Citichem India Limited IPO: A Look into the Latest Offering in the SME Market

Citichem India Limited, a prominent name in the supply of chemicals and bulk drugs, has launched its Initial Public Offering (IPO), amounting to ₹12.60 crores. The issue is entirely a fresh issue of 18.00 lakh shares, priced at ₹70 per equity share. The IPO opens on December 27, 2024, and closes on December 31, 2024, with BSE SME listing expected around January 3, 2025.

Key IPO Details and Subscription Information

Citichem India’s IPO has seen an excellent early response, with 25.89 times subscription on its first day, indicating strong investor interest. The lot size of this IPO is 2,000 shares, and retail investors need to invest a minimum of ₹1,40,000. For High-Net-Worth Individuals (HNIs), a minimum investment of ₹2,80,000 (2 lots) is required.

The market capitalization of Citichem India at the IPO price of ₹70 per share is ₹47.60 crores, with a Grey Market Premium (GMP) of ₹20, which suggests an expected listing price of ₹90 per share, indicating potential listing gains of 28.57%.

Citichem India’s Business and Market Position

Citichem India is primarily involved in the procurement, supply, and distribution of organic and inorganic chemicals, bulk drugs, and food chemicals. Serving various industries, including pharmaceuticals, aluminium, steel, textiles, paints, dairy, soap making, and adhesives, the company plays a key role in the supply chain of critical raw materials.

The company’s success is driven by its focus on quality products and a dedicated distribution team ensuring safe and efficient delivery. Additionally, Citichem India supplies food preservatives and chemicals under its own brand, contributing to its diversified revenue streams.

Financial Performance and Valuation Insights

Looking at the financial performance of Citichem India, the company has shown steady growth. For the fiscal year ending June 30, 2024, the company reported revenues of ₹149.07 lakhs, with an EBITDA of ₹28.39 lakhs and a Profit After Tax (PAT) of ₹19.95 lakhs. The previous fiscal years also reflect consistent growth, with revenues crossing ₹1,960 lakhs in FY 2023 and ₹2,094 lakhs in FY 2022.

In terms of profitability, the company’s Return on Capital Employed (ROCE) for FY24 stands at 21.47%, and Return on Equity (ROE) is 15.42%, indicating a strong performance relative to its industry peers. The P/E ratio of the company stands at 31.25x pre-issue and 42.56x post-issue, which is lower than the industry average of 60x, suggesting that the IPO is reasonably priced.

Investment Considerations and Recommendation

While the Grey Market Premium suggests an initial upside potential, the company’s financials show steady but modest growth. The P/E ratio and ROE indicate that Citichem India is priced attractively compared to the broader industry but may not offer significant upside based on its past financial performance.

Despite strong initial subscription numbers and a healthy GMP, our recommendation for retail investors is to avoid the IPO for listing gains. The valuation metrics and financial performance suggest that the company may not offer significant returns in the short term, though long-term growth could be possible as it continues to expand in the chemical and pharmaceutical industries.

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 and .The Current active IPO is Citichem IndiaAnya Polytech

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