Prasol Chemicals Limited Company coming up with IPO – Read Indepth insights before investing

Prasol Chemicals

Prasol Chemicals Limited Overview

Prasol Chemicals got SEBI approval for INR 800 crores of Initial public offering. The company was incorporated as ‘Prachi Poly Products Private Limited’ in Mumbai on January 24, 1992. The name again changed to “Prasol Chemicals Limited”, upon conversion into a public company, on December 23, 2021, and a certificate of change of name was issued on February 4, 2022, by the RoC. The registered and corporate office of ‘Prasol Chemicals Limited’ is in Navi Mumbai, Thane, Maharashtra – 400710, India.

  • A leading forward integrated manufacturer of acetone derivatives and phosphorous derivatives in India.  
  • The company is one of the important players in the specialty chemical industry in India.
  • The products of the company cater to various industries such as pharmaceuticals, agrochemicals, home, personal care, and performance chemicals.
  • The company distribution network is spread across 45 countries across Asia, North America, and the European Union.
  • The government of India certified Two Star Export House Company
  • Revenue from exports is approximately 23% of the total revenue in FY 2021 which is INR 1,387.20 million.
  • Prasol Chemicals manufactured 75+ specialty products.
  • The company also has 32 new products in the pipeline that will help to further diversify its customer base across various industries.

Prasol Chemicals Limited Products & Services

The company is a leading forward integrated manufacturer of acetone derivatives and phosphorous derivatives in India. The major products of the company are as below.

  • Acetone-based specialty chemicals – are the major segment based on the revenue in the nine months ended December 31, 2021. Prasol Chemicals Limited earns 48.2% of total revenue from this segment.
  • Phosphorous-based specialty chemicals – The company earns 28.5% of the total revenue from this segment.
  • Other specialty chemicals for customization of products. The revenue from this segment is approximately 22.5% of the total revenue.

Prasol 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. Nishith Rajnikant Shah is the founder chairman and Whole-time director of the Company. He holds a master’s degree in engineering from California Polytechnic State University. Before joining the company, he was associated with Heatreaters and Engineers, Heat fabs, and Pratech Brands Private Limited. Mr. Nishith has over 32 years of experience in the chemical industry. He has been associated with the Company as a director since its incorporation.

Mr. Gaurang Natwarlal Parikh has been the Managing Director of the Company since August 9, 2001. He holds a bachelor’s degree in engineering, in the chemical branch from the University of Pune. Mr. Gaurang also holds a master’s of science in chemical engineering from the University of Toledo. He has over 22 years of experience in the chemical industry. Before joining the company, he was associated with Rostone Corp and The Budd Company.

Mr. Dhaval Nalin Parikh is a Joint-Managing Director of the Company since May 31, 2007. He holds a bachelor’s degree in Polymer Technology from the Institute of Chemical Technology, at the University of Mumbai.  Mr. Dhaval also holds a master’s of science in engineering (Plastics engineering) from the University of Massachusetts, Lowell. Before joining the company, he was associated with GE Plastics. He has over 17 years of experience in the chemicals industry.

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Major Clients of the Company

Prasol Chemicals Limited has a long-standing relationship with its clients. Most of the major OEMs are clients of the company.

To name a few such as PI Industries Limited, Bayer CropScience Limited, Solvay Specialities India Private Limited, Proctor & Gamble, Dr. Reddy’s Laboratories Limited, Alembic Pharmaceuticals Limited, Coromandel International Limited, Arkema, Lubrizol India Private Limited, UPL Limited, Asian Paints Limited, Indoco Remedies Limited, Lanxess India Private Limited, Croda India Company Private Limited, Bharat Rasayan Limited, Hubergroup India Private Limited, Indian Additives Limited, Privi Speciality Chemicals Limited.

The quality of the products and the long relationship with clients act as an entry barrier to this industry.

Prasol Chemicals Limited Financial snapshot

The company reported strong revenue from operations of INR 6322 million, for the nine months ended in December 2021. The revenue from the operation has been going up from FY 2019 to FY 2021 from INR 4,983.00 million to INR 5,955.40 million.

Prasol Chemicals Limited reported a profit of INR 500 million, for the nine months ended in December 2021. However, the company has been maintaining a decent profit of over INR 200 million during the period reported. This reflects the operational capability of the company.

Valuation Parameters

Prasol 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
(Year ended March 31)
201920202021Nine-month
period ended
December 2021
Total income4,988.745,347.156,021.366,321.85
Total Revenue from Operation4,983.005,312.405,955.406,269.32
Total expenses4,606.594,908.475,683.465,649.54
Profit after tax237.20377.74250.84500.96
Earnings Per Share-Diluted (in INR)16.3626.0517.334.55
Net Cash from Operating Activities528.15858.85201.30304.84
Debt-Equity Ratio1.10.90.90.7
Return on Equity Percentage22.13%27.5%14.9%24.45%
Return on Capital employed16.15%16.7%12.3%18.5%
Profit margin4.7%7.1%4.2%7.9%
Source: DHRP document file by Prasol Chemicals Limited

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Competitors of Prasol Chemicals Limited

Prasol Chemicals Limited is the leading manufacturer of phosphorus and acetone derivatives in India. The major competitors are multinational companies operating in India such as Evonik and Arkema.

While for the products such as acetone derivatives, competition is from companies such as Monument Chemical, SI Group, Arkema, ALTIVIA, and TASCO, for the phosphorous derivatives the competition is from companies such as Italmatch chemicals (Italy), Perimeter Solutions (US), Hubei Xingfa (China), FMC Cheminova India (Subsidiary of FMC Corp, US). However, there is very little competition from domestic players in acetone derivatives products.

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Why do you invest in Prasol Chemicals Limited IPO?

Asia-Pacific is the largest region in the global chemicals market, accounting for 55% of the market in 2021. Europe (including Russia) is the second largest, followed by North America, having accounted for 20% and 15% of the global chemicals market, respectively, in 2021.

The global specialty chemicals market is valued at US $750-770 billion in 2021 growing at a CAGR of 3-4% from 2016 to 2021. Growing awareness of healthcare and increasing disposable income drive the growth of this sector. The recent downturn in China’s specialty chemicals industry is an opportunity for Indian manufacturers.  Indian companies have a cost advantage. In the changing global landscape after Covid19, global companies want to diversify supply risks, thereby improving the export opportunity for Indian players.

Prasol Chemicals Limited has significantly expanded its business and scale of operations since incorporation. The company has grown from a small-scale manufacturer to a large diversified specialty chemical player with a global footprint. Again, the opportunities after China’s slowdown will benefit the company’s future growth prospects. Further, Prasol Chemicals Limited will benefit from its long-standing relationships with clients for sustained growth and success.

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