Archean Chemical Industries Limited files DRHP with SEBI
DRHP Link: https://www.iiflcap.com/Upload/InvestmentBanking/Prospects/Archean_Chemical_Industries_Limited_-_DRHP.pdf
Key pointers of the IPO as per DRHP:
(1) The Issue – Archean Chemical Industries Limited (“Archean” or “Company”), a leading specialty marine chemical manufacturer in India, has filed its Draft Red Herring Prospectus (“DRHP”) with market regulator Securities and Exchange Board of India (“SEBI”). The IPO consists of a fresh issue of equity shares aggregating up to Rs. 10,000 million (“Fresh Issue”) and an offer for sale of up to 19.07 million shares (the “Offer for Sale”), by the Promoters, and investors including the India Resurgence Fund (a joint venture between the Piramal Group and Bain Capital).
(2) About the Company: Archean Chemical Industries is a leading manufacturer of specialty marine chemicals in India, and is focused on producing and exporting bromine, industrial salt, and sulphate of potash to customers around the world.
(3) Company’s Business: Archean is the largest exporter of bromine and industrial salt in India in Fiscal 2021 and has amongst the lowest cost of production globally in both bromine and industrial salt. The Company produces its products from its brine reserves in the Rann of Kutch, located on the coast of Gujarat, and manufactures products at its facility near Hajipir in Gujarat.
(4) Product Portfolio and Usage: The bromine produced by Archean is used as key initial level material, which has applications in pharma, agrochemicals, water treatment, flame retardant, additives, oil & gas and energy storage segments. Industrial salt is an important raw material used in chemical industry for production of various other chemicals and compounds. Sulphate of potash is used as a fertilizer and also has medical uses.
(5) Global Distribution: As of September 30, 2021, the Company marketed its products to 13 global customers in 13 countries, and to 29 domestic customers.
(6) Market Leadership: Archean is the largest exporter of Bromine from India. The Company is also the largest exporter of industrial salts in India. In addition, Archean is the only manufacturer of sulphate of potash from natural sea brine in India.
(7) Entry Barriers: The specialty marine chemicals industry has high barriers to entry due to 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 R&D and building customer confidence and relationships.
(8) Financial Performance: Archean’s revenue from operations has grown at a CAGR of 9.42% from Rs. 5,655.06 million Fiscal 2019 to Rs. 7,407.64 million in Fiscal 2021. Moreover, the Company’s EBITDA margin has also expanded from 34.37% in Fiscal 2019, to 42.78% in the six months ended September 30, 2021.
(9) Growth Strategy: In response to the growing global demand of bromine, Archean intends to, and is in the process of, increasing its manufacturing capacity for bromine production. In addition, the Company plans to expand its product line into bromine derivative performance products in the next two-to-three years.
(10) Use of IPO Proceeds: The Company plans to use the proceeds of the Fresh Issue for the redemption of NCDs issued by the Company. This will reduce its outstanding indebtedness, debt servicing costs, improve the debt to equity ratio and enable utilisation of our internal accruals for further investment in our business growth and expansion.
IIFL Securities Limited, ICICI Securities Limited and JM Financial Limited are the Book Running Lead Managers to the IPO.