What you must know about Yasons Chemex Care IPO

Yasons Chemex Care Ltd, is an SME IPO on the NSE which is opening for subscription on 24th July 2023. The company, Yasons Chemex Care Ltd, was incorporated in in the year 2017 to manufacture dyes and pigment paste and other related FMCG products. Under the dyes segment, Yasons Chemex Care Ltd manufactures a wide spectrum of dyes including basic dyes, reactive dyes, food colourants, direct dyes, and VAT dyes. They even offer multiple shades of these dyes for choice. The company, Yasons Chemex Care Ltd, is into the manufacture and supply of natural dyes, synthetic dyes, and synthetic organic dyes.

The FMCG segment of the company also manufactures products such as hair oil, perfumes, deodorant, handmade soap, and sanitizers under its proprietary brand name PLXO. It also trades in dyes, pigment, and pigment paste for meeting customer requirements. Yasons Chemex Care Ltd has 2 manufacturing facilities in Gujarat. It manufactures dyes and pigment paste at GIDC, Vatva, Ahmedabad with 650 MTPA capacity. FMCG products are made at its Sanand facility with installed capacity of 350 LTR per annum. The fresh funds will be used by the company to fund its working capital needs and general corporate purposes.

Key terms of the Yasons Chemex Care IPO

Here are some of the highlights of the Yasons Chemex Care IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 24th July 2023 and closes for subscription on 26th July 2023; both days inclusive.
   
• The company has a face value of ₹10 per share and the issue price for the fresh issue portion has a fixed price of ₹40 per share.
   
• The company will issue a total of 51.42 lakh shares at the price of ₹40 per share aggregating to a total fund raising of ₹20.57 crore.
   
• The company has allocated 50% of the issue size for the retail investor while the balance 50% is allocated to HNI / NII investors. The market maker portion will be carved out separately. There is a market maker allocation of 270,000 shares.
   
• The minimum lot size for the IPO investment will be 3,000 shares. Thus, retail investors can invest a minimum of ₹120,000 (3,000 x ₹40 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO.
   
• HNI / NII investors can invest a minimum of 2 lots comprising of 6,000 shares and having a minimum lot value of ₹240,000. There is no upper limit on what the HNI / NII investors can apply for.
   
• Like every SME IPO, this issue also has a marketing making portion with a market maker portion allocation of 270,000 shares. The market maker to the issue will provide two-way quotes to ensure liquidity on the counter.
   
• The company has been promoted by Yash Chemex Ltd and the promoter stake in the company stands currently at 70.16%. Post the IPO, being a fresh issue of shares, the promoter stake will be get diluted proportionately.

While Fedex Securities Ltd will be the lead manager to the issue, KFIN Technologies Ltd will be the registrar to the issue.

Key dates to be aware of in the Yasons Chemex Care IPO (SME)

Yasons Chemex Care IPO opens on Monday, July 24th, 2023 and closes on Wednesday July 26th, 2023. The Yasons Chemex Care Ltd IPO bid date is from July 24th, 2023 10.00 AM to July 26th 2023, 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is the 26th of July 2023.

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account.

Financial highlights of Yasons Chemex Care Ltd

The table below captures the key financials of Yasons Chemex Care Ltd for the last 3 completed financial years.

Data Source: Company DRHP filed with SEBI

The profit margins have been fairly low in single digits and the sales growth has been quite erratic. However, the company has an established model with a matured market for its dyes and chemical products. Investors must remember that this is a traditionally low margin business. That could be an overhang on valuations. Also, the competition from the unorganized segment can be quite high in this space.

In 3 out of the last 4 years, the company has generated negative cash from operations. This is largely on account of working capital pressures that the company has been facing, especially in the light of the supply chain constraints in the recent past. In terms of valuation, the stock valuation is less than 20 times forward valuation, so it is not too expensive. However, it remains a high risk investment for the investors.