Archean Chemical IPO subscribed 1.41x on day 2

The Rs 1,462-crore initial public offering (IPO) of Archean Chemical Industries received a decent response from investors during the second day of the bidding process. The issue has been subscribed 1.41 times.

The company is selling its shares in the range of Rs 387-407 apiece between November 9 to November 11, with a lot size of 36 equity shares.

According to the data from BSE, investors made bids for 2,81,97,180 equity shares to the 1,99,57,325 equity shares offered for subscription.

The quota for the retail bidders was subscribed 2.94 times, whereas the allocation for the HNI investors fetched 1.80 times bids. The portion for the QIBs was booked 0.54x as of the given time.

Archean Chemical Industries has been India's largest exporter of bromine and industrial salt in fiscal year 2020-21. The company is the leading speciality marine chemical manufacturer in India.

Majority of the brokerage firms remain positive on the issue and have suggested subscribing to it. However, some have a word of caution citing expensive valuations.

The company has delivered 36.3% and 77.7% growth in revenue and EBITDA between FY20-22, respectively. The company is expected to utilize its funds for the redemption of NCDs issued by the company which will improve its debt-to-equity ratio, said Nirmal Bang Institutional Equities.

"This will have a positive impact on the profitability given the significant reduction in the interest cost of NCDs. It is valued at a discount based on its P/E of 26.6x, EV/EBITDA of 12.7x compared to its average valuation of peer companies," it added with a subscribe rating.

Archean Chemical Industries raised Rs 658 crore from anchor investors by allocating them 1,61,67,991 equity shares at Rs 407 apiece, according to the details available on BSE's website.

Being an export-oriented business with a strong client portfolio gives the company a competitive advantage over its peers. It also has an established infrastructure and integrated production has one of the largest salt works at a single location according to industry reports, said BP Equities.

"On the upper end of the price band, the issue is valued at a P/E of 22.3x based on FY22 consolidated earnings which we feel is fairly priced and hence initiate a ‘subscribe' rating to the IPO for the benefit of listing gains," it added.

However, Religare Broking remains neutral on the company citing high competition from the international players and an increase in cost or shortfall of any raw material can impact business.

IIFL Securities, ICICI Securities and JM Financial are the book running lead managers to the issue, whereas Link Intime India has been appointed as the registrar to the issue.

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