Chemcon Speciality shares slip 31% in two days after making a strong debut

With the past two day’s fall, the stock now trades 52 per cent higher against its issue price.
Shares of Chemcon Speciality Chemicals remained under pressure on Monday, falling 12 per cent to Rs 516.45 on the BSE in the intra-day trade in an otherwise firm market. The stock of the speciality chemicals has slipped 31 per cent in the past two trading days after making a stellar debut at the bourses on Thursday.

Chemcon Speciality Chemicals was listed at Rs 731, a 115 per cent premium against the issue price of Rs 340 per share on the BSE. It touched a high of Rs 743.80 in the intra-day on the exchange on Thursday.

With the past two day’s fall, the stock now trades 52 per cent higher against its issue price. At 02:12 pm, it was trading 9 per cent lower at Rs 530 on the BSE, as compared to a 1 per cent rise in the S&P BSE Sensex. A combined 6.03 million equity shares changed hands on the counter on the NSE and BSE.

Chemcon Speciality Chemicals is a manufacturer of specialised chemicals, such as HMDS (hexamethyldisilazane) and CMIC (chloromethyl isopropyl carbonate), which are predominantly used in the pharmaceuticals industry. Further, the company also manufactures inorganic bromides namely Calcium Bromide, Zinc Bromide and Sodium Bromide, which are predominantly used as completion fluids in the oilfields industry. It is the only manufacturer of HMDS in India and was the third-largest manufacturer of HMDS worldwide in terms of production.

The company plans to set up two more plants for the manufacture of pharma chemicals (capex of Rs 41.1 crore), which would increase its capacity from 375KL to 626KL (operational by FY22 end). This will help Chemcon expand its reach in India which is currently a net importer of HMDS/ CMIC. Chemcon also aims to expand its product portfolio and usage of its existing products to other industries.

Post Covid-19, there has been anti-china sentiments across the world, which analysts expect to benefit Chemcon given that it has already expanded capacity for HMDS and likely to increase capacity for CMIC in the coming time. It is evident that the company could likely to capture import share in the years to come in a view that it maintains pricing dynamics in line with the Chinese players.

“Since China being the largest manufacturer of HMDS and CMIC, any pricing erosion by the Chinese players to maintain the market share can translate into realisation pressure for Chemcon given that the company also plays the level playing field with the overseas peers. The pricing of both chemicals are largely in line with the Chinese prices and thus, any negative development towards the realisation can hurt the financial performance of the company,” ICICI Securities said in IPO note.

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