Archean Chemicals Pvt Ltd a speciality marine chemical company got listed on 21 Nov. Being a market leader the expectation was high, to be listed 31.20 % higher than the issue price of Rs.407. However it missed the mark by a lot. It was listed at Rs.450 at the start of the trading day and later picked up to reach a high of Rs.476, finally ending at Rs.458.15. This is a mere 12% higher than the issue price, far below expectations considering that the grey market premium (GMP)was Rs.124.
Archean Chemical Industries is the largest exporter of bromine and industrial salt in the year 2021.As per the company’s website it was the first of its kind with an integrated plant in India to produce Industrial Salt, Bromine and Sulphate of Potash. It harnesses Seawater (Arabian Sea) to derive valuable raw materials that are used in a wide range of industries. It prides itself on being very environmentally conscious. Causing minimal environmental harm in the processes it uses. It supplies bromine and industrial salt to 13 countries across the globe. It also has 24 clients in India.
Experts were bullish for this listing for both short term and long term. The company has a monopoly in its sector as the entry barrier is very high for this industry. Archean chemical Industries a Chennai based company was initially started with an investment of Rs.225 million. It has a robust business model with an established infrastructure and focus on environmental safety. Globally, it has one of the lowest costs of production for both bromine and industrial salt.
It has several positives like consistent top-line and bottom-line growth and excellent cost efficiencies. Its expansion plans in product lines and capacities are making it a favourite amongst the experts. Although it has a few negatives like its high debt-to-equity ratio which was 3.25 in financial year 2022, high product, key customer concentration and restructuring of loans during 2018 it is still a good bet for the medium term and long term.
Archean Chemicals IPO opened on 9th November and closed on 11th November. The minimum lot size was 36 shares. It was oversubscribed both in the retail and institutional categories. The retail shares were oversubscribed 9.96 times and the institutional ones by 48.91 times. A little over 98.20 lakh shares were traded on the NSE and 5.44 lakh shares on the BSE. The IPO raised Rs 1,462 crore in total. Some of this capital will be used for the redemption of the NCDs issued earlier by the company. The remaining for corporate use.
Retail investors who managed to get an allotment should ideally have cashed in on the listing gains. Stop loss for allottees should be ideally Rs.440. The company has good prospects hence it makes sense to hold it for the long term for those who have bought the shares on the first day of trade. It is expected to rise to Rs.640 per share in a year’s time, suggested a top broker.
All in all, although the initial listing of Archean Chemical stock was extremely lacklustre owing primarily to high expectations, it does hold promise in the year ahead mainly because of its strong management, its concern for the environment and phenomenal growth prospects.
Recently Bikaji Foods IPO also got listed at a good premium despite market fluctuations.