Clean Science and Technology Limited - IPO Note

Specialty Chemicals

Clean Science and Technology Limited - IPO Note

Specialty Chemicals

Price range
Rs. 880 - 900
Issue Period:
Jul 07, 2021
Jul 09, 2021
July 07, 2021

Stock Info

CNX Nifty
Face value (Rs.)
Market lot
Issue size
Rs. 1,546.62 cr.
Public Issue
1.72 cr. shares
Market cap post IPO
9,347 – 9,560 cr.
Equity Pre - IPO
10.62 cr.
Equity Post - IPO
10.62 cr.
Issue type
Offer for Sale

Shareholding (Pre IPO)

Source: Ace equity, StockAxis Research

Shareholding (Post IPO)

Source: Ace equity, StockAxis Research

Key Strengths and Strategies

Among The World's Largest Producers of Specialty Chemicals
The company is among world’s largest producers of certain speciality chemicals in terms of manufacturing capacity as of March 2021 (refer the table below).

Chemical Global/India Rank
MEHQ #1/#1
BHA #1/#1
Guaiacol #3/#2
Anisole #1/#1
4-MAP #1/#1
Ascorbyl Palmitate #2/#2

The chemicals which the company manufacturers have a wide range of applications and the raw material which the company uses are available in abundant which results in the de-risked business model. Its products are used as inhibitors, intermediates, anti-oxidants, and anti-retroviral reagents in a variety of industries, including paints and inks, agro-chemicals, pharmaceuticals, flavours and fragrances, food and animal nutrition, and personal care products (cosmetics). Its products and customer base allow it to be less reliant on any one industry, protecting it from any industry-specific slowdown.

Process Innovation
The company is among the leading companies in India to commercialise the use of environmentally friendly processes to produce specific specialty chemicals in large quantities. It has gotten to this point by maximising the utilisation of conventional raw materials, boosting yields, lowering effluent discharge, and increasing cost competitiveness. It can carry out these procedures at world scale capabilities based on the technical expertise it has gained over the years, which the management believes to be difficult to reproduce and creates major barriers for new competitors. These technologies have been developed through process innovation and continuous R&D.

Strong, Long-term Relations with Key Clients
The company’s customers include direct end-use manufacturers as well as institutional distributors. The key customers include Bayer AG, SRF, Gennex Laboratories, Vinati Organics, and Nutriad International NV. Some of its customers have been associated with the company for more than a decade now. The company's ability to meet demand and quality at a reasonable pricing, has resulted in strong and long-standing ties with various global organisations.

Delivering consistently high-quality products is critical for consumer engagement. Customers may require several years to accept a supplier depending on quality control systems and product clearances from different agencies across jurisdictions. Customers are less likely to pursue alternate supply sources due to the resources required to engage with new suppliers, giving the company an advantage over new entrants who would need to make large investments and endure a long gestation period with potential customers in order to effectively compete.

Expanding Manufacturing Capacities
The company is in the midst of establishing two new manufacturing facilities in order to capitalise on the increasing demand for its products. The facility-III is being built near Kurkumbh, Pune, and will be utilised to produce Anisole and other performance chemicals, including MEHQ. The one unit of facility- has recently started operations, and the rest of the facility is still under development. The company recently received land in Kurkumbh, Pune, for facility-IV, where it plans to produce stabilisers and other intermediates for use in the pharmaceutical, flavour and fragrance, and agriculture industries. We anticipate it will take the corporation a long time to start operations at unit-IV.


Peer comparison

Particulars (FY21) Revenue CAGR (FY18 - FY21) OPM (%) PAT (%) RoE (%) RoCE (%) EPS PE (x)
Clean Science and Technology 28.58% 50.58% 38.71% 45.00% 60.50% 18.68 48.18
Camlin Fine Sciences 18.10% 15.74% 4.29% 8.53% 14.13% 4.13 46.97
Atul 2.02% 24.58% 17.57% 17.14% 24.78% 221.54 41.93
Vinati Organics 9.36% 37.02% 28.23% 17.45% 23.80% 26.20 76.44
Fine Organic Industries 9.81% 17.58% 10.62% 16.45% 22.14% 39.19 77.95
SRF 14.55% 25.53% 14.26% 17.47% 18.45% 202.35 37.26
Navin Flourine International 8.92% 26.22% 21.84% 15.76% 23.42% 52.02 72.92
PI Industries 26.20% 22.11% 16.13% 13.82% 22.13% 48.67 61.14


  • There are no patents on the company's catalytic techniques, and its intellectual property may not be sufficiently protected.
  • High customer concentration – Dependent on the successful relationship with its customers. Its top ten customers account for almost half of the revenues.
  • Does not enter into long-term agreements with majority of its customers. Similarly, the company does not have long-term agreements with its suppliers and therefore, any increase in cost and shortage of raw material, could impact the operations of the business.
  • High product concentration – Derives significant portion of its revenue from MEHQ (~48% in FY21).
  • Significant portion of the revenue is derived from limited number of markets such as China (37.12%), India (31.41%), Europe (13.82%), and the USA (11.47%). Any adverse developments in these markets could impact its business. Also, any adverse geopolitical conditions such as increased tensions between India and China, could impact its business and financial condition.
  • Foreign exchange risk: Majority of the revenue (~68%) is generated from exports. Also, its expenses are linked to foreign currency as well (~15% of the total expenses). Therefore, a substantial or frequent fluctuation in the exchange rate, may impact its financial conditions.

Company Description

Clean Science and Technology Limited (Clean Science) is engaged in the business of manufacturing specialty chemicals such as performance chemicals (MEHQ, BHA and AP), pharmaceutical intermediates (Guaiacol and DCC), and FMCG Chemicals (4-MAP and Anisole). In terms of installed capacity as of March 2021, the company is largest manufacturer of MEHQ, BHA, Anisole, and 4-MAP. It develops and applies clean chemistries based on in-house catalytic technology. As a result, most of its manufacturing processes either have no liquid discharge or merely discharge water.

Its speciality chemicals are used in a wide range of sectors and have a wide range of applications. Manufacturers and distributors in India, as well as other regulated foreign markets such as China, Europe, the United States, Taiwan, Korea, and Japan, are among the company's customers. Key customers include Bayer AG, SRF, Gennex Laboratories, Nutriad International NV, and Vinati Organics. Revenue from operations outside India accounted for 67.9% of total revenue in FY21. The company has two production facilities in India located at Maharashtra with a combined installed capacity of 29,900 MTPA as of March, 2021, and capacity utilisation of ~72% for FY21. Recently, the company has set up a third facility adjacent to its existing facilities and has been allotted the land for the construction of a fourth facility.

Chemical Use
MEHQ, BHA, Acrobyl Palmitate Performance Chem - Inhibitor, Antioxidants
Guaiacol, DCC Pharma Intermediates - Antiseptic & Dehydrate
4-MAP, Anisole FMCH Chem - Flavours & Fragrance
Particulars (Rs. in Cores) FY21 FY20 FY19
Revenue % Revenue % Revenue %
Performance Chemicals 354.77 69.23% 272.12 64.90% 249.04 63.32%
Pharmaceutical Intermediates 83.01 16.20% 64.38 15.35% 68.11 17.32%
FMCG Chemicals 63.22 12.34% 66.57 15.88% 61.23 15.57%
Other Products 5.95 1.16% 6.28 1.50% 6.47 1.65%
Other Operating Revenue 5.49 1.07% 9.96 2.38% 8.44 2.15%
Total 512.44 100.00% 419.31 100.00% 393.29 100.00%


The company is the leader in certain speciality chemicals in terms of manufacturing capacity and has been able to perform well on operational front in the last four years. The Revenue, EBITDA, and PAT has grown at a CAGR of 28.58%, 51.96%, and 59.49%, respectively, during FY18 – FY21. Its focus on product identification, process innovation, catalyst development, and measures towards backward integration have contributed to the growth and profitability. It also has strong customer relationships and some of its customers have been associated with the company for more than a decade. Its initiatives to expand its manufacturing base from currently two facilities to four in the long-term, would help in catering to the demand. Given the strong outlook of speciality chemical industry and company’s comparatively better financial performance amongst its listed peers, it could get a premium valuation. At the upper price band of Rs. 900, the issue is value at 48.2x of FY21 earnings. We recommend to “Subscribe” the issue.

Key Information

Use of Proceeds:
To make an offer for sale of equity shares aggregating to Rs. 1,546.62 crores; To achieve the share listing benefits on the BSE and NSE.

Book running lead managers:
Axis Capital Limited, JM Financial Limited, and Kotak Mahindra Capital Company Limited

Pradeep Ramwilas Rathi (Chairman and Non-Executive Director), Ashok Ramnarayan Boob (Promoter and MD), Siddhartha Ashok Sikchi (Promoter and Whole-time Director), Krishnakumar Ramnarayan Boob (Promoter and Whole-time Director), Parth Ashok Maheshwari (Promoter and Vice President), and Pratik Abhaykumar Bora (CFO)

Financial Statement

Profit & Loss Statement:- (Consolidated)

Year End March (Rs. in Crores) 2018 2019 2020 2021
Net Sales 241.07 393.27 419.30 512.43
Growth % 63.13% 63.13% 6.62% 22.21%
Material Cost 113.42 171.22 129.24 123.58
Employee Cost 16.01 24.86 31.01 43.56
Other Expenses 127.23 37.65 92.99 -167.14
EBITDA 73.87 136.61 185.58 259.19
EBITDA Margin 30.64% 34.74% 44.26% 50.58%
Depreciation & Amortization 7.60 11.03 13.71 17.21
EBIT 66.27 125.58 171.86 241.98
EBIT Margin % 27.49% 31.93% 40.99% 47.22%
Other Income 4.54 11.29 10.87 25.64
Interest & Finance Charges 0.56 0.33 0.41 0.33
Profit Before Tax - Before Exceptional 70.25 136.54 182.32 267.30
Profit Before Tax 70.25 136.54 182.32 267.30
Tax Expense 21.35 38.88 42.69 68.92
Effective Tax rate 30.40% 28.47% 23.41% 25.78%
Net Profit 48.90 97.66 139.63 198.38
Net Profit Margin 20.28% 24.83% 33.30% 38.71%
Consolidated Net Profit 48.90 97.66 139.63 198.38
Net Profit Margin after MI 20.28% 24.83% 33.30% 38.71%