Technichem Organics IPO Listing: Stock lists at 4% premium on BSE SME

Technichem Organics IPO Listing

Technichem Organics IPO Listing: Marginal Premium on Debut, Hits Upper Circuit Later

The highly anticipated IPO listing of Technichem Organics, a specialized chemical company, on the BSE SME platform on January 7, 2025, garnered significant attention from both retail and institutional investors.

While the stock’s debut on the stock exchange was somewhat underwhelming, it quickly gained traction, eventually hitting the upper circuit limit.

The shares opened at Rs 57.25, representing a modest 4% premium over the issue price of Rs 55 per share (upper price band), signaling investor confidence, albeit a conservative one.

However, as trading progressed, the stock surged by 5%, touching the upper circuit limit of Rs 60.11, a 9% increase from the IPO price.

Despite the initial tepid reception, the sharp rise later in the session signals a positive sentiment toward Technichem Organics, a company that manufactures a broad range of chemicals, specialty chemicals, pigment and dye intermediates, and air oxidation chemistry.

These products cater to several industries, including pharmaceuticals, agriculture, coatings, pigments, dyes, and other niche sectors.

This diverse product offering positions Technichem Organics as an essential player in the highly competitive chemical manufacturing sector.

IPO Subscription and Market Demand

The Technichem Organics IPO, which was launched to raise Rs 25.25 crore, opened for subscription on December 31, 2024, and closed on January 2, 2025.

The IPO offered 45.90 lakh new shares, with the price band set between Rs 52 and Rs 55 per share.

The offering saw overwhelming demand, evidenced by an eye-popping 425.09 times subscription overall.

This enthusiastic response from investors across all categories suggests strong market optimism surrounding the company’s growth potential.

• Qualified Institutional Buyers (QIBs): Subscribed 101.49 times the allotted portion
• Non-Institutional Investors (NIIs): Subscribed an astonishing 1,078.9 times
• Retail Investors: Subscribed 329.43 times

This overwhelming demand indicates strong investor confidence in Technichem Organics, driven by both the company’s promising product portfolio and its strategic growth initiatives.

The substantial over-subscription from institutional investors, in particular, points to the company’s perceived value and the potential for strong market performance in the medium to long term.

Promoter Background and Fund Utilization

The company is spearheaded by Bharat Jayantilal Pandya and Pandya Anilkumar Jayantilal, who serve as the promoters.

Their leadership and expertise in the chemical industry have played a key role in the company’s development and positioning in the market.

The company raised Rs 7.14 crore from anchor investors before the IPO launch, signaling institutional confidence in the company’s business prospects.

The proceeds from the IPO are earmarked for key strategic purposes, including:

1. Capital Expenditure (CapEx): A portion of the funds will be directed toward setting up a new manufacturing plant. This expansion is essential for increasing production capacity and meeting the growing demand for specialty chemicals in various industries.
2. Debt Repayment: Another significant portion of the funds will be used to repay existing debts, which will help reduce the company’s interest burden and strengthen its balance sheet.
3. General Corporate Purposes: A portion of the funds will also be allocated for general corporate purposes, enabling the company to maintain operational flexibility and invest in strategic growth initiatives.

Financial Performance and Outlook

While Technichem Organics has demonstrated strong growth in profitability, its financial trajectory has shown some volatility.

For the financial year ending March 2024 (FY 2024), the company posted a revenue decline of 8%, with annual revenue falling to Rs 46.96 crore from Rs 51 crore in the previous fiscal year.

This decline can be attributed to factors such as fluctuating demand in some of its key sectors, challenges in the supply chain, or pricing pressures in the chemical industry.

However, the company’s net profit showed a remarkable performance, increasing by 173%, jumping from Rs 1.72 crore in FY 2023 to Rs 4.72 crore in FY 2024.

This significant profit growth is largely driven by improved operational efficiency, cost optimization, and effective management of production costs, which have allowed the company to maintain profitability even amidst a decline in revenue.

In the first quarter of FY 2024-25 (April-June 2024), Technichem Organics reported revenue of Rs 14.87 crore, with a net profit of Rs 1.40 crore, signaling early signs of a recovery and improved performance.

These figures suggest that the company may be in the process of reversing its revenue decline, driven by strategic measures such as the expansion of its product line, improving market penetration, and enhancing the quality of its core offerings.

Key Risks and Challenges

Despite the positive outlook, Technichem Organics faces several risks and challenges that could impact its future performance:

1. Volatility in Raw Material Prices: The chemical manufacturing industry is highly dependent on raw material prices, which can fluctuate due to global supply chain disruptions, geopolitical issues, and changes in commodity prices. Any significant increases in raw material costs could adversely affect profit margins.
2. Regulatory Risks: As a company operating in the chemicals and specialty chemicals sector, Technichem Organics is subject to stringent environmental and safety regulations. Any changes in regulations or non-compliance could lead to legal liabilities or operational disruptions.
3. Competition and Market Conditions: The chemical industry is highly competitive, with both local and international players vying for market share. Fluctuating demand in key industries like pharmaceuticals, agriculture, and coatings could also pose risks to growth.
4. Debt Levels: Although the company is using the IPO proceeds to reduce debt, its ability to manage financial leverage and meet debt obligations in the future will be a critical factor in its long-term viability.

Market Sentiment and Future Prospects

Despite the initial lukewarm listing, the subsequent surge in the stock price to its upper circuit limit suggests a positive market sentiment towards Technichem Organics.

The company’s robust financials, effective cost management, and strategic use of IPO proceeds to expand its manufacturing capabilities and reduce debt have contributed to investor optimism.

The chemical industry, particularly specialty chemicals, is poised for growth, driven by increasing demand across sectors such as pharmaceuticals, agriculture, and consumer goods.

As Technichem Organics expands its production capacity and diversifies its product offerings, the company has the potential to capture a larger share of these growing markets.

Given the promising outlook for the chemical sector and the company’s sound strategic initiatives, Technichem Organics may continue to see upward momentum in its stock price, provided it can address its key challenges and maintain a steady path toward revenue growth.

Final Remarks

The listing of Technichem Organics on the BSE SME platform reflects a strong initial interest from investors, despite a modest debut.

With the stock hitting the upper circuit limit shortly after listing, investor confidence appears to be building, signaling a positive outlook for the company.

As the company continues to expand its operations, repay debt, and enhance its profitability, Technichem Organics may prove to be an attractive investment in the long run, particularly as the demand for specialty chemicals continues to rise.