Hindcon Chemicals NSE SME IPO Review (May apply)

Review By Dilip Davda on Feb 21, 2018

Hindcon Chemicals Ltd. (HCL) is primarily engaged in manufacturing of chemicals particularly for construction industry. It offers a wide range of chemical products which finds variety of applications in the construction sector. Company’s portfolio consists of over 100 products which can be broadly classified into Waterproofing additives for R.C.C. Structures, roof, basement, underground, Plasticizers and Super Plasticizers which are used in Concrete & Mortar mixtures, Concreting Aids which are admixtures/chemicals that provide special properties, Release, Corrosion prevention etc., Sodium Silicate which finds its application in various commodities such pharmaceuticals, building materials etc., Protective and Waterproofing Coatings for walls, roofs, swimming pool, water, Grouts & Repairing Mortar Admixtures which are used in grouting of underground, Shot Crete Aids which are used as accelerating admixtures for dry/wet concrete repair works etc.,  Floor Topping products which are used in making floors more concrete, Sealant Products which are used for sealing of cracks in structural members, Tile Adhesives which are used for fixing of ceramic & mosaic tiles on wall, Epoxy Grout & Mortar which are used for pressure injection into concrete, Foundry Aid which consists of sodium ligno based foundry grade compound, leather tanning, drilling fluid etc., Coating/Impregnation Product for exposed aggregate finish on surface, Cleaning Compound chemicals for removing rust from steel reinforcement, Expansion and Contraction Joint System Products which consist of injection etc.  HCL also undertakes waterproofing and rehabilitation jobs on works contracts basis.

To part finance its working capital and general corpus fund needs, HCL is coming out with a maiden IPO of 2760000 equity shares of Rs. 10 each at a fixed price of Rs. 28 per share to mobilize Rs.7.73 crore. Issue opens for subscription on 26.02.18 and will close on 28.02.18. Minimum application is to be made for 4000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue is solely lead managed by Hem Securities Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. Issue constitutes 26.96% of the post issue paid up capital of the company. Average cost of acquisition of shares by the promoters is Rs. 2.69 and Rs. 0.97 per share. Since inception till March 2000 it issued equity at par. Thereafter, it raised further equity in the price range of Rs. 50 to Rs. 500 per share between March 2003 and March 2012. It has also issued bonus shares in the ratio of 4 for 1 in August 2017. Post issue, its current paid up equity capital of Rs.7.48 crore will stand enhanced to Rs. 10.24 crore.

On performance front, HCL has (on a consolidated basis) posted turnover/net profits of Rs. 30.92 cr. / Rs. 0.35 cr. (FY14), Rs. 34.96 cr. / Rs. 0.34 cr. (FY15), Rs. 33.45 cr. / Rs. 0.85 cr. (FY16) and Rs. 34.30 cr. / Rs. 2.10 cr. (FY17). While it suffered a setback in top line for FY 16, it posted higher bottom line. On a static top line, it posted bumper net for FY 17 which is surprising. More surprising is the first half for which it has earned net profit of Rs. 2.16 crore on a turnover of Rs. 18.13 crore. For last three fiscals, it posted an average EPS of Rs. 3.61 and an average RoNW of 9.65% on an equity base of Rs. 1.50 crore as on 31.03.17. Issue is priced at a P/BV of 0.69 on the basis of its consolidated NAV of Rs.40.32 as on 30.09.17 and at a P/BV of 0.81 on the basis of its post issue consolidated NAV of Rs. 34.42. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 7.  As per offer documents HCL has shown Pidilite, BASF and Gillandars as its peers on broad base comparison which are trading at a P/E of 51, 41 and 31 respectively. These peers are not strictly comparable with the model of HCL and are thus misleading. Industry composite P/E is around 31.

On merchant banker’s front, this is 35th mandate in last three fiscals (overall 44th mandate so far). Out of last 10 listings, 1 opened at 2.7% premium and the rest at 20% premiums to offer price on the listing day.


Conclusion / Investment Strategy

Sudden jump in bottom line on a static top line is surprising and raising concern. However, based on performance it appears a lucrative bet. Investment may be considered for long term.

Review By Dilip Davda on Feb 21, 2018

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the past, SME IPOs drew the attention of investors across the board. However, as SME issues have entry barriers and continued low preference from the broking community, any reader taking decisions based on any information published here does so entirely at own risk. The above information is based on information available as on date coupled with market perceptions. The Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

Hindcon Chemicals IPO FAQs

  1. 1. Why Hindcon Chemicals IPO?

    The initial public offer (IPO) of Hindcon Chemicals Limited offers an early investment opportunity in Hindcon Chemicals Limited. A stock market investor can buy Hindcon Chemicals IPO shares by applying in IPO before Hindcon Chemicals Limited shares get listed at the stock exchanges. An investor could invest in Hindcon Chemicals IPO for short term listing gain or a long term.

  2. 2. How is Hindcon Chemicals IPO?

    Read the Hindcon Chemicals IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Hindcon Chemicals IPO what should investors do?

    Hindcon Chemicals IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Hindcon Chemicals IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is Hindcon Chemicals IPO good?

    Our recommendation for Hindcon Chemicals IPO is to subscribe for long term.

  5. 5. Is Hindcon Chemicals IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Hindcon Chemicals IPO.

  6. 6. When will Hindcon Chemicals IPO allotment status?

    The Hindcon Chemicals IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Hindcon Chemicals IPO allotment status to check.

  7. 7. When will Hindcon Chemicals IPO list?

    The Hindcon Chemicals IPO will list on Friday, March 9, 2018, at NSE SME.








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