Tatva Chintan Pharma Chem Ltd. - IPO Note


Tatva Chintan Pharma Chem Ltd. - IPO Note


Price range
Rs. 1073 – 1083
Issue Period:
Jul 16, 2021
Jul 20, 2021
July 16, 2021

Stock Info

CNX Nifty
Face value (Rs.)
Market lot
Issue size
Rs. 500 cr.
Public Issue
0.4616 cr. shares
Market cap post IPO
Rs. 2,380 – 2,400 cr.
Equity Pre - IPO
2.01 cr.
Equity Post - IPO
2.22 cr.
Issue type
Fresh Issue and Offer for Sale

Shareholding (Pre IPO)

Source: Ace equity, StockAxis Research

Shareholding (Post IPO)

Source: Ace equity, StockAxis Research

Key Strengths and Strategies

Leading Manufacturer of SDAs and PTCs
With a very few players in India and globally, Tatva Chintan is the largest producer and sole commercial manufacturer of SDAs in India and enjoys second-largest position globally. As per the RHP, the company’s key chemistries and products are gaining importance in the global market. The global tetramethyl ammonium hydroxide market is expected to grow at over 7% CAGR through 2020-25E with Korea and China dominating the market. However, with just a few players in the domestic market, the company has an opportunity to expand and explore the global market. The company has managed to build a market for itself in India and across the globe. On a domestic front, it is the only manufacturer.

Additionally, the company is witnessing recurring demand for its PTC products. During 2019-24E, the global PTC market is projected to expand at a CAGR of 5+% on the back of rising demand and adoption of green chemistry in organic synthesis. During FY21, the company’s revenue from sale of PTCs accounted for 27.17% (28.46% in FY20).

Global Presence with Wide Customer Base
The company supplies it products in India and exports to over 25 countries including the USA, China, Germany, Japan, South Africa, and the UK. During FY21, the revenue share from the exports was 70.6%. To facilitate its overseas operations, the company has two wholly-owned subsidiaries in the USA and Netherlands. The varied applications of the company’s products have aided in building a wide range of customer base as well as build on existing relationships by providing the clients with multiple product-oriented solutions for the varying requirements.

The company has long-standing relationships with marquee players across various industries. Its customers include Merck, Bayer AG, Asian Paints, Ipox Chemicals KFT, Laurus Labs, Tosoh Asia, SRF, Navin Fluorine, Oriental Aromatics, Atul, Otsuka Chemical, Meghmani Organics, Divi’s Laboratories, Hawks Chemical Company, Firmenich Aromatics, Jiangsu Guotai Super Power New Materials, and Jade Chem. Of the entire client base, more than half (53.14%) of the customers associate with the company from more than five years. The number of new customers and number of customers serviced by the company are:

Particulars FY21 FY20 FY19
Number of new customers 153 107 110
Number of customers served 508 445 444

Diversified Product Portfolio Requiring Strong Technical Know-how
Over the years, the company has diversified, expanded, and evolved its operations into manufacturing of pharmaceutical and agrochemical intermediates and other speciality chemicals. This expansion is primarily driven by evolving needs and R&D initiatives undertaken by the company’s customers. Basically, the products which the company manufacturers form a part of base raw material required for the manufacture of products of its customers. The company believes that its strengths lie in the quick turnaround in developing the product samples, following the receipt of request of the new product.

As of March, 2021, it offered 47 products under SDA product portfolio, 48 products under PTC product portfolio, 6 products under electrolyte salts for super capacitor batteries portfolio, and 53 products under PASC portfolio. Production of SDAs and electrolyte salts for super capacitor batteries requires strong technical know-how and sound technical expertise.

Strong Financial Performance
The company’s revenue from operations has grown at a CAGR of 30.4% during FY18 – FY21. During the same period, its EBITDA has grown a CAGR of 45.31% and EBITDA margin has improved from 15.9% in FY18 to 22% in FY21 (21% in FY20). Its consolidated PAT has also witnessed a growth of 59% during FY18 - FY21 and PAT margin has improved from 9.6% in FY18 to 17.4% in FY21 (14.4% in FY20). Further, its Post-tax RoCE and RoE stands strong at 25.6% and 31.5%, respectively as of March 2021.

Further Develop R&D Capabilities
The company has consistently invested in R&D capabilities and technologies. During FY20 and FY21, it has incurred R&D expenditure amounting to Rs. 3.99 crores and Rs. 5.11 crores, respectively. The company intends to further develop its R&D capabilities in order to enhance product portfolio. The R&D capabilities of the company has enabled it to expand the product portfolio from 72 products in FY11 to 154+ on FY21.

The company plans to use 1,887 sq. mts. of the 2,787 sq. mts. of land leased for premises in Vadodara to expand its R&D facility. Its goal is to identify and adopt cutting-edge technologies that will boost production, quality, and cost-effectiveness while also helping to make products more environmental friendly. It also intends to promote methods that use continuous flow chemistry and electrolysis to produce conventional products. The company believes that investing in R&D and expanding its R&D staff will create a long-term growth opportunity, allowing it to better match with predicted demand and better position itself to meet consumers' evolving needs.

Expand Existing Manufacturing Capacities
Over the years, the company has consistently grown its manufacturing and production capabilities and now it seeks to capitalise on the growth opportunities in the industry. The aggregate manufacturing capacity of the company has increased at a CAGR of 20.6% from an aggregate reactor capacity of 82 KL and zero Assembly Lines as of March, 2010 to 280 KL Reactor Capacity and 17 Assembly Lines as of March, 2021. Further, pursuant to the proposed expansion, the company intends to enhance the installed capacity by 200 KL and 14 Assembly Lines. The company believes that the expansion plans and strategy will allow to meet the anticipated increase in the demand for its products in the future and enable it to supply growing markets more efficiently and drive profitability.


Peer comparison

Name of the Company Revenue CAGR (FY18 - FY21) OPM (%) PAT (%) RoE (%) RoCE (%) EPS PE (x)
Tatva Chintan Pharma Chem 30.40% 22.00% 17.40% 31.49% 32.98% 26.02 41.63
Aarti Industries 5.79% 21.78% 11.62% 14.94% 13.56% 15.02 56.89
Alkyl Amines 26.33% 34.63% 23.77% 37.27% 55.64% 57.91 65.01
Navin Flourine International 8.92% 26.22% 21.84% 15.76% 23.42% 52.02 73.97
Vinati Organics 9.36% 37.02% 28.23% 17.45% 23.80% 26.20 73.08
Fine Organic Industries 9.81% 17.58% 10.62% 16.45% 22.14% 39.19 76.93


  • Depends on the limited number of customers for significant part of the revenue. Its top 10 customers contributed 60% to its revenue in FY21 (58.4% in FY20).
  • Does not have long-term agreements with most of the customers. Loss of one or more customers or reduction in demand could adversely impact the business.
  • Operates in a competitive business environment. Competition from existing players and new entrants and consequent pricing pressure could impact the business and financial conditions.
  • Increase in cost of raw material. Cost of raw materials consumed was 50.24% of revenue in FY21. The company does not have long-term agreements with most of the raw material suppliers.
  • The company is exposed to forex fluctuations as exports account for 70.6% of sales in FY21 (76.7% in FYF20).

Company Description

Incorporated in 1996, Tatva Chintan Pharma Chem (Tatva Chintan) is engaged into manufacturing and selling of speciality chemicals. It manufactures structure directing agents (SDAs), phase transfer catalysts (PTCs), electrolyte salts for super capacitor batteries, and pharmaceutical and agrochemical intermediates and other specialty chemicals (PASC). It is the largest and only commercial manufacturer of SDAs for zeolites in India as well as second-largest, globally. Additionally, it is one of the leading global producers of entire range of PTCs. As of March 2021, the company has two manufacturing facilities located in Ankleshwar and Dahej in Gujarat with an installed reactor capacity of 280 KL and 17 Assembly Lines.

The company’s products are widely applicable in various industries such as automotive, petroleum, pharmaceutical, agro chemicals, paints and coatings, dyes and pigments, personal care and flavour and fragrances industries. Apart from doing business in India, the company also exports its products to more than 25 countries and revenue share of exports to total revenue was 70.58% in FY21.

Business Verticals

Particulars (Rs. in Crores) SDAs PTCs Electrolyte Salts for SCB PASC
Revenue (FY21) 120.24 81.61 3.04 91.22
% of Revenue 40.03% 27.17% 1.01% 30.37%
No. of Products (FY21) 47 48 6 53
India Largest & Only Commercial Manufacturer of SDAs for Zeolites Largest Producer Largest Producer NA
Globally Second-largest manufacturer of SDAs for Zeolites One of the Leaders NA NA
Applications Manufacture of zeolites and refining catalysts Pharma and Argo-chem intermediates Organic battery electrolytes, Automotive, Transportation, and consumer electronics Pharma and Argo-chem intermediates, paints & coatings, personal care, flavours & fragrances


Tatva Chintan is the largest and only commercial manufacturer of SDAs in India as well as second-largest, globally. SDA market remains highly consolidated with handful of players operating at the global level. Zeolites have an importance as it is used in emission control. It is also one of the leading producers of PTC globally. On financial front, the company has performed strong with high return ratios. The fresh issue is proposed to be utilised to fund the capex for expanding manufacturing facility at Dahej and upgrade R&D facility which is expected to aid the company to meet the anticipated increase in demand. The company has been acquiring new customers and in FY21 it acquired 153 new customers and given the higher costs involved of approving any changes in suppliers, it creates a high entry barrier. Also, the overall industry outlook remains strong. On the upper price band of Rs. 1,083, the issue is priced at 41.6x of FY21 earnings. We recommend to “Subscribe” the issue.

Key Information

Use of Proceeds:
The Company proposes to utilise the Net Proceeds from the Fresh Issue towards funding capital expenditure requirements for expansion of Dahej Manufacturing Facility, upgradation of R&D facility in Vadodara, and for general corporate purposes.

Book running lead managers:
ICICI Securities Limited and JM Financial Limited

Chintan Shah (Managing Director), Ajaykumar Patel (Whole-time Director), Shekhar Somani (Whole-time Director), and Mahesh Tanna (CFO)

Financial Statement

Profit & Loss Statement:- (Consolidated)

Year End March (Rs. in Crores) 2018 2019 2020 2021
Net Sales 135.46 206.31 263.24 300.36
Growth % 52.30% 52.30% 27.60% 14.10%
Material Cost 70.48 119.03 137.91 155.12
Employee Cost 9.54 16.31 20.53 24.13
Other Expenses 92.17 72.62 75.97 -179.25
EBITDA 21.49 34.12 55.27 65.94
EBITDA Margin 15.87% 16.54% 21.00% 21.95%
Depreciation & Amortization 3.58 4.02 4.79 6.73
EBIT 17.91 30.10 50.48 59.21
EBIT Margin % 13.22% 14.59% 19.18% 19.71%
Other Income 4.78 0.49 1.38 5.93
Interest & Finance Charges 3.16 3.95 4.27 4.45
Profit Before Tax - Before Exceptional 19.53 26.64 47.60 60.70
Profit Before Tax 19.51 27.39 47.60 60.70
Tax Expense 6.51 6.85 9.81 8.43
Exceptional Items -0.02 0.75 - -
Net Profit 13.00 20.54 37.79 52.26
Net Profit Margin 9.60% 9.96% 14.36% 17.40%
Consolidated Net Profit 13.00 20.54 37.79 52.26
Net Profit Margin after MI 9.60% 9.96% 14.36% 17.40%