Bhatia Colour Chem coming with an IPO to raise upto Rs 40 crore

Bhatia Colour Chem

• Bhatia Colour Chem is coming out with an initial public offering (IPO) of 5000000 Equity Shares of face value of Rs 10 each for cash at a fixed price of Rs 80 per equity share.
  
• The issue will open for subscription on March 14, 2022 and will close on March 16, 2022.
  
• The shares will be listed on SME Platform of BSE.
  
• The share is priced 8.00 times higher to its face value of Rs 10.
  
• Book running lead manager to the issue is Interactive Financial Services.
  
• Compliance Officer for the issue is Hiral Shah. 
  

Profile of the company

The company is in trading & manufacturing of Chemicals, Dyes and Auxiliaries products. It produces finished Textile Auxiliaries & Chemicals by mixing basic Textile Auxiliaries & Chemicals with its standardised formulation of chemicals with the help of stirrers. It produces Foil Binders, Printing Inks and Zari Binders in company with the variety of ranges and specialisation as per the demand of the client. Its main strength of the products are formulation of chemicals and quality maintenance. The company being trader of Dyes and Auxiliaries products, supply‘s its products to mainly the processing house of the textile industries for the printing of the textile. Its products are mainly useful for the printing on Textile materials like Polyester & Cotton which includes, ambos on T shirts, Zari Prints and shading.

The company is manufacturing the Foil Binders of different specifications as per the requirements of the processing houses. The product manufactured by it is innovative and compete with the market on the price range. The quality of the company’s product is accepted by the processing houses and they got desired results by using its product satisfactorily, on account of that, it has developed cordial relation with the customers and got repetitive orders.

Proceed is being used for:

• Acquiring partnership firm Polychem Exports.
  
• Working Capital
  
• General Corporate Purposes
  

Industry overview

India‘s chemicals industry is de-licensed, except for few hazardous chemicals. In the Indian chemical industry, alkali chemicals have the largest share with 69% in the total production; production of polymers accounts for 59% of the total production of basic key petrochemicals in 2019. The chemical industry is expected to contribute $ 300 billion to India‘s GDP by 2025. A revival in domestic demand and robust exports will spur a 50% YoY increase in the capex of specialty chemicals manufacturers in FY22 to Rs 6,000-6,200 crore ($ 815-842 million). Revenue growth is likely to be 19-20% YoY in FY22, up from 9-10% in FY21, driven by recovery in domestic demand and higher realizations owing to rising crude oil prices and better exports. Chemicals industry in India covers >80,000 commercial products. India‘s chemicals industry is de-licensed, except for a few hazardous chemicals. Specialty chemicals constitute for 22% of the total chemicals and petrochemicals market in India. Demand for specialty chemicals is expected to register 12% CAGR in 2019-22. Specialty chemical companies are seeking at import substitutions while exploring export opportunities to accelerate their business. The Indian dyes and pigments market is projected to reach $ 63 billion by 2022, accounting for about 16% of the global dye production.

India holds a strong position in exports and imports of chemicals at a global level and ranks 14th in exports and 8th in imports at global level (excluding pharmaceuticals). The chemicals industry in India covers more than 80,000 commercial products with overall market size standing at $ 178 billion in 2018-19. The industry is expected to grow at 9.3% to reach $ 304 billion by 2025 on the back of rising demands in the end-user segments for specialty chemicals and petrochemicals. In July 2021, production volumes of key chemicals stood at 909,310 MT and petrochemicals at 1,867,351 MT. The specialty chemicals sector is expected to reach $ 40 billion by 2025. In July 2021, exports of organic and inorganic chemicals increased 28.46% YoY to reach $ 2.42 billion. In July 2021, imports of organic and inorganic chemicals increased 42.95% YoY to reach $ 3.36 billion. For petrochemicals, imports of petroleum and crude products decreased 10.6% YoY to reach $ 9,581.85 million in December 2020.

Pros and strengths

Specialized in developing and marketing of value added printing products: The company has developed the value added printing products for getting better value realization. The new shades are developed after doing research and development work and also provide glitter powder to be with the textile revolution. The glitter powder is mainly useful for the fancy T-Shirt work. The promoters are associated with other partnership firms and they have in-house Laboratory for research and development work. The company will get the benefit of research work and develop value added product.

Research and Development: The company has R&D team and they, with their knowledge, develop various dyes and auxiliaries and also guide the customers on the products. Its promoters are providing special facilities to clients by fulfilling their requirements with colours, embosses and glitter shades which are not easily available in the market. The Promoter arranges the Master batch (Colour Chips) for unique colours to their customers.

Cordial relations with Customers: The promoters are surat based and mainly supply the material to the process house in and around Surat. The easy access to the promoters by the client and immediate solution of their problems by the company develop cordial relations with customers. The customer centric approach of the promoters is one of the key factor for the development of the business of the Company.

Risks and concerns

High working capital requirements: The company’s working capital requirement is high due to supplying goods to the textile industry and the credit period given to the customers is high. Inability of the company to raise corresponding working capital in line with the growth of its operations may result in adversely affecting its operations and financial performance.

Operations are in Surat city only: Currently, the company’s office and Factory are situated in Surat and it is carrying its business mainly with market players from Surat itself. Hence, its revenues are generated from operations in this region only. In the event that demand for its products in general reduces or stops by any reason including political discord or instability or change in policies of State, then its financial condition and operating results may be materially and adversely affected.

Various regulations and policies: The company is subject to various regulations and policies. Its business and prospects could be materially adversely affected by changes in any of these regulations and policies, including the introduction of new laws, policies or regulations or changes in the interpretation or application of existing laws, policies and regulations. There can be no assurance that the company will succeed in obtaining all requisite regulatory approvals in the future for its operations or that compliance issues will not be raised in respect of its operations, either of which could have a material adverse affect on its business, financial condition and results of operations.

Outlook

Bhatia Colour Chem specializes in trading & manufacturing Chemicals, Dyes, and Auxiliaries products. The company produces Value Added Printing Products, Textile Auxiliaries & Chemicals, Foil Binders, Glitter Powder, Printing Inks, and Zari Binders with a variety of ranges and specialization as per the demand of the client. The products are mainly useful for the printing on Textile materials like Polyester & Cotton which includes, ambos on T-shirts, Zari Prints, and shading. The company has R&D team and they, with their knowledge, develop various dyes and auxiliaries and also guide the customers on the products. The company has always focused on meeting the requirement of clients and providing them maximum support in terms of timely delivery. Its success lies in the strength of its relationship with customers and suppliers who have been associated with its promoters for a long period. On the concern side, the company has not identified any alternate source of funding and hence any failure or delay on its part to raise money from this Issue which may delay in the implementation schedule and could adversely affect its growth plans. Besides, the company’s future ability to pay dividends will depend on its earnings, financial condition and capital requirements. There can be no assurance that it will generate sufficient income to cover the operating expenses and pay dividends to the shareholders.

The company is coming out with a maiden IPO of 5000000 equity shares of Rs 10 each at a fixed price of Rs 80 per equity share to mobilize Rs 40 crore. On the performance front, the total income from the operation for the stub period ended on February 18, 2022 was Rs 531.96 lakh consist of 100% of Sale of Product income only. The profit after Tax (PAT) for the stub period was Rs 35.30 lakh representing to 6.64% of the total revenue. The company at present is doing business in and around Surat only, so it is planning to expand its business activities in not only Gujarat but also in other states of India. It intends on implementing various measures to improve its operational efficiencies, including undertaking measures to reduce its consumption of disposable items and avoid wastage. It intends to maximize its operational efficiency by achieving greater integration and by implementing a stronger supply chain management.