IPO Update: Archean Chemical Industries Seeks SEBI Approval to Raise Funds Through IPO

Archean Chemical Industries, a developer of specialty marine chemicals, has filed preliminary paperwork with market regulator Sebi to raise up to Rs 2,200 crore through an initial public offering (IPO).

According to the draught, the IPO will consist of a fresh issue of equity shares worth up to Rs 1,000 crore and an offer for sale of up to 1.9 crore shares by the promoter and investors, including the India Resurgence Fund, a joint venture between the Piramal Group and Bain Capital.

The Archean Chemical Industries IPO will include a fresh issue of Rs.1,000 crore as well as an offer-for-sale (OFS) of up to 1.91 crore shares tendered by the company’s early shareholders and promoters.

In terms of shareholding, CS LLP owns 41 percent of Archean, IRF-I owns 7.46 percent, IFR-II owns 12.19 percent, and PNRPL owns 7.46 percent of Archean. These are some of the initial investors in Archean Chemical Industries.

Chemikas Specialty (CS) LLP would tender 53 lakh shares in the OFS, followed by 37.3 lakh shares by India Resurgence Fund Scheme I (IRF-I), 63 lakh shares by India Resurgence Fund Scheme II (IRF-II), and 37.3 lakh shares by Piramal Natural Resources (PNRPL). The OFS will only be transfer of ownership with now fresh funds coming in.

In terms of the fresh issue component, it will mostly be utilized to redeem the company’s non-convertible debentures. At this point, the total outstanding NCDs, including accrued interest, is close to Rs.980 crore. The redemption of NCDs is projected to minimize Archean Chemical Industries’ solvency risk, improve the debt/equity ratio, and improve coverage ratios such as interest coverage and debt service coverage ratios.

Archean is primarily concerned in producing and exporting bromine, industrial salt, and potash sulphate to consumers all over the world. It derives its goods from brine reserves in the Rann of Kutch, which is located on the Gujarat coast, and manufactures them at a facility near Hajipir in Gujarat.

Archean’s bromine is employed as a crucial initial level material in pharma, agrochemicals, water treatment, flame retardant, additives, oil & gas, and energy storage areas.

Industrial salt is a key raw material in the chemical industry for the manufacturing of a variety of other chemicals and compounds, and potash sulphate is used as a fertilizer as well as for medical purposes.

The revenues from the Rs 800-crore issuance will be used to fully or partially retire non-convertible debentures. The sum outstanding under the firm’s borrowing agreements as of December 2021 was Rs 840 crore, with interest accrued but not payable at Rs 116.67 crore.

Archean Chemical Industries has a large customer base that spans India and the global markets. Currently, the company markets its products to 13 global customers in 13 countries, as well as 29 B2B domestic customers in India. This is a very concentrated emphasis on chemicals with little competition.

Archean Chemical Industries recorded sales income from operations of Rs.741 crore in FY21, a 21.9 percent increase over Rs.608 crore in FY20. Archean Chemical Industries declared a net profit of Rs.66.61 crore for the fiscal year FY21, reflecting a high net profit margin of 9 percent. In H1-FY22, the company maintained its strong sales and profit performance.

IIFL Securities, ICICI Securities Ltd and JM Financial are the lead managers to the issue.