in Fiscal 2021. They include the following: 
Archean Chemical Industries Ltd. was the leading and the largest industrial salt exporter in India by volume in Fiscal 2021. Archean Chemical Industries Ltd. has well developed and integrated scale salt works in Gujarat in India and enjoys cost advantage the facilities’ proximity to port.
Company’s position in the Industrial salt business:
Company is the largest exporter of industrial salt in India with exports of 2.7 million MT in Fiscal 2021.
In the three months ended June 30, 2022 and in Fiscal 2022, Fiscal 2021 and Fiscal 2020 company exported 100% of our industrial salt production, primarily to customers in Japan and China.
The cost of production for Industrial salt from sea water brine is about US$12 to 15 per MT, while company’s costs are in the range of US$5.5-6 per MT.
Further the quality of salt is on par with Grade 1 salt required by chlor-alkali producers.
Company’s best-in-class cost position along with the quality of our product has enabled company to be a competitive salt exporter to South East Asian markets
Company’s revenue from Dometic market and Exports:
Company’s Manufacturing facilities:
Company has an integrated production facility for bromine, industrial salt, and sulphate of potash operations, located at Hajipir, Gujarat, which is located on the northern edge of the Rann of Kutch brine fields.
Company’s manufacturing facility is located in close proximity to the captive Jakhau Jetty and Mundra Port, where we transport our products to our customers internationally.
Company’s facility and its surrounding salt fields and brine reservoirs span approximately 240 sq.km.
As of June 30, 2022 , company’s manufacturing facility had an installed capacity of 28,500 MT per annum of bromine, 3,000,000 MT per annum of industrial salt and 130,000 MT per annum of sulphate of potash.
Management Team:
- Mr. Ranjit Pendurthi (Designation: Managing Director)
- Mr. Ravi Pendurthi (Designation: Non-Executive Director)
Objectives of the Issue:
Offer for Sale: (Rs.657 cr )
- Each of the Selling Shareholders will be entitled to the proceeds of the Offer for Sale. Company will not receive any proceeds from the Offer for Sale.
Fresh Issue: (Rs.805 cr )
- Redemption or earlier redemption, in part or full, of NCDs issued by the Company.
- General corporate purposes.
Positives for the Company:
Leading market position, expansion and growth in bromine and industrial salt.
- Company is a leading specialty marine chemical manufacturer in India since 2013.
- Company is the largest exporter of bromine and industrial salt by volume in India in Fiscal 2021 and have amongst the lowest cost of production globally in both bromine and industrial salt.
- Company’s leadership position and low cost-production offers competitive advantages such as product pricing, economies of scale, and the ability to scale our business, increase customer loyalty and expand the client base, all of which have in turn resulted in the growth of revenues and EBITDA in the last three fiscal years.
The table set forth below sets out our market position in India and globally for each of our products for the periods indicated
High entry barriers in the specialty marine chemicals industry.
- The specialty marine chemicals industry in which we operate has high entry barriers, which include the high cost and intricacy of product development, manufacture, and investment in salt beds, the limited availability of raw materials necessary for production.
- The limited number of locations with a suitable climate and access to reserves, and the lead time and expenditure required for research and development and building customer confidence and relationships, which can only be achieved through a long gestation period.
- Further, because end products manufactured by our customers are typically subject to stringent regulatory and industry standards, any change in the vendor of the products may require significant time and expense for customers, which acts an entry barrier and disincentives any such change.
Largest Indian exporter of bromine and industrial salt with global customer base.
- As of June 30, 2022, company had 18 global customers and 24 domestic customers.
- Company’s major customers include, for industrial salt, Sojitz Corporation (which is also a shareholder in the Company), Wanhau Chemicals and Qatar Vinyl Company Limited; and for bromine, Shandong Tianyi Chemical Corporation and Unibrom Corporation.
- In the three months ended June 30, 2022 and in Fiscal 2022, Fiscal 2021 and Fiscal 2020, our largest customer, Sojitz Corporation, contributed 19.29%, 20.56%, 30.51% and 31.94%, respectively, of our revenue from operations.
- In 2011, company established relationship with Sojitz Corporation, a Japanese trading conglomerate and a major customer, which allowed us to develop new solar evaporation ponds in India based on the growing demand in Asia and offtake by Sojitz.
Setting up a new facility to manufacture bromine performance derivatives.
Company is setting up a new facility to manufacture bromine performance derivatives products through our subsidiary, Acume Chemicals Private Limited.
The proposed facility will be constructed on 34,983 square meters parcel of land which has been alloted to us from the GIDC, Ankleshwar. The installed capacity of the facility is proposed to be an aggregate of:
• High end Flame retardant – 10,000 TPA, which is expected to commence commercial operations by second quarter of Fiscal 2024.
• Clear Brine fluids – 13,000 TPA, which is expected to commence commercial operations by second quarter of Fiscal 2024.
• PTA – 5,000 TPA, which is expected to commence commerical operations by second quarter of Fiscal 2024.
Plans to Expand bromine and industrial salt capacities.
- Company intends to, and are in the process of, increasing the manufacturing capacity for bromine production.
- To achieve the expansion of bromine capacity, company added in Fiscal 2021 a feed enrichment section at our site in Hajipir, Gujarat which will improve bromine recovery from our sea bittern.
- This expansion added 18,000 metric tons per annum to our bromine capacity.
- Company is also looking to add an additional 12,500 MT per annum capacity by Fiscal 2023 at an estimated cost of plant and machinery of approximately Rs.17.8 crores, which company intend to fund through cash generated from our operations.
- In addition, to cater to the growing demand from our existing customers and to meet requirements of new customers, company intend to expand the manufacturing capacities for industrial salt production by adding an additional washery of 250 tons per hour.
- Company expects that this additional washery will be operational in Fiscal 2023.
Financials of the Company:
| (in Crores) | FY 20 | FY 21 | FY 22 | 30th June 2022 |
|---|---|---|---|---|
| Revenue | 617.0 | 754.7 | 1142.8 | 408.8 |
| Net Profit | (-36.2) | 66.6 | 188.5 | 84.4 |
Valuation of Peer Group Companies:
| Company Name | Face Value | EPS | PE Ratio | RoNW | NAV |
|---|---|---|---|---|---|
| Archean Chemical Industries Ltd | 2 | 18.26 | 22.28 | 72.24% | 25.28 |
| Neogen Chemicals Ltd | 10 | 18.70 | 79.79 | 10.16% | 176.12 |
IPO Details:
| Details | Info |
|---|---|
| Issue Opens on | 9th November 2022 |
| Issue Closes on:. | 11th November 2022 |
| Issue Price | Rs.386 – 407 |
| Face Value | Rs.10 |
| Retail Category Allocation | 10% |
| Minimum Lot | 36 Shares |
| Minimum Investment | Rs.14,652 |
| Issue Constitutes | 29.19% |
| Issue Size | Rs.1462 cr ($176 million) |
| Market Cap | Rs.5008 cr ($603 million) |
| Listing at | NSE & BSE |
| Equity Shares Offered (Fresh) | 1,97,78,870 |
| Equity Shares Offered (OFS) | 1,61,50,000 |
| Total Equity Shares Offered (Fresh+OFS) | 3,59,28,870 |
| Equity Shares Prior to the Issue | 10,32,74,120 |
| Equity Shares after the issue | 12,30,52,990 |
Also Read : List of Upcoming IPO’s in India.
Also Read : List of Upcoming SME IPO’s in India.
Important Dates:
| Finalization of Basis of Allotment | on or Before 16th November 2022 |
| Initiation of Refunds | on or Before 17th November 2022 |
| Credit of Equity Shares: | on or Before 18th November 2022 |
| Listing Date: | on or Before 21st November 2022 |
IPO Valuation Parameters:
| Earnings Per Share (EPS) | Price To Earnings ratio (PE) | Return on Net Worth (RoNW) | Net Asset Value (NAV) |
|---|---|---|---|
| 18.26 | 22.28 | 72.24% | 25.28 |
| Company Contact Info: |
|---|
| Archean Chemical Industries Ltd No. 2, North Crescent Road, T Nagar, Chennai 600 017, Tamil Nadu, India. Tel: +91 44 6109 9999 Email: info@archeanchemicals.com Website: www.archeanchemicals.com |
| IPO Registrar Info: |
|---|
| Link Intime India Private Limited C 101, 247 Park L.B.S Marg, Vikhroli (West) Mumbai 400 083 Maharashtra, India Tel: +91 810 811 4949 E-mail: archean.ipo@linkintime.co.in Website: www.linkintime.co.in |
