Management

• Vipul Parekh (Chairman and Whole-Time Director)
• Kaksha Vipul Parekh (Whole-Time Director and Chief Financial Officer)
• Yash Vipul Parekh (Managing Director and Chief Executive Officer)
• Ajay Saha (Independent Director)
• Shrenik Kishorbhai Vora (Independent Director)
• Parag Ratnakar Gogate (Independent Director)
• Shubhangi Bhalchandra Umbarkar (Independent Director)

Use of Proceeds

The total issue size is Rs. 451.25 cr, which comprises of fresh issue of Rs 175 cr and Offer for sale (OFS) of Rs 276.25 cr. The company intends to utilize a portion of the net proceeds towards Prepayment and/or repayment, in full or in part, of all or a portion of certain outstanding borrowings availed the company and its subsidiary, Krystal Ingredients Private Limited (Rs 140 cr), and the rest for general corporate purposes

Competitive Strengths

Established manufacturer of specialty ingredients, including, essential oils, aroma chemicals and Value-Added Derivatives in India The company is an established manufacturer of specialty ingredients with over two decades of experience, producing essential oils, aroma chemicals, and value-added derivatives. It offers a diversified portfolio from Mother Ingredients to derivatives and holds a strong presence in mint, clove, eucalyptus, and other essential oils. In FY 2025, it ranked among the largest procurers of Piperita oil and processors of DMO, clove oil, eugenol, and eucalyptus oil. Market share stood at 12% for DMO, 65% for eugenol, and 58% for eucalyptus oil production in India, making it one of the largest producers of mint oil domestically.

Wide product range with continuous product development and R&D capabilities The company operates across four broad categories with 70 products as of March 31, 2025: mint and derivatives, clove and derivatives, phenol, and other synthetic and natural ingredients. It has expanded into citral-based products with new infrastructure at the Dahej facility to support large-scale production. Advanced processes and skilled manpower ensure efficient scaling from lab trials to full manufacturing. With a diversified portfolio across multiple price points, the company remains less dependent on single demand factors, strengthening customer relationships while enabling expansion into new categories and markets. Continuous product development supports competitiveness in a fragmented industry landscape.

In-house manufacturing and R&D capabilities have contributed towards its track record of product innovation and launches and assisted it with maintaining consistent product quality The company’s R&D capabilities play a crucial role in innovation, product improvement, and manufacturing quality. Complex chemistries such as Grignard’s, Friedel-Crafts, cross-coupling, photochemical reactions, and green chemistry are applied, alongside advanced technologies like high-pressure reactions, process automation, and fractional distillation. A dedicated R&D facility in Maharashtra, supported by 13 scientists, focuses on forward and backward integration. Key developments include citral chemistry, effluent-free processes for anisole and synthetic anethole, menthol cooling agents, and guaiacol-to-eugenol derivatives using in-house catalysts. These innovations have strengthened sustainability and global competitiveness, with backward integration improving control, customization, and specialty product development, setting benchmarks in clean chemical processes.

Long standing relationship with well-established customers in India and globally The formulated flavours and fragrances segment remains dominated by large global suppliers, creating high entry barriers. Over two decades, the company has built strong ties with global and Indian customers including Colgate-Palmolive, Dabur, Patanjali, SH Kelkar, Rossari Biotech, Symrise, dōTERRA, Ventos So Brasil, and Anhui Hautian Spices. It holds a strong presence in oral care through customers like Colgate, Dabur, and Patanjali. A supply agreement with dōTERRA since 2019 ensures annual minimum volumes and quality commitments. In the last three fiscals, the company served 451 customers globally and domestically, with customization capabilities driving new product requirements and portfolio expansion.

Strategically located Manufacturing Facilities with focus on sustainability / Experienced Promoters and management team The company operates three facilities in Uttar Pradesh, Dadra & Nagar Haveli and Daman & Diu, and Gujarat, with an installed capacity of 5,346 MTPA as of March 31, 2025. The Budaun facility is located in India’s mint belt, while Silvassa supports exports via Nhava Sheva port. The Dahej facility is strategically placed near phenol suppliers and an effluent discharge ecosystem. Promoters Vipul Parekh, Kaksha Vipul Parekh, and Yash Vipul Parekh lead the company, supported by an experienced board and senior management. With 280 full-time employees and 15 contract workers, strong training, recruitment, and employee relations contribute to efficiency, sustainability, and growth.

Peer Comparison

Key Risks & Concerns

• A large share of revenue comes from a limited set of customers, with the top 10 customers contributing more than half of total revenue in Fiscal 2025. Dependence on a few key clients creates a concentration risk, and the loss of any of these relationships could negatively impact revenue flow and overall profitability. Such reliance makes the business vulnerable to changes in customer preferences, procurement strategies, or shifts in supplier policies by these companies.
• A significant portion of revenue is linked to dōTERRA Global Limited, which remains the single largest customer under a supply agreement valid until December 31, 2028. While the agreement provides visibility in the medium term, there is a risk that dōTERRA may choose not to continue sourcing after the term expires. Any disruption or termination of this agreement could materially affect financial performance, cash flow, and long-term stability.
• The business is also heavily dependent on mint and mint derivatives, which consistently account for nearly 70% of total revenue across the last three fiscals. This reliance on a single product category poses a major risk as any decline in demand, regulatory change, pricing pressure, or supply-side disruption in mint-based products could significantly affect revenue and profitability.

Outlook and Valuation

Gem Aromatics Ltd. is expanding manufacturing capacity, diversifying its product portfolio, and focusing on R&D. The company operates three facilities across Budaun, Silvassa, and Dahej, with ongoing expansion at Dahej to build one of the largest cooling agent capacities in India at 500 MT. Product innovation remains central, with additions such as safranal, damascene, and anethole supported by robust in-house R&D. Expansion into citral production, development of complex compositions, and widening chemistry capabilities position the company to capture higher client wallet share and address a broader market. With growing manufacturing integration and economies of scale, profitability is expected to strengthen further.

The company’s emphasis on sustainability and efficiency adds to its long-term appeal. Through green manufacturing initiatives such as vapour phase continuous reactions, Gem Aromatics has developed cost-efficient and environmentally friendly production methods that ensure zero hazardous effluent discharge. It is set to become India’s second-largest manufacturer of Anisole with 7,000 MT capacity, strengthening competitiveness through scale and clean technologies. Investment in SAP systems, automation, and data analytics enhances efficiency, quality assurance, and customer satisfaction. The company’s business is working capital heavy because of prolonged receivable days associated with exports, increased inventory of mint resulting from a restricted procurement period and a greater number of SKUs to meet client requirements. The company’s international footprint across the US, Europe, Asia, and Australia, along with plans for expanded warehousing abroad, offers significant export growth opportunities. The company derives 52% of its sales from exports. Of this, 31% of sales come from the US, making global expansion and the uncertainty surrounding US tariffs critical factors. Although management indicates that the tariff situation can be managed since some of their products are included on the exemption list, and global clients have multiple plant locations that can assist in re-routing, we need to closely monitor the US tariff impact on the company. The company is valued at a FY25 EV/EBITDA multiple of 21.7x, based on the upper price band, which looks expensive when compared with peers. Given the immediate challenges related to the unpredictability of US tariffs, investors might reevaluate the stock following the earnings report after its listing. Hence, we assign an Avoid rating to the issue.