A Deep Dive into the Shiv Texchem IPO

Table of Contents

Shiv Texchem Limited IPO Introduction

Shiv Texchem Limited is a chemical distribution business-based company that is going to float in the stock market as part of its upcoming Initial Public Offering or IPO. The IPO is far more than just a fund generation process; it’s also the stepping stone toward crossing a milestone in the growth and expansion curve of the organization. Shiv Texchem deals with hydrocarbon-based chemicals import and subsequent distribution. The company, therefore, plays an important role in various industries relating to paints, coatings, and specialty polymers, among others.

Shiv Texchem Limited: Company Overview

Shiv Texchem Limited IPO Details

The long waited SME IPO, Shiv Texchem Limited opens up for subscription between Oct 8, 2024 and Oct 10, 2024. Those interested investors can garner the equity of this SME IPO at between Rs 158 to Rs 166 per share. The fresh issue size of the entire SME IPO is of Rs 101.35 cr. The minimum lot size required for applying to this IPO is 800 shares. The IPO is primarily to raise finance for long-term working capital needs and general corporate purposes in a bid to strengthen the company’s operational capabilities.

Event	Date
IPO Opens	October 8, 2024
IPO Closes	October 10, 2024
Basis of Allotment Finalized	October 11, 2024
Refund Initiation/Shares Credited	October 14, 2024
Listing Date	October 15, 2024

Here’s the table summarizing details regarding the Shiv Texchem Limited IPO, based on the provided information:

IPO Details	Information
Company Name	Shiv Texchem Limited
IPO Size	₹101.35 crore
New Issue	₹101.35 crore (61.06 lakh equity shares)
Price Band	₹158 – ₹166 per share
Face Value	₹10 per share
Listing Exchange	BSE SME
Minimum Bid Lot	800 shares
Minimum Investment	₹132,800 (at the lower price band)
Issue Type	Book-built Issue
Issue Category	SME IPO
QIB Allocation	50%
NII Allocation	15%
Retail Allocation	35%
Company Sector	Import and Distribution of Hydrocarbon-based Chemicals

Financial Performance and Health

Analyzing Shiv Texchem’s financial health gives a promising future for investors. The company has shown a strong growth of revenue by 37% and profit after tax of 88% in the fiscal year closing March 2024 compared to the previous fiscal year. This financial standing brings along crucial questions about the strategic positioning of this company in its market and the efficiency of its operations as pillars that would facilitate future growth and investor trust.

Here are Shiv Texchem Limited’s last three years of financials over the fiscal year:

Financial Metric	31 Mar 2024	31 Mar 2023	Change (%)
Assets	₹79,868.05 L	₹60,234.98 L	+32.6%
Revenue	₹1,53,668.79 L	₹1,11,866.98 L	+37.4%
Profit After Tax	₹3,011.30 L	₹1,602.72 L	+88.0%
Worth	₹19,287.69 L	₹12,276.39 L	+57.1%
Reserves and Surplus	₹19,074.36 L	₹12,116.39 L	+57.4%
Total Borrowing	₹29,665.25 L	₹32,914.39 L	-9.9%

Bottom Line Summary :

Asset Growth: The assets have grown by a healthy 32.6% compared to the previous period, thereby reflecting increases in the scales of operations or investment basis.
Revenue Growth: Revenue is up 37.4%, evidencing an increase in demand of Shiv Texchem’s products or efficient entry into new market, or product lines.
Profitability: PAT has more than doubled; PAT is almost double the previous year at 88% growth, which is evidence of both revenue increase as well as operational efficiency or profit-margin expansion.
Net Worth and Reserves: Both show very high growth. Net worth has increased by 57.1%, and there was 57.4% of growth in reserves, which implies earned profits retained inside the company.
Total Borrowing Decreased: The decrease in total borrowings by 9.9% is a sign that the health of the firm is improving or that it is practicing good prudential debt management, thereby reducing interest expenses and making the balance sheet look more robust.

Altogether, the company has demonstrated an excellent growth, especially in profitability and assets expansion, and simultaneously reduced financial liabilities. Such financial performance would depict an enterprise that is not only growing but growing profitably too, which can be a positive factor for those considering investing in it as and when it goes for public listing. Apart from that, significant reduction in borrowings against enhanced net worth makes the corporation even more stable from the financial perspective and, hence, in a better position to grow and gain the confidence of investors.

Shiv Texchem Limited IPO GMP and Subscription

Based on the above information presented:

Grey Market Premium (GMP):

The GMP of Shiv Texchem Limited’s IPO stands at ₹35. That means the market is willing to pay ₹35 over and above the issue price, which reflects a positive attitude towards the IPO.

Subscription Details:

QIBs:
Subscription: 3.11 times
This reflects healthy institutional interest, and it is a reflection of the strength of their fundamentals or prospectus going forward.
Non-Institutional Buyers:
Subscription of 2.28 times
Here, the interest is moderately reflected, showing a genuine but not very enthusiastic response from high net worth individuals and corporate bodies.
Retail Investors:
Subscription of 4.83 times
Retail investors have shown significant interest in the IPO, which often goes well for retail participation and could indicate good listing gains.
**Overall Subscription:
The IPO has been subscribed 3.79 times; this means the offer has seen bids for nearly four times the number of shares issued. This degree of oversubscription, generally it bodes well for a successful IPO in terms of demand.

Interpretation:

Positive Market Sentiment: ₹35 GMP mentions positive market sentiment around listing price anticipation by the group, hence possible listing gains for investors.
Confidence Level among Investors: Subscription Rates shown by QIB and retail indicates overall high confidence in the Company. Retail investors look for listing gains, while for QIBs, it is more a long-term play.
Listing Expectations: Albeit the GMP and subscription rates, one would expect it to list at a premium; however, the actual performance on the listing day would also be influenced by market conditions at that particular time.
Investment Consideration: This sort of IPO with a high rate of subscription and positive GMP would be more attractive for short-term gains on listing to investors. But to spend the money for long-term investment, the financial health of the company, the industry’s position, growth prospects, and overall market conditions may need to be taken into consideration.

Note:

Market Volatility: Performances of IPOs are said to get affected by some broader market sentiments prevailing during the period of listing.
Due Diligence: Always advised before investing, not only for GMP and subscription rates but also for the company fundamentals, competitive landscape, and macro-economic factors.

Remember, the IPO looks promising based on these numbers; however, all investments carry risks, and market behaviors cannot be predicted.

Shiv Texchem Limited IPO EPS and PE Ratio

Based on the data available on or before October 3, 2024, we find the following about Shiv Texchem Limited IPO‘s EPS (Earnings Per Share) and PE Ratio (Price to Earnings Ratio):

EPS: EPS figures for the current year are not disclosed in the details of Shiv Texchem Limited. From the financial statements given, we can infer that the company has observed remarkable growth on revenue as well as PAT. For instance, PAT has grown by an astronomical percentage from FY23 to FY24. Considering an EPS:
PAT for FY24: ₹3,011.30 lakh (given with the financials).
Number of Shares: Assuming an issue size of 61,05,600 shares after IPO. Assuming the current shares were considered, then we need issued shares before IPO. However this is something that wasn’t put out. To simplify, let us assume the same and calculate a rough EPS by just using post-IPO issued shares for newly issued shares:
EPS = PAT / Number of Shares = ₹3,011.30 lakh / 61,05,600 shares ≈ ₹4.93 (if all the PAT was attributed to these new shares, which is not accurate but gives an idea).
PE Ratio: The PE ratio calculation directly involves the EPS and the stock price. Given the price band for the IPO was ₹158 to ₹166 per share:

If we take the higher price band at ₹166 and the simplified EPS calculation above:

PE Ratio = Stock Price / EPS = ₹166 / ₹4.93 ≈ 33.65, an indicative and not an exact figure because of the approach used to calculate EPS.

This PE ratio would be quite high for an SME, suggesting either high growth expectations or potentially overvaluation, though the actual PE would be lower considering the total number of shares before the IPO.

With these insights:

The Shiv Texchem Limited IPO is calibrated with growth expectations that have been well indicated in the financial performance and industry positioning of the firm. Actual EPS and the ensuing PE would be more correct once all shares, both before the IPO and afterward, are considered.

The reader should also look for total share outstanding post-IPO, detailed financial projections, and conditions of the market at the time of listing for making an investment decision. These numbers here are just a rough guide and must be verified through proper financial information.

Investment Risks and Opportunities

Shiv Texchem Limited IPO Opportunities

Chemicals: Next to oils, the chemical industry is substantial by itself. Opportunity wise, there are vast opportunities in the chemical industry. Growth potential is very important, especially for segments handling specialty and niche chemicals. This opportunity resonates well with Shiv Texchem, primarily hydrocarbons. Often demand for specialty chemicals arises from pharmaceuticals, electronics, and advance materials, which may be perceived to grow.

Niche Market Leadership: Shiv Texchem can especially identify niche markets such as chemicals or industries and establish leadership in them. This strategy, to some extent, eliminates competition since premium pricing will be based on specialized knowledge and service which create better profit margins and sustainable competitive advantage.

Risks for Shiv Texchem Limited IPO

Raw Material Price Sensitivity: The chemical industry is rather sensitive to any price increases of raw materials. For Shiv Texchem, an appropriate increase in the price of hydrocarbons or other base chemicals may squeeze its profitability unless such price hikes are passed on to customers, which is impossible most of the times.
Rigorous Competition: The chemicals market is huge, and there is intense competition. Large companies with a huge portfolio or smaller companies with a low-cost structure can potentially shave off Shiv Texchem’s market share. To retain their market position, they need to constantly innovate and cut costs and maybe even integrate vertically.

Regulatory and Environmental Hazards: The chemical industry is highly regulated due to environmental, health and safety reasons. Changes in regulations aimed at reducing emissions or any other initiatives toward sustainability could be costly to implement. Failure to meet, or failure to predict regulatory changes may cause plant shutdowns or hefty fines.

Market Risk: Chemicals are the product of general economic down cycles or industry-specific slowdown. Industrially-dependent markets using chemicals may defer investment or reduce their production activities during periods of uncertain economies, which will reflect directly on Shiv Texchem’s sales.

Technological and Innovation Risks: The chemical sector is also driven by technology and innovations. Shiv Texchem might miss the train in the use of new production techniques, recycling technologies, and sustainable practices, making current processes obsolete or less competitive.

Conclusion

An investment in Shiv Texchem Limited through its Initial Public Offering is a two-edged sword of great growth prospects aligned with considerable risk factors. Shiv Texchem Limited, if it is perceived to be focused on niche markets and with no obviously worrying health of finances, will deliver high returns, mainly due to its current position in the market. Still, such prospects need to be weighed against the backdrop of volatility in markets, regulatory changes, and competitive pressures for prospective investors. All these would be crucial for making the right decision to invest in Shiv Texchem’s IPO, considering the market conditions prevailing at that point of investment.