The Citichem India IPO, which opened on December 27, 2024, has attracted significant attention from investors. The Fixed Price Issue, amounting to ₹12.60 Crores, consists entirely of a Fresh Issue of 18 Lakh shares priced at ₹70 per equity share. With the subscription period closing on December 31, 2024, the IPO has already been subscribed 66.39 times by December 30, 2024, indicating a high demand for the stock.

The market capitalization of Citichem India at the IPO price of ₹70 per share stands at ₹47.60 crore. The lot size for retail investors is set at 2,000 shares, with a minimum investment requirement of ₹1,40,000. For High-Net-Worth Individuals (HNIs), the minimum investment is ₹2,80,000, corresponding to two lots (4,000 shares).

Company Overview and Financial Performance

Citichem India is a prominent player in the procurement and supply of chemicals across various industries, including pharmaceuticals, textiles, dairy, paints, and food. The company has built a reputation for providing organic, inorganic, and specialty chemicals, with a strong presence in the pharma and food industries.

The financials for the fiscal years ending June 30, 2024 and prior indicate a steady growth trajectory. The revenue for FY24 stood at ₹149.07 lakh, while the Profit after Tax (PAT) was ₹19.95 lakh. Despite fluctuations in revenue in earlier years, Citichem India has shown improving profitability with EBITDA rising from ₹44.71 lakh in FY22 to ₹179.29 lakh in FY23.

Valuation and Grey Market Premium

Citichem India’s P/E ratio is relatively high compared to industry standards, with a pre-issue P/E of 31.25x and a post-issue P/E of 42.56x, while the industry average is around 60x. The company’s ROCE stands at 21.47%, and the ROE is 15.42%. These figures point to efficient capital utilization, though the high P/E ratio suggests that the stock is fully priced.

The Grey Market Premium (GMP) for Citichem India is ₹20, indicating an expected 28.57% listing gain. While the GMP shows potential for listing gains, it is crucial to consider that the valuation of the company could limit the upside potential once the shares are listed.

Subscription Status and Investor Sentiment

The live subscription status of the IPO as of December 30, 2024, shows 66.39 times subscription, reflecting strong interest from investors. However, this high subscription should be weighed against the relatively high IPO pricing and valuation metrics.

Should You Invest in Citichem India IPO?

Given the solid subscription numbers and decent Grey Market Premium, there may be some opportunity for listing gains. However, the high valuation and pricing at a premium suggest that the IPO may not be the best bet for long-term investment or short-term profits.

We recommend that cautious investors avoid this IPO if seeking listing gains and consider waiting for further market movements before taking a position in the stock.

Takeaway

The Citichem India IPO has seen strong demand and offers a decent Grey Market Premium, but its high valuation and P/E ratio raise concerns for potential listing gains. With better IPOs available at lower valuations, we advise investors to avoid the IPO in favor of other opportunities that may offer greater upside potential.

The Upcoming IPOs in this week and coming weeks are Indo Farm, Technichem Organics, Leo Dry Fruits, Davin Sons, Fabtech Technologies and Standard Glass Lining.

The Current active IPO is Citichem India and Anya Polytech.

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