IPO Analysis

Date Heading Details
21-Sep-2020   11:31 Hrs IST Angel Broking coming with an IPO to raise upto Rs 602 crore <P align=justify><STRONG>Angel Broking</STRONG> <UL><LI><DIV align=justify>Angel Broking is coming out with a 100% book building; initial public offering (IPO) of 1,96,72,130 shares of Rs 10 each in a price band Rs 305-306 per equity share.</DIV></LI><LI><DIV align=justify>Not more than 50% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not less than 15% of the issue will be available for the non-institutional bidders and the remaining 35% for the retail investors.</DIV></LI><LI><DIV align=justify>The issue will open for subscription on September 22, 2020 and will close on September 24, 2020.</DIV></LI><LI><DIV align=justify>The shares will be listed on BSE as well as NSE.</DIV></LI><LI><DIV align=justify>The face value of the share is Rs 10 and is priced 30.50 times of its face value on the lower side and 30.60 times on the higher side.</DIV></LI><LI><DIV align=justify>Book running lead manager to the issue are ICICI Securities, Edelweiss Financial Services and SBI Capital Markets. </DIV></LI><LI><DIV align=justify>Compliance Officer for the issue is Naheed Patel. </DIV></LI></UL><P align=justify><STRONG>Profile of the company</STRONG><P align=justify>The company is one of the largest retail broking houses in India in terms of active clients on NSE as of June 30, 2020. It is a technology-led financial services company providing broking and advisory services, margin funding, loans against shares (through one of its Subsidiaries, AFPL) and financial products distribution to its clients under the brand ‘Angel Broking'. The company's broking and allied services are offered through company's online and digital platforms, and its network of over 11,000 Authorised Persons, as of June 30, 2020. It has had more than 4.39 million downloads of its Angel Broking mobile application and nearly 1 million downloads of its Angel BEE mobile application as of June 30, 2020, which enable its clients to avail its services digitally. Digital marketing has enabled the company to garner 398 million digital impressions in June, 2020 on its various online and digital platforms. Its customer outreach, spans across approximately 96.87% or 18,649 pin codes in India as of June 30, 2020. It manages Rs 132,540 million in client assets and over 2.15 million operational broking accounts as of June 30, 2020.<P align=justify>The company's experience of over two decades has helped it to integrate its knowledge and expertise in the broking industry with the technology it provides to its retail clients through various platforms. Over the years, the company has enhanced client engagement and experience through digitisation of its processes and augmentation of its technological platforms. It launched its mobile application for broking services in the year 2011 and KYC authentication and complete client on-boarding through the electronic and digital medium in the year 2015 and 2016, respectively. The company's primary focus is to profitably grow its retail broking, margin funding and distribution businesses through its online and digital platforms, ‘Angel Broking Mobile App', ‘trade.angelbroking.com', ‘Angel SpeedPro', ‘Angel BEE', which are powered by ARQ, a rule-based investment engine. It provides its broking services through various web, digital and .exe platforms, which are integrated with each other enabling its clients to have a seamless trading and investment experience, positioning it to benefit from the development of the Indian financial market, increased emphasis on digitalisation, and growth in the returns from such financial investments.<P align=justify><STRONG>Proceed is being used for:</STRONG><UL><LI><DIV align=justify>Meeting working capital requirements.</DIV></LI><LI><DIV align=justify>General corporate purposes.</DIV></LI></UL><P align=justify><STRONG>Industry overview</STRONG><P align=justify>The domestic broking industry's revenue registered 10.5% CAGR over fiscals 2015-2020, to reach an estimated Rs 225 billion on account of a 34% increase in turnover in equity (cash and derivatives of NSE, BSE) markets during the same period. The industry is expected to see strong growth going ahead, after facing difficulties on account of pressure on yields and changing regulatory landscape. The growth will mostly be due to increased scalability and reach of players to untapped markets, especially lower tiered cities, leveraging their highly agile digital models. This will be adequately supported by the growing turnover levels across the equity derivatives and cash segments. These segments are expected to cumulatively grow at a 23-25% CAGR up to fiscal 2025. This growth will be driven mainly by the higher investor awareness, increased retail interest across market segments, easier and faster means to access the markets and continuing FII inflows. As advanced technology enables easier online operations, brokerages can gain access to a large amount of client information and data. This will help them better target their customers with value added services as well as credit and distribution services in addition to their core offering which is now more simple and customer-friendly. <P align=justify>Until 1994, equity trading in India was based on the open outcry system, where professionals communicated their buy/sell orders on a stock exchange's trading floor. It involved shouting and the use of hand signals. With the establishment of the NSE in 1994, the era of screen-based trading dawned in the country. Within a short span of time, screen-based trading replaced the open outcry system on all the stock exchanges in the country. The screen-based trading system adopted in India is referred to as the open electronic limit order book (ELOB) market system. In the present market scenario, participants look for enhanced efficiency, improvement in information dissemination and better use of technology to reduce cost. Mobile trading, which the regulator approved in 2000, has further changed the face of the domestic broking industry as it increases the convenience and facilitates trading on the go. The time for account opening and verification has dramatically reduced for the industry. With wider access to information and increased ease of doing transactions, trading volumes are likely to see significant growth. With the evolution of technology and artificial intelligence (AI), trades can now take place through a machine based on algorithm and that too within a few micro seconds. This AI-based buying and selling system has changed the law of supply and demand and it is now possible to easily estimate individualized demand and supply curves and thus individualized pricing. Further, AI has reduced information asymmetry in the market and made it more efficient.<P align=justify><STRONG>Pros and strengths</STRONG><P align=justify><STRONG>One of the largest retail broking houses with strong brand equity: </STRONG>The company is one of the largest retail broking houses in India, in terms of active clients on NSE as of June 30, 2020. Its online and digital platforms, along with its vast network of Authorised Persons enables it to reach a large population of retail clients spread across approximately 96.87% or 18,649 pin codes in India. This widespread reach has enabled company to enhance its client base by 36.81% CAGR from 1.06 million in FY18 to 2.15 million as on June 30, 2020. Over this period, it witnessed a consistent growth in its gross client addition of 0.22 million, 0.26 million, 0.56 million and 0.35 million in FY18, FY19, FY20 and Q1 FY21, respectively and representing a 59.54% CAGR over the period from FY18 to FY20. In the three months period ending June 30, 2020, it witnessed an average monthly client addition of approximately 115,565 clients, over a monthly average of 46,676 clients in FY20 representing a growth of 147.59%. Over the last one year, it has more than doubled its overall turnover market share in the retail broking space in India. It has developed a dedicated client base due to its client-centric approach in respect of the services it provide, user-friendly digital interfaces; and the ability to provide seamless access to all segments of the stock markets.<P align=justify><STRONG>Integrated, end to end, and advanced digital experience ensuring client satisfaction:</STRONG> The company remains focussed on innovation and implementation of technology across various services offered by it, which has resulted in an increase in client satisfaction. Its mobile based applications across the broking and advisory businesses have been consistently appreciated and awarded. Its backend systems provide an integrated and seamless access across all product platforms. Over the last three years, the company has transformed its business into a seamless digital experience for its 2.15 million clients as on June 30, 2020. Its marketing initiatives are now driven using artificial intelligence. The client on-boarding journey is largely a straight through process, without any requirement for physical documentation. Due to its continuous digital initiatives, it has increased its monthly average online order execution of direct clients to more than 99% in Q1 FY 21. It has also entered into an agreement with a third party for them to supply printable white labelled research reports and portfolio analysis for stock selection by its clients, which will be an additional offering for them. Further, its client on boarding is completely digital and a seamless process. Its client engagement and service activities are completely driven by its artificial intelligence and machine learning based strategies which provides a unique personalised experience to them. <P align=justify><STRONG>Diversified product offering across segments at competitive price</STRONG>: The company's online platforms, Angel Broking, trade.angelbroking.com, Angel SpeedPro and Angel BEE, powered by ARQ, allow it to provide its clients with an ability to manage their wealth and investments in an efficient and organized manner. Its clients trade in equities in the cash-delivery, cash-intraday, futures and options, indices – derivatives segment through various order types, including market orders, stop loss orders and valid till cancelled orders. It also facilitate participation in initial public offerings. Its Angel iTrade Prime Plan was launched comprising, Rs 0 for equity delivery and Rs 20 per order for all other segments. Coupled with this competitive pricing plan, it also offer services such as complementary in-house research and advisory, margin trading facility, securities as collateral and no charges for any fund transfer. This complete offering is a unique proposition and makes it one of the most competitive players across the industry. <P align=justify><STRONG>Robust business metrics building operating leverage:</STRONG> The company's well executed strategy of being a digital first organisation enabled it to grow its business exponentially. The augmentation of company's digital processes, technological platforms, performance marketing, client engagement strategy, robust client acquisition and an all-inclusive flat pricing model has enabled it to substantially grow the average daily turnover from Rs 253,176 million in Q1 FY20 to Rs 618,945 million in Q1 FY21, as well as placed it at the forefront in the turnover based market share for the retail broking industry in India. The company's broking, distribution and advisory services are backed by robust infrastructure and has processed at peak usage, being, approximately 3.46 million trades in a day.<P align=justify><STRONG>Risks and concerns</STRONG><P align=justify><STRONG>Rely on Indian exchanges for significant portion of business:</STRONG> The company's brokerage business relies on the Indian exchanges, such as NSE, BSE, MCX, MSEI and NCDEX, and the clearing corporations to execute and settle all its clients' transactions. Its electronic brokerage platform and its systems for retail brokerage clients are connected to the exchanges and all orders placed by its clients are fulfilled through the exchanges. Any disruption in the functioning of the exchanges or a disruption to its connection with the exchanges could have a material adverse effect on its business and results of operations. To use the services of the exchanges, it is required to be registered as their members. This registration subjects it to various stock exchange regulations and periodic inspections by such exchanges. It cannot assure you that it will be able to strictly comply with such regulations or that such inspections would not find any violations by it. Failure to comply with such regulations could lead to fines, penalties, suspension of its registrations, and in extreme circumstances, termination of its registration. If its registration with the exchanges is terminated, it will be unable to provide brokerage services, which will have a material adverse effect on its business, financial condition and results of operations. In addition, its business operations are subject to regulatory limits on brokerage fee rates and net worth requirements imposed by exchanges. <P align=justify><STRONG>Highly dependent on information technology:</STRONG> The company's operations rely heavily on the effectiveness of its IT systems and their ability to record and process accurately a large number of transactions on a daily basis and in a timely manner to provide a seamless digital experience to its clients. While it is compliant with the SEBI Circular on Cyber Security &amp; Cyber Resilience framework for Stock Brokers / Depository Participants, it has recognised and continue to address the need to have sophisticated technology systems in place to meet its clients' requirements. A prolonged disruption of, or failure of, its information processing or communications systems would limit its ability to process transactions. Although the company back up its business data regularly and has a contingency disaster recovery centre for its retail brokerage and distribution businesses, it cannot assure you that there will not be an unforeseen circumstance or that its disaster recovery planning is adequate for all eventualities.<P align=justify><STRONG>Rely on broking and related services business for substantial share of revenue, profitability:</STRONG> The company relies on its brokerage business for a substantial share of its revenue and profitability. The company's brokerage business depends on number of orders executed and trading volume, which is significantly affected by external factors, such as general economic conditions, macroeconomic and monetary policies, market conditions and fluctuations in interest rates, all of which are beyond its control. Its operating revenue is also affected by the size of its client base, and the frequency at which they do business through it. It earn brokerage fee based on, among other things, the number of orders executed, the volume of trades its clients undertake through it. If the company fail to maintain and increase its client base, or fail to provide better services and products to retain and attract client activity, its brokerage income may be adversely affected.<P align=justify><STRONG>High working capital requirements:</STRONG> The company's business requires a high amount of working capital. To finance such capital requirements, it has availed certain loan facilities including overdraft facilities, working capital demand loans and bank guarantees. It cannot assure you that it will be able to raise debt to meet its working capital requirements on commercially acceptable terms in a timely manner or at all. If it has to fund its working capital requirements from infusion of equity, it may result in dilution of shareholding of its existing Shareholders. Further, the company proposes to utilize the Net Proceeds for its working capital requirements. Any delay in the Offer may have an adverse effect on its business, results of operation, cash flows and financial condition.&nbsp; <P align=justify><STRONG>Outlook</STRONG><P align=justify>Incorporated in 1996, Angel Broking is one of India's oldest stock broking houses providing broking, marging funding, advisory, and financial services through brands Angel Broking and Angel Bee powered by ARQ. It provides its broking services through various web, digital and .exe platforms, which are integrated with each other enabling its clients to have a seamless trading and investment experience, positioning it to benefit from the development of the Indian financial market, increased emphasis on digitalisation, and growth in the returns from such financial investments. It remains focussed on innovation and implementation of technology across various services offered by it, which has resulted in an increase in client satisfaction. Besides, it has a strong management team with experience in the Indian financial services and broking sectors. On the concern side, if the company is unable to maintain and enhance the ‘Angel' brand equity, the sales of its products and services may suffer which would have a material adverse effect on its financial condition and results of operations. The Indian securities industry is fragmented and typified by low barriers to entry. Accordingly, the company faces significant competition from companies seeking to attract its clients' financial assets. It compete on the basis of a number of factors, including execution, depth of product and service offerings, innovation, reputation, price and convenience. <P align=justify>The issue has been offered in a price band of Rs 305-306 per equity share. The aggregate size of the offer is around Rs 599.99 crore to Rs 601.96 crore based on lower and upper price band respectively. On the performance front, the company's total income decreased by 3.75% from Rs 7,841.13 million in Financial Year 2019 to Rs 7,547.14 million in Financial Year 2020. Its profit for the year increased by 3.15% from Rs 798.35 million in Financial Year 2019 to Rs 823.46 million in Financial Year 2020. The company intends to strengthen its leadership position to become the largest retail broking firm in India, both by broking revenue and active clients. In particular, it aims to enhance its market position in the growing retail broking segment, by continuing to focus on acquiring and retaining clients, product innovation, leveraging its web and digital broking platforms and brand to acquire clients through these platforms and its extensive Authorised Person network, analyzing client behaviour and provide personalized recommendations. Further, it intends to expand and offer all the financial services required by its retail clients.<BR>
19-Sep-2020   12:57 Hrs IST Chemcon Speciality Chemicals coming with an IPO to raise upto Rs 223 crore <P align=justify><STRONG>Chemcon Speciality Chemicals</STRONG> <UL><LI><DIV align=justify>Chemcon Speciality Chemicals is coming out with a 100% book building; initial public offering (IPO) of 65,59,173 shares of Rs 10 each in a price band Rs 338-340 per equity share. </DIV></LI><LI><DIV align=justify>Not more than 50% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not less than 15% of the issue will be available for the non-institutional bidders and the remaining 35% for the retail investors.</DIV></LI><LI><DIV align=justify>The issue will open for subscription on September 21, 2020 and will close on September 23, 2020.</DIV></LI><LI><DIV align=justify>The shares will be listed on BSE as well as NSE.</DIV></LI><LI><DIV align=justify>The face value of the share is Rs 10 and is priced 33.80 times of its face value on the lower side and 34.00 times on the higher side.</DIV></LI><LI><DIV align=justify>Book running lead manager to the issue are Intensive Fiscal Services and Ambit Capital.</DIV></LI><LI><DIV align=justify>Compliance Officer for the issue is Shahilkumar Maheshbhai Kapatel. </DIV></LI></UL><P align=justify><STRONG>Profile of the company</STRONG><P align=justify>The company was originally incorporated as Gujarat Quinone Private Limited at Vadodara, Gujarat, India, as a private limited company under the Companies Act, 1956, pursuant to a certificate of incorporation dated December 15, 1988 issued by the RoC. Its Promoters and Promoter Group completed the acquisition of 100% of the Equity Share capital of the company in 2004 from the shareholders of the company at the time. Chemcon Engineers Private Limited (CEPL) was incorporated at Vadodara, Gujarat, India as a private limited company under the Companies Act, 1956, pursuant to a certificate of incorporation dated April 30, 1996 issued by the RoC. CEPL, a company largely owned and promoted by its Promoters and Promoter Group, merged into the company pursuant to an order of the High Court of Gujarat dated May 6, 2004 approving the Scheme of Amalgamation between CEPL and the company. Thereafter, to reflect the nature of activities of the company consequent to the Scheme of Amalgamation, the name of the company was changed to ‘Chemcon Speciality Chemicals Private Limited' pursuant to the approval of the company's Shareholders at an extra-ordinary general meeting held on July 24, 2004 and the fresh certificate of incorporation on change of name issued by the RoC on July 27, 2004. Subsequently, the company was converted into a public limited company pursuant to the approval of company's Shareholders at an extra-ordinary general meeting held on November 28, 2018. Consequently, the name of the company was changed to ‘Chemcon Speciality Chemicals Limited' and a Fresh certificate of incorporation consequent upon conversion to public limited company was issued by the RoC on April 10, 2019.<P align=justify>The company is a manufacturer of specialised chemicals, such as HMDS and CMIC which are predominantly used in the pharmaceuticals industry (the Pharmaceutical Chemicals), and inorganic bromides, namely Calcium Bromide, Zinc Bromide and Sodium Bromide, which are predominantly used as completion fluids in the oilfields industry. The company supply its products to domestic customers and also export its products to countries including United States of America , Italy, South Korea, Germany, People's Republic of China, Japan, United Arab Emirates, Serbia, Russia, Spain, Thailand and Malaysia. The company is are an ISO 9001:2015 and ISO 14001:2015 certified company for the manufacture and supply of pharmaceutical intermediates, silanes and oilfield chemicals. Its manufacturing facility is located at Manjusar near Vadodara in Gujarat.<P align=justify>Within company's manufacturing facility, it currently has seven operational plants of which two plants are dedicated to the manufacturing of HMDS and ancillary products (including one plant dedicated to the manufacturing of hi-purity HMDS), one multipurpose plant, currently being used for manufacturing of HMDS and other pharmaceutical chemicals, two plants are dedicated to the manufacturing of CMIC and two plants dedicated to the manufacturing of company's Oilwell Completion Chemicals, along with three warehouses for the storage of products and raw materials. The company also has an in-house laboratory at manufacturing facility to test its raw materials procured, as well as products at the various stages of the manufacturing process. Further, it has five leased warehouses located outside its manufacturing facility, in Manjusar, Vadodara. <P align=justify><STRONG>Proceed is being used for:</STRONG><UL><LI><DIV align=justify>Capital expenditure towards expansion of company's manufacturing facility (Project).</DIV></LI><LI><DIV align=justify>Meeting working capital requirements.</DIV></LI><LI><DIV align=justify>General corporate purposes.</DIV></LI></UL><P align=justify><STRONG>Industry overview</STRONG><P align=justify>Domestic consumption for chemicals used as pharma intermediates is dependent upon bulk drugs manufacturing (domestic consumption as well as captive consumption by integrated players). Majority of large bulk drug players are forward integrated through presence in formulations as well. However, backward integration for large players through intermediates manufacturing is limited. The players in chemicals used as pharma intermediates domain mostly have footprints in specialty chemicals, which are supplied to pharmaceutical sector in addition to other sectors. Indian players, with better process chemistry skills, have relative advantage in custom synthesis, intermediates for drug discovery and contract manufacturing. India market of Chemicals used as pharma intermediates includes domestic consumption and exports. The overall market of chemicals used as pharma intermediates is anticipated to grow at 7-9% CAGR over the 5 year forecast period. <P align=justify>The share of imports in domestic consumption has dropped from around 65% in fiscal 2013 to around 58% in fiscal 2019. The drop in imports is majorly due to expiry of patents and withdrawal of customs duty exemption on drugs and intermediates in fiscal 2017. The imports of bulk drugs and intermediates are dominated by China. Large manufacturing units of China have economies of scale, supplying to several countries at a lower cost. The API/intermediates industry gets support from the government through export subsidy. Moreover, the cost of electricity is cheaper in China, which helps to maintain a cost advantage particularly in fermentation based products which have higher electricity requirements. However, an analysis of chemical exports from China shows that there has been a decline in exports from China in the past 2-3 years. Tougher regulations on the pollution causing industries have impacted the chemicals sector in China adversely. Indian intermediates players' export competitiveness can be attributed to their greater expertise in specialised intermediates as compared with traditional intermediates. <P align=justify><STRONG>Pros and strengths</STRONG><P align=justify><STRONG>Leading manufacturer in India of Oilwell completion chemicals:</STRONG> The company was the only manufacturer of HMDS in India and was the third largest manufacturer of HMDS worldwide in terms of production in calendar year 2019. It was the largest manufacturer of CMIC in India and the second largest manufacturer of CMIC worldwide, in terms of production and capacity in calendar year 2019.&nbsp; The company was the only manufacturer of HMDS in India, and it is well positioned to capitalize on the potential growth of the HMDS market. By substituting imports and catering to India's growing HMDS market, the company has immense opportunity in India. Additionally other countries of the world are dependent on China for their HMDS requirement, however with changing environment regulations, the trade from the country is low, giving opportunity to company to target China's export customer base. Besides, it was the only manufacture of Zinc Bromide and the largest manufacturer of Calcium Bromide in India, in terms of production in calendar year 2019. Further, while it commenced the sales of its Oilwell Completion Chemicals in calendar year 2014, its share in the global production of the Oilwell Completion Chemicals has grown to 2.65% in calendar year 2019. <P align=justify><STRONG>Diversified customer base coupled with long standing relationships:</STRONG>&nbsp; The company supply its products to customers in India and also export its products to countries including United States of America, Germany, Italy, South Korea, People's Republic of China, Japan, United Arab Emirates, Serbia, Russia, Spain, Thailand and Malaysia. In Fiscals 2020, 2019 and 2018, the company's exports (including Deemed Exports) contributed 39.78%, 31.99% and 47.84% respectively of its total revenue from operations. The company has established relationships with its key customers. For instance, it conducts business with Aurobindo Pharma on the basis of purchase orders and they have been its client for over 20 years. 68.61% of its total revenue from operations in Fiscal 2020 was contributed by customers who have been consistently purchasing its products over the last five years. Its top seven customers for Fiscal 2020 have been its customers for over four years.<P align=justify><STRONG>Specialty chemicals industry in which company operates has high entry barriers:</STRONG> The specialty chemicals industry in which the company operates has high entry barriers due to inter alia: (a) the involvement of complex chemistry in the manufacture of company's Products, which is difficult to commercialize on a large scale and; (b) a long gestation period to be enlisted as a supplier with the customers, particularly with the customers of its Pharmaceutical Chemicals. The specialty chemicals industry is highly knowledge intensive. The company's products have application in the pharmaceutical, oil-well drilling, semi-conductor and electronic-chemical industries where they are used to manufacture high value proprietary and specialised products. Given the nature of the application of its products, its processes and products are subject to, and measured against, high quality standards and stringent impurity specifications. Further, end products manufactured by its customers, where its products are used, and where 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. Hence, customer acquisition involves a long gestation period, resulting in a very few players being involved in manufacturing of the products.<P align=justify><STRONG>Manufacturing facility with dedicated plants:</STRONG> The company is ISO 9001:2015 and ISO 14001:2015 certified company for the manufacture and supply of pharmaceutical intermediates, silanes and oilfield chemicals. Its manufacturing facility is located in Manjusar, near Vadodara in Gujarat. The company's manufacturing facility, has seven operational plants of which two plants are dedicated to the manufacturing of HMDS and ancillary products (including one plant dedicated to the manufacturing of hi-purity HMDS), one multipurpose plant, currently being used for manufacturing of HMDS and other pharmaceutical chemicals, two plants are dedicated to manufacturing of CMIC and two plants are dedicated to manufacturing of its Oilwell Completion Chemicals, along with three warehouses for the storage of its products and raw materials. The company is in the process of setting up two new plants, within its manufacturing facility.<P align=justify><STRONG>Risks and concerns</STRONG><P align=justify><STRONG>Profitability largely depends upon the global prices of products:</STRONG> The company is dependent on the global prices for its products. There has been volatility in the global prices of certain of its products. Its ability to maintain as well as expand its international operations is dependent on it providing its products at prices competitive with international as well as local manufacturers. Since the company manufactures all its products at the Manufacturing Facility, it may be unable to provide the products at competitive prices as against suppliers able to implement more cost-effective distribution facilities and local suppliers. Accordingly, the company may be more exposed to the volatility to the global prices of its products as against competitors whose manufacturing operations are less centralised. Its inability to price its products at the applicable prices in the international markets, may affect the demand for its products and consequently have a material adverse effect on its results of operations and financial condition. <P align=justify><STRONG>Derive significant portion of revenue from few customers:</STRONG> While the company typically has long term relationships with its customers, it does not have long term agreements with them. The success of its business is accordingly significantly dependent on it maintaining good relationships with its customers and suppliers. While the company has a number of customers, it is dependent on a limited number of customers for a significant portion of its revenue. The actual sales by the company may differ from the estimates of its management due to the absence of long term agreements. The loss of one or more of these significant customers or a reduction in the amount of business it obtains from them could have an adverse effect on its business, results of operations, financial condition and cash flows. It cannot assure you that it will be able to maintain historic levels of business and/or negotiate and execute long term contracts on terms that are commercially viable with its significant customers or that it will be able to significantly reduce customer concentration in the future.<P align=justify><STRONG>Limited product portfolio:</STRONG> The company's product portfolio is limited to its Pharmaceutical Chemicals, mainly HMDS and CMIC and its Oilwell Completion Chemicals, namely Calcium Bromide (solution and powder), Zinc Bromide (solution) and Sodium Bromide (solution and powder). A reduction in the demand for any of its products may have a materially adverse effect on its operations. The demand for its products may decline due to the emergence or increase in competition, as the case may be, regulatory action, pricing pressures and/or fluctuations of demand and supply. If company's competitors are able to improve the efficiency of their manufacturing process or their distribution or raw materials sourcing process and thereby offer their products at lower price, the company may be unable to adequately react by reducing its gross margin to retain customers by offering its products at lower prices or losing customers to competitors offering similar products at prices lower than it. Similarly, in the event of any breakthrough in the development of products, the company's products may become obsolete or be substituted by such alternatives.<P align=justify><STRONG>Face competition:</STRONG> The company is required to compete both in the domestic and international markets. It may be unable to compete with the prices and products offered by its competitors (local as well as international). It may have to compete with new players in India and abroad who enter the market and are able to offer competing products. Its competitors may have access greater financial, manufacturing, research and development, marketing, distribution and other resources and more experience in obtaining the relevant regulatory approvals. Increasing competition may result in pricing pressures and decreasing profit margins or lost market share or failure to improve its market position, any of which could substantially harm its business and results of operations. It cannot assure you that it shall be able to compete with its existing as well as future competitors as well as the price and services offered by them. In addition, the company's customers may enter into contract manufacturing arrangements with third parties, for products that they are presently purchasing from it. Its failure to successfully face existing and future competition may have an adverse impact on its business, growth and development.<P align=justify><STRONG>Outlook</STRONG><P align=justify>Incorporated in 1988, Chemcon Speciality Chemicals is a manufacturer of specialized chemical products i.e. HMDS and CMIC. Its product portfolio includes oilfield chemicals (Calcium Bromide, Sodium Bromide, and Zinc Bromide), Pharma intermediates, Silanes, and chemicals contract manufacturing work. The company supply its products to customers in India and also export its products to countries including United States of America, Germany, Italy, South Korea, People's Republic of China, Japan, United Arab Emirates, Serbia, Russia, Spain, Thailand and Malaysia. It has experienced sustained growth in various financial indicators including its revenue and PAT, as well as a consistent improvement in its balance sheet position in the last three Fiscals, wherein it has seen an increase in its net worth. On the flip side, the company requires substantial power, water and fuel for its manufacturing facility, and energy costs represent a significant portion of the production costs for its operations. If energy or water costs were to rise, or if electricity or water supplies or supply arrangements were disrupted, its profitability could decline. Besides, the company is dependent on the services of its Promoters and Key Managerial Personnel, and its ability to attract, train, motivate and retain skilled employees and other professionals will enable it to manage and expand its business operations. <P align=justify>The issue has been offered in a price band of Rs 338-340 per equity share. The aggregate size of the offer is around Rs 221.70 crore to Rs 223.01 crore based on lower and upper price band respectively. On the performance front, the company's total income decreased by 12.87% to Rs 2,660.17 million in Fiscal 2020 from Rs 3,053.26 million in Fiscal 2019. The company's profit after tax increased by 13.50% to Rs 488.53 million in Fiscal 2020 from Rs 430.41 million in Fiscal 2019.&nbsp; The company aims to expand the sales of the Oilwell Completion Chemicals in existing and new geographies including Nigeria, Malaysia, China and Ghana. It also intends to further consolidate its position in the geographic markets where it sell its products as well as expand into additional geographic markets. It intends to continue to be cost efficient in the production of its products.<BR>
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