Balaji Specialty Chemicals IPO

Indepth Insights on Balaji Specialty Chemicals Limited before investing

Balaji Specialty Chemicals Limited

Balaji Specialty Chemicals Limited Overview

Balaji Specialty Chemicals got SEBI approval of IPO for INR 250 crores fresh issues and offer for sale (OFS) up to 26,000,000 equity shares by the Promoter and selling shareholders. The company was incorporated as ‘Balaji Benzochem Private Limited” in Solapur, Maharashtra on January 20, 2010. To become a public company before IPO, the name again changed to “Balaji Specialty Chemicals Limited” on February 26, 2022, and a certificate of change of name was issued on March 17, 2022, by the RoC. The registered and corporate office of Balaji Specialty Chemicals Limited’ is in Balaji Towers No 9/1A/1, Hotgi Road, Aasara Chowk, Solapur – 413 224, Maharashtra, India.

  • The company is one of the important players in the specialty chemical industry in India.
  • One of the subsidiaries of Balaji Amines Limited (BAL) that manufacturer of aliphatic amines in India.
  • Balaji Amines group is an integrated specialty chemicals manufacturing company.
  • The products of the company cater to various industries such as pharmaceuticals, agrochemicals, and specialty chemicals.
  • The company has a total installed production capacity is 30,000 MTPA.
  • It is one of the fastest-growing specialty chemicals companies in India.
  • Balaji Specialty Chemicals manufacturing facility is located at E-8/1 MIDC Chincholi, Taluka Mohol, Solapur, Maharashtra.
  • The company exports its products to the European Union and certain other geographies.
  • Key markets for the products include India, China, Turkey, Malaysia, Republic of Korea, United States of America, Belgium, United Arab Emirates, Germany, United Kingdom, Kuwait, and Italy.
  • India is the major market for the company in terms of revenue contributing 75.84% of the total revenue.

Balaji Specialty Chemicals Limited Products focus on niche chemicals

The company is the sole manufacturer in India of niche chemicals such as Ethylene Diamine (EDA), Diethylenetriamine (DETA), Aminoethyl ethanolamine (AEEA), and Aminoethyl Piperazine (AEP), using the Monoethanol Amine (MEA) process. The products such as Ethylene Diamine (EDA), and Diethylenetriamine (DETA) products are REACH certified, which helps the company to export them to European countries.

 The products of the company can be categorized below.

  • Specialty Chemicals – this segment is the major segment based on the revenue in FY 2022 contributing 60.25% of the total revenue.
  • Agrochemicals – The company earns 32.46% of the total revenue from this segment.
  • Pharmaceuticals – this segment contributes approximately 7.28% of the total revenue.

Balaji Specialty Chemicals Limited Founders and Leadership team

The company is run by experienced Promoters and a qualified senior management team with significant experience in the specialty chemical business.

Mr. A. Prathap Reddy is the promoter, chairman, and whole-time director of the company. He has been associated with the company since 2016. Mr. Prathap holds a diploma in civil engineering from the State Board of Technical Education and Training with over 33 years of experience in technology.

Mr. N. Rajeshwar Reddy is the promoter and Managing Director of the Company. He has more than 33 years of experience in business development, logistics, and general administration in the chemical industry. He has also been associated with the company since 2016.

Mr. D. Ram Reddy is one of the promoters and whole-time Director of the Company. He has more than 33 years of experience in the procurement of raw materials, marketing, sales, and general administration in the chemical industry. He has also been associated with BAL since 1989 and is currently its director.

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Balaji Specialty Chemicals Limited Revenue and profits

The company is a fasted growing company in terms of revenue. The revenue from operations has grown from INR 538.81 million in FY 2020 to INR 1,744.01 million in FY 2021 and INR 5,142.80 million in FY 2022. The revenue grew over 10 times during the fiscal years between 2020 to 2022.  The profit after tax also jumped many folds from INR -158.70 million in FY 2020 to INR 1,089.45 million in FY 2022. Profit after tax margin jumped from -29.33% in FY 2020 to 5.91% in FY 2021 and 21.11% in FY 2022.

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Balaji Specialty Chemicals fast growing company – Valuation Parameters

Balaji Specialty Chemicals Limited has been registering strong EPS over the years. The debt-equity ratio has been negligible over the years and has declined over the period mentioned. Similarly, all other parameters such as the return on equity, ROCE, net cash flow, and profit margin look strong.  Looking at the numbers below one can invest in the company’s IPO if the valuation is good.

All amounts in INR Million except percentages
(Year ended March 31)
202020212022
Revenue from Operations538.811,744.015,142.80
Gross Margin26.06%41.40%48.88%
EBITDA Margin0.81%25.14%35.12%
Restated Profit After Tax for the Year-158.70103.951,089.45
PAT Margin-29.33%5.91%21.11%
Return on Average Equity (“RoAE”)-20.86%14.18%81.91%
Return on Average Capital Employed (“RoACE”)-2.70%11.89%53.12%
Net Debt / Equity2.972.580.87
Earnings Per Share-Diluted (in INR)-0.790.525.45
Net Cash from Operating Activities-122.27184.26542.14
Working Capital as a Percentage of Revenue from Operations32.60%22.7%26.84%
Source: DHRP document file by Balaji Specialty Chemicals Limited

Competitors of Balaji Specialty Chemicals Limited

The specialty chemical market in India is fragmented. However, Balaji Specialty Chemicals Limited manufactures niche products. Hence, the company competes with large multinational companies with greater financial, manufacturing, research, and development. This affects the ability of the company in terms of price negotiation, etc.

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Why do you invest?

The specialty chemical industry in India is bound to grow with strong support from government policies. The recent downturn in China’s specialty chemicals industry is an opportunity for Indian manufacturers. India has a cost advantage with the required talent and technology to catch this opportunity. The government’s PLI scheme to incentivize the domestic chemical industry will further boost production.

Balaji Specialty Chemicals is focusing on increasing manufacturing capacities and continues to diversify its product portfolio to meet market demand. The company is planning to increase its capacity utilization and actual production by adding new equipment. The environmental clearance for the manufacturing facility provides approval for an annual capacity of up to 45,330 MT per annum. With rising demand and effective implementation of debottlenecking measures, additional capacity could develop within the same manufacturing facility.

In addition, the company is also proposing to introduce new products, such as ethylenediamine tetraacetic acid (“EDTA”) and other derivatives of EDTA with varied applications across industries. All these factors will help the top line of the company. This is one of the best parental and fundamentally strong companies to invest in. One can wait for the price of the equity share to get the valuation and think of investing in the company.

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