Indian Emulsifiers coming with IPO to raise Rs 42.39 crore

Indian Emulsifiers 

• Indian Emulsifiers is coming out with initial public offering (IPO) of 32,11,000 shares of Rs 10 each in a price band Rs 125-132 per equity share.  
• The issue will open for subscription on May 13, 2024 and will close on May 16, 2024.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 12.50 times of its face value on the lower side and 13.20 times on the higher side.
• Book running lead manager to the issue is Ekadrisht Capital.
• Compliance Officer for the issue is Ramraj Singh Thakur.

Profile of the company

The company was incorporated with the objective of Manufacturing and Supplying of Specialty Chemicals i.e., Esters, Amphoterics, Phosphate Esters, Imidazolines, Wax Emulsions, SMO & PIBSA Emulsifiers. The company has its manufacturing plant at Plot No. E-10 MIDC, Lote Parshuram, Tal. Khed, Ratnagiri, Maharashtra, India since inception. The facility has a production capacity of 4,800 metric tons per annum as on March 31, 2023 and 3,600 MT per annum for the period ended December 31, 2023, equipped with process control, innovative R&D centre, Quality Control and Application Laboratories. and its Registered office at Shop 206, Floor 2, Sumer Kendra, Shivram Seth, Amrutwar Road Near Doordarshan Kendra, Off Pandurang Budhwar Marg, Worli, Mumbai, Maharashtra, India. The company was formed with a vision to become a pioneer specialty chemicals manufacturer. The company got ISO Certified in the year 2021 as ISO 9001:2015. It is manufacturing the Specialty chemicals industry, with a focus on Esters, Phosphate Esters, Imidazolines, Succinimides, Sulfosuccinates, Specialty Emulsifiers and formulated products. The company serve specialty chemicals to wide range of industries such as Mining, Textile, Cleaning Industry, PVC (Poly Vinyl Chloride)/ Rubber, Personal Care, Food and Other Industries.

The manufacturing facility has a production capacity of 4,800 metric tons per annum the capacity has been increased from 2400 MT per annum to 4,800 MT per annum due to additional Reactors installed, equipped with process control, innovative R&D centre, Quality Control and Application Laboratories. Operations at the facility are managed by an able and motivated team of highly qualified technical personnel, having expertise in their individual fields. Multipurpose facility designed to have a high degree of flexibility to meet customer needs. Multiple high-pressure stainless-steel reactors equipped to deliver yields from 100 Kg to 8,000 kg per batch providing high level of flexibility. The facility can carry out reactions at temperatures ranging from 10 C to 250 C and pressure 5 kg to 8kg/cm, the reactors are equipped with condenser, vacuum arrangement and receiver and high speed stirred reactor. 

Proceed is being used for:

• Funding of capital expenditure requirements of the company towards Plant & Machinery, Civil work and installation cost thereon.
• Funding Working Capital Requirements of the company.
• General corporate purposes.

Industry overview

India’s chemical industry is extremely diversified and can be broadly classified into bulk chemicals, specialty chemicals, agrochemicals, petrochemicals, polymers, and fertilisers. India is the 6th largest producer of chemicals in the world and 3rd in Asia, contributing 7% to India’s GDP. India's chemical sector, which is currently estimated to be worth $ 220 billion in 2022 and is anticipated to grow to $ 300 billion by 2025 and $ 1 trillion by 2040. Globally, India is the fourth-largest producer of agrochemicals after the United States, Japan and China. India accounts for 16-18% of the world production of dyestuffs and dye intermediates. As per Chemexcil (Chemicals Export Promotion Council), India’s agrochemicals export was estimated to be at $ 1.04 billion from April 2023-June 2023 (Provisional). Indian colorants industry has emerged as a key player with a global market share of 15%. The country’s chemicals industry is de-licensed, except for few hazardous chemicals. India has traditionally been a world leader in generics and biosimilars and a major Indian vaccine manufacturer, contributing more than 50% of the global vaccine supply. India holds a strong position in exports and imports of chemicals at a global level and ranks 14th in exports and 8th in imports at global level (excluding pharmaceuticals). From April 2023 to June 2023 (provisional), India's dye exports (Dyes and Dye Intermediates) totaled $ 561.56 million.

The domestic chemicals sector's small and medium enterprises are expected to showcase 18-23% revenue growth in FY22, owing to an improvement in domestic demand and higher realisation due to high prices of chemicals. Domestic demand is expected to rise from $ 170 billion-$ 180 billion in 2021 to $ 850 billion-$ 1,000 billion by 2040. The Indian chemicals industry stood at $ 178 billion in 2019 and is expected to reach $ 304 billion by 2025 registering a CAGR of 9.3%. The demand for chemicals is expected to expand by 9% per annum by 2025. The chemical industry is expected to contribute $ 383 billion to India’s GDP by 2030. India has traditionally been a world leader in generics and biosimilars and major Indian vaccine manufacturers, contributing more than 50% of the global vaccine supply. Chemicals and petrochemicals demand in India is expected to nearly triple and reach $ 1 trillion by 2040. An investment of Rs. 8 lakh crore ($ 107.38 billion) is estimated in the Indian chemicals and petrochemicals sector by 2025. The specialty chemicals constitute 22% of the total chemicals and petrochemicals market in India. The demand for specialty chemicals is expected to rise at a 12% CAGR in 2019-22.

Pros and strengths

Scalable Business Model: The company has a scalable business model as its business model is customer-centric and order driven, and requires optimum utilization of its existing resources, assuring quality supply and achieving consequent economies of scale. The business scale generation is basically due to the development of new markets and products in both domestic and international markets by exploring customer needs, marketing expertise and consistent product quality.

Wide and diverse range of product offerings: The company has more than 40 plus Specialty Chemicals & Intermediates for Mining, Textile, Cleaning Industry, PVC (Poly Vinyl Chloride)/ Rubber, Personal Care, Food and various other industries. It proposes to enhance its product basket in various segment. It manufactures various types of chemical such as Esters, Phosphate Esters, Imidazolines, Succinimides, Sulfosuccinates, and Specialty Emulsifiers. It also manufactures products based on needs and requirements of the clients and its market. It has necessary resources, experience, and network to launch additional products in future.

In-house manufacturing facility with equipped machines and processes: The company’s manufacturing infrastructure is equipped with glass lined reactors and stainless-steel equipment. Its manufacturing facility situated at Lote, Ratnagiri District in Maharashtra. Its facility has its own quality control department. Moreover, it sources majority of its raw material locally only. The factory is equipped with a comprehensive organizational structure comprising vital departments such as Sales, Procurement, Stores, Quality Control, Production, Research & Development, Facility Maintenance, Administration, Quality Assurance, and Security. Each department is instrumental in contributing to the overall operational synergy, working cohesively to uphold the internal quality standards of the company. Sales and Procurement oversee the strategic acquisition of resources, while Stores manage inventory to facilitate smooth production processes. Quality Control and Quality Assurance departments meticulously monitor and uphold the high standards of the final products, ensuring that they meet or exceed the company's benchmarks. Production and Research & Development collaborate to innovate and produce goods of exceptional quality. Facility Maintenance ensures the smooth functioning of equipment, while Administration oversees the administrative aspects of the business. Lastly, Security plays a crucial role in safeguarding the company's assets and maintaining a secure working environment. Together, these departments form a robust framework, ensuring the company's commitment to excellence and quality in every aspect of its operations.

Risks and concerns

Derive significant part of revenue from major customers: The company’s operations are dependent on the requirements of its customers, from its Top 5 Customers, it generate Rs 3,240.80 lakh of revenue, which is 78.70% of the Total Revenue generated as on March 31, 2023. It is an innovation driven enterprise and to produce new products which attracts higher cost. Thus, the cost of the new product is comparatively higher than the usual product. This thus raises the price of the product and thus involves the risk of acceptance by the customer. As a result, number of potential consumers of its product/ services may reduce which will ultimately affect its potential revenue in future to that extent. Accordingly, any failure to retain these customers and/or negotiate and execute contracts on terms that are commercially viable, with these select customers, could adversely affect its business, financial condition and results of operations. In addition, any defaults or delays in payments by a major customer or the insolvency or financial distress by a major customer may have an adverse effect on business, financial condition and results of operations. 

Operate in highly competitive industry: The company operate in a highly competitive industry with a number of other manufacturers that produce competing products, both in India and internationally. As a result, to remain competitive in the market it must continuously strive to reduce its production and distribution costs and improve its operating efficiencies and innovate its products offering. If it fails to do so, it may have an adverse effect on its market share and results of operations. In relation to its products segment, it may incur significant expense in preparing to meet anticipated customer requirements which may not be recovered. 

Do not have long-term agreements with suppliers: During the Stub period ended on December, 2023, and for the Financial Year ended March 31, 2023, March 31, 2022 and March 31, 2021, its Cost of Goods Sold (cost of materials consumed, Purchase of stock in trade and changes in inventories of finished goods) was Rs 1,448.87 lakh, Rs 1103.81 lakh, Rs 405.66 lakh and Nil respectively, which represented 70.23%, 73.20%, 77.06% and Nil of its revenue from operations. The raw materials it uses in its manufacturing process are primarily sourced from third party suppliers in India. In addition, it usually does not enter into long-term supply contracts/ agreements with any of its raw material suppliers and typically source raw materials from the open market. The absence of long-term contracts/agreements at fixed prices exposes it to volatility in the prices of raw materials that it requires and it may be unable to pass these costs onto its customers, which may reduce its profit margins. It faces a risk that one or more of its existing suppliers may discontinue their supplies to it, and any inability on its part to procure raw materials from alternate suppliers in a timely manner, or on commercially acceptable terms, may adversely affect its business, financial condition and results of operations.

Outlook

Indian Emulsifiers manufactures, supplies and markets a diverse range of speciality chemicals to industries such as Food, Cosmetic, Pharmaceutical, Personal care, Home care, Institutional & Industrial Cleaning, Metal Cleaning, Metal Working, Lubricants, Textiles, Mining, Oilfields, Agriculture and Paint & Pigments. The company’s core team has over 30 years of rich and unparalleled experience in the chemical industry each making Indian Emulsifiers a pioneer and leading manufacturer of speciality chemicals. The company has set up a state of art manufacturing facility at MIDC LOTE. The facility is located 225 km from the country’s financial hub Mumbai on the west coast of India. The proximity to Mumbai and its ports makes it an ideal location. The facility has a production capacity of 6000 metric tons per annum, equipped with computerized process control, innovative R&D centre, Quality Control and Application Laboratories. Operations at the facility are managed by an able and motivated team of highly qualified technical personnel, having expertise in their individual fields. On the concern side, the company face an inherent business risk of exposure to product defects and subsequent liability claims if the use of any of its products results in personal injury or property damage. It may not be able to meet the quality standards imposed by its customers and applicable to its manufacturing processes, which could have a material adverse effect on its business, financial condition, results of operations and cash flows.

The company is coming out with an IPO of 32,11,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 125-132 per equity share. The aggregate size of the offer is around Rs 40.14 crore to Rs 42.39 crore based on lower and upper price band respectively. On performance front, total income for the financial year 2022-23 stood at Rs 4,118.35 lakh whereas in Financial Year 2021-22 the same stood at Rs 1768.31 lakh representing an increase of 132.90%. The main reason of increase was increase in the volume of business operation of the company. The company’s profit after tax for the year increase by 8932.43% from net profit of Rs 4.31 lakh in financial year 2021-22 to net profit Rs 389.44 lakh in financial year 2022-23.  Meanwhile, the company has, since its inception, consistently sought to diversify its portfolio of products which could cater to customers across segments, sectors, and geographies. In accordance with this, while it seeks to continue to strengthen its existing product portfolio, it intends to further diversify into products with prospects for increased growth and profitability. It plans to continue to increase offerings in its current business segments as well as diversify into new products by tapping into segments which in the view of its management have attractive growth prospects. For instance, it intends to increase its focus on products manufactured using continuous flow chemistry as these will be more sustainable and are good value propositions.