Chemplast Sanmar sizzles on overall industry trend, Crisil’s positive rating

KS Badri Narayanan Chennai | Updated on October 05, 2021

Gives 25% return within 45 days to IPO investors

The recently (re)listed Chemplast Sanmar zoomed 12.50 per cent, thanks to overall buoyant sentiment towards specialty chemical stocks and a positive rating from Crisil.

According to analysts, shares of specialty chemicals have been sizzling on the bourses in the last few years due to strong volume growth in key business segments.

Demand from domestic as well export markets is increasing at a faster clip as production is shifting to India, said analysts.

The stock of Chemplast Sanmar has also benefitted from the overall positive mood towards the industry, they added. The Chemplast Sanmar stock on Monday closed at ₹674.80 on the BSE, a gain of 12.50 per cent over the Friday’s close. During the day, it hit a fresh high of ₹684, since its listing on August 24.

The stock has generated a return of almost 25 per cent for those who had invested through the IPO, within 45 days of listing. Immediately within a few days after a flat listing, the stock dipped to a low of ₹510.30 as against the IPO price of ₹541.

Fund buying

According to analysts, Chemplast Sanmar has attracted fund buying too post listing from both from domestic and foreign investors. Crisil's rating of A+ (Positive) for its long-term loan facility and A1+ (Positive) for its short-term facility (total loan of ₹700 crore) also lifted the sentiment, they added.

“The rating reflects Chemplast Sanmar’s (consolidated basis including 100 per cent subsidiary Chemplast Cuddalore Vinyl Ltd (CCVL)) established market presence in the poly vinyl chloride segment (PVC, both paste and suspension segments), diversified revenue stream catering to multiple end user industries, long standing relationship with customers and healthy demand prospects for its products,” said Crisil.

The rating also factors in the long vintage and experience of the promoters in the PVC and chemicals sector.

CSL’s financial risk profile is adequate and improving, benefitting from healthy cash generating ability, and a largely deleveraged balance sheet, with sizeable debt reduction taking place post the recently completed initial public offering (IPO).

These strengths are partially offset by part commoditised nature of products which lends variability to operating margins, Crisil further added.

Profitability of PVC and chlor alkali manufacturing companies depends on the prevailing PVC and ECU prices. Cyclical downturns have resulted in variations in operating profitability in the past for these players including CSL, it cautioned.

Published on October 04, 2021

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