Gem Aromatics
- Gem Aromatics is coming out with a 100% book building; initial public offering (IPO) of 1,41,63,430 shares of Rs 2 each in a price band Rs 309-325 per equity share.
- Not more than 50% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not less than 15% of the issue will be available for the non-institutional bidders and the remaining 35% for the retail investors.
- The issue will open for subscription on August 19, 2025 and will close on August 21, 2025.
- The shares will be listed on BSE as well as NSE.
- The face value of the share is Rs 2 and is priced 154.50 times of its face value on the lower side and 162.50 times on the higher side.
- Book running lead manager to the issue is Motilal Oswal Investment Advisors.
- Compliance Officer for the issue is Pooja Padam Bhandari.
Profile of the company
Gem Aromatics is an established manufacturer of specialty ingredients, including, essential oils, aroma chemicals and Value Added Derivatives in India with a track record of over two decades. It offers a diversified portfolio of products, ranging from the Mother Ingredients to its various Value-Added Derivatives. Its products find application across a broad spectrum of industries, such as, oral care, cosmetics, nutraceuticals, pharmaceuticals, wellness and pain management and personal care. It is one of the prominent essential oils and Value-Added Derivatives manufacturers in India, based on value and volume manufactured, specializing in products that are derived from mint and clove oil. Its track record, diverse product portfolio and brand recall has helped it to establish several leadership positions within its product portfolio, for instance, in India, it has a dominant presence in essential oil-based products and derivatives that are manufactured from mint, clove, eucalyptus oils and other essential oils.
Its in-house manufacturing and R&D capabilities have contributed towards its track record of product innovation and launches and assisted it with maintaining consistent product quality. With over two decades of experience, it has developed its expertise in advanced organic synthesis through application of complex chemistries like Grignard’s, amide coupling, Friedel-Crafts reactions, cross-coupling chemistry, photochemical reactions, and methoxylation using green chemistry. Its advanced capabilities also extend to high-pressure reactions, continuous processes, fixed-bed systems, and process automation.
It offers 70 products across its four product categories, namely, (i) mint and mint derivatives; (ii) clove and clove derivatives; (iii) phenol; and (iv) other synthetic and natural ingredients. It is among the leading supplier in many of the product lines that it operates in. With a focus on servicing its customers and manufacturing quality products, it commenced its operation in Fiscal 1999 in the mint and mint derivative category with products like spearmint and piperita. In order to expand its product portfolio, it commenced production and sale under the clove and clove derivative category in 2009. In continuation with its focus on expanding its product portfolio, it is in the process of introducing products under the new category, being, citral.
Proceed is being used for:
- Prepayment and/or repayment, in full or in part, of all or a portion of certain outstanding borrowings availed by the company and its Subsidiary, Krystal Ingredients Private Limited
- General corporate purposes
Industry Overview
Specialty chemicals are value added products that are used for specific applications that often involves high R&D investment and technical know-how. There are over 40-50 value chains covering a broad spectrum of products within this industry. The capability to handle multiple value chains that overlap with one another are available only with large conglomerates, while a single or double value chain is what most medium to small scale players are efficient with. This sector is witnessing a monetary corpus towards expansion investments. India is the largest beneficiary for this segment since the US and European manufacturers are facing pressures from institutional investors to ensure supply security by focussing on China+1. This has forced several western manufacturers to re-base their supply chain away from China. Increasing labour costs and significant currency fluctuations along with the fear of resurgence of global pandemic has forced downstream industries to seek alternative manufacturing options such as India.
The Indian chemicals market is valued at $235 billion in year CY 2025e (4% share in the global chemical industry) with the commodity chemicals accounting for more than 50%. It is expected to reach $380 billion by CY 2030, with an anticipated growth of 10% CAGR. Specialty chemicals industry forms 40% of the domestic chemical market, which is expected to grow at a CAGR of around 10-12% between 2025 and 2030. India’s chemical industry is one of the most diversified globally, and the specialty chemicals segment represents a significant growth area. With the global shift towards sustainability, technological advancements, and changing market dynamics, India is uniquely positioned to capitalize on these opportunities.
The US-China Trade war led specialty chemical players to look beyond China as a raw material supplier and manufacturing hub. In order to reduce the risk in their supply chains, global companies are concentrating on a China+1 approach. Because of its cost advantage over China and its supportive laws and reforms, including the enabling of 100% FDI in the chemical industry, India is uniquely positioned to gain from the shift away from China. Indian chemicals sector is set for rapid growth, with specialty chemicals expected to be the most lucrative segment. India attracts investment as companies diversify away from China. Chemical industry revenue has been growing at an average rate of 15% in the last 5 years. The Indian chemicals sector stands out as one of the most rapidly advancing industries globally.
Pros and strengths
Established manufacturer of specialty ingredients: The company is an established manufacturer of specialty ingredients, including, essential oils, aroma chemicals and Value Added Derivatives in India with a track record of over two decades. Within the product categories in which it operates, it offers a diversified portfolio of products, ranging from the Mother Ingredients to its various Value Added Derivatives. In India, it has a dominant presence in essential oil-based products and derivatives that are manufactured from mint, clove, eucalyptus oils and other essential oils.
Wide product range with continuous product development and R&D capabilities: The company has a wide and differentiated product category, which includes 70 products as of March 31, 2025, and is spread across its four product categories, namely, (i) mint and mint derivatives; (ii) clove and clove derivatives; (iii) phenol; and (iv) other synthetic and natural ingredients. It also has established manufacturing capabilities for new product categories like citral and are in the process of expanding its production capabilities in the same by expanding the capacity of its Dahej Facility. It has developed advanced processes for producing downstream products using Citral as a base through its dedicated R&D Facility.
Long standing relationship with well-established customers: The formulated flavours and fragrance/ F&F blends segment is dominated by global suppliers as this segment requires considerable investment in Research and product development. Intellectual property safeguarding, loyal customer base, strong branding is some of the major requirements apart from R&D in this segment, which act as major entry barriers for new players. FMCG companies risk losing customers in the event of any change in fragrance or flavour profile of the product. Thus, once on boarded and having delivered results as a supplier, FMCG companies are reluctant to change suppliers. In over two decades of its operations, it has established long-standing relationships with several well established Indian and global customers such as Colgate-Palmolive (India), Dabur India, Patanjali Ayurved, SH Kelkar and Company etc. There is substantial presence of the company in the oral care segment with customers such as Colgate, Dabur, Patanjali.
Strategically located Manufacturing Facilities: One of the primary raw materials which is Natural Mint oil is available in abundance in India. Its Budaun Facility is located in the heart of the Mint cultivation belt of India which includes Mentha Arvensis, Piperita, Spearmint and Mentha Citrata (Bergamot Mint) (species of flowering plant in the Mint family). Its Silvassa Facility is strategically located close to Jawaharlal Nehru Port in Nhava Sheva, Maharashtra and help reduce time for export shipments. This also reduces its import costs for raw materials that are imported from Indonesia, Germany, China, Rwanda and Madagascar. The company’s Dahej Facility will provide it access to phenol, with one of the largest suppliers of phenol in the vicinity. The Dahej Facility has an already established effluent discharge eco-system which will provide it in effectively discharging effluents that may be generated in manufacturing of certain products. The Dahej Facility is strategically located close to Mumbai-Delhi Expressway and Jawaharlal Nehru Port, Hazira.
Risks and concerns
Maximum revenue comes from limited customers: The company has derived 56.06%, 52.19% and 65.81% of its total revenue from top 10 customers in FY25, FY24 and FY23 respectively. The loss of all or a significant portion of sales to any of its top 10 customers, for any reason (including the loss of contracts or inability to negotiate favourable terms, failure to meet their quality specification, technological changes, a decline in market share of these customers in their respective industries or high growth segments, disputes with these customers, adverse changes in their financial condition, insolvency or bankruptcy of these customers, decrease in their sales, facility closures, any action undertaken by the government affecting business of these customers, or labour strikes affecting their production), could have an adverse impact on its business, financial condition, results of operations, and cash flows.
Substantial revenue comes from the mint and mint derivatives product category: The company relies substantially on revenue generated from the sale of mint and mint derivatives product category. The company has derived 69.12%, 72.89% and 69.98% of its total revenue from mint and mint derivatives product category in FY25, FY24 and FY23 respectively. Any reduction in demand for products under the mint and mint derivatives product category may adversely affect its revenues and profitability.
Significant dependence on top 10 suppliers for supply of raw materials: The company is significantly dependent on its top 10 suppliers for supply of raw materials, with whom it does not have long-term contracts for the purchase of raw materials. The company has procured 52.92%, 68.61% and 51.76% of its total raw material from top 10 suppliers in FY25, FY24 and FY23 respectively. The loss of all or a significant number of its top 10 suppliers, for any reason (including the inability to negotiate favourable terms, failure to meet its quality specification, disputes with these suppliers, adverse changes in their financial condition, insolvency or bankruptcy of these suppliers, any action undertaken by the government affecting business of these suppliers, or labour strikes affecting their production), could have an adverse impact its business, financial condition, results of operations, and cash flows.
Substantial working capital requirements: The company requires a significant amount of working capital to finance the purchase of raw materials and the performance of manufacturing and other work before payment is received from clients. The company’s working capital requirements may increase if the payment terms in its agreements include reduced advance payments or longer payment schedules for its customers or increased advance payments or shorter credit period from its suppliers. These factors may result, or have resulted, in increases in the amount of, its receivables, short-term borrowings and working capital funding. As on June 30, 2025, it had total outstanding borrowings of Rs 2,598.42 million. Additionally, its inability to obtain adequate amount of working capital at such terms which are favourable to it and in a timely manner or at all may also have an adverse effect on its financial condition.
Outlook
Gem Aromatics manufactures speciality ingredients, including essential oils, aroma chemicals, and Value-Added Derivatives in India, with over two decades of experience. The company offers various products, from Mother Ingredients to Value-Added Derivatives. The company has wide product range with continuous product development and R&D capabilities. It has long-standing relationship with well-established customers in India and globally. On the concern side, the company derives a significant portion of its revenue from its top 10 customers. The loss of any of these customers may adversely affect its revenues and profitability. Moreover, the company derives a substantial portion of its revenue from the mint and mint derivatives product category. Any reduction in demand for products under the mint and mint derivatives product category may adversely affect its revenues and profitability.
The issue has been offering 1,41,63,430 shares in a price band of Rs 309-325 per equity share. The aggregate size of the offer is around Rs 437.65 crore to Rs 460.31 crore based on lower and upper price band respectively. Minimum application is to be made for 46 shares and in multiples thereon, thereafter. On performance front, the company’s revenue from operations increased by 11.38% to Rs 5,039.53 million in Fiscal 2025 from Rs 4,524.52 million in Fiscal 2024. Moreover, the company’s profit for the increased by 6.55% to Rs 533.84 million for Fiscal 2025 from Rs 501.04 million for Fiscal 2024.
The company intends to streamline its operations and enhance its manufacturing capacity and further widen its product portfolio by adding products such as safranal and damascene under its new product category, being citral. It will have one of the largest capacities of about 500 MT for cooling agents in India as part of its planned expansion. For the same, it is in the process of expanding the capacity of its Dahej Facility. It continues to focus on further integrating its operations and benefit from economies of scale and improve operating margins. The company is focussed on adopting the best practices and standards across its manufacturing facilities, drawing on its management’s expertise and experience. The management team closely oversees its operational performance against established and target metrics and take appropriate action as required. By planning for a high utilization rate and with the commissioning of additional capacities it strives to continue reducing its cost of production and achieving economies of scale.
