Clean Science and Technology Ltd IPO Analysis

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About The company

Clean Science and Technology Ltd, is a company in which any process, product, or service that reduces negative environmental impacts through significant energy efficiency improvements, the sustainable use of resources, or environmental protection activities.

Clean technology includes a broad range of technology related to recycling, renewable energy, information technology, green transportation, electric motors, green chemistry, lighting, grey water, and more.

Basic Details About Clean Science and Technology Ltd IPO

BASIC DETAILS ABOUT IPO (7-9 July)
Price Band880-900
Bid Lot16
OFS (Amount)1546.6
Total issue amount- AT Upper Band1546.6
Post issue Implied Market Cap9560
Post issue (Shares) Cr10.62
Book Runner and Lead Managers: Axis Capital, JM Financial & Kotak

PRO’s & CON’s of Clean Science and Technology Ltd IPO

SHAREHOLDING
ParticularPre-IssuePost-Issue
Promoter94.66%78.51%
Public5.34%21.49%
Total100%100%
Clean Science and Technology Ltd IPO

PRO’s

  • Clean Science and Technology Ltd is into speciality chemical business which derives around 68% revenue from exports also of the total Revenue 37% is exported to China which shows the cost efficiency of the company’s business. Company is market leader globally in its certain speciality chemical products which again shows its strength and quality.
  • Clean Science and Technology Ltd’s financials seems very strong…thanks to Reduced COMC as % of revenue which has boosted the EBITDA margins .
P&L
Particulars31-Mar-2131-Mar-2031-Mar-19
Revenue from Operation512419393
% Growth22.2%6.6%
COMC+change in inventory124129171.6
% of Revenue24.2%30.8%43.7%
EBITDA258185136
Margin50.4%44.2%34.6%
PBT267182137
PBT Margin52.1%43.4%34.9%
PAT19814098
PAT Margin38.7%33.4%24.9%
EPS18.713.29.2
  • Interesting is company did capex of around 173cr in last 3 years and as on 31 March 2021 Investment in mutual funds/Bonds/cash/Bank at 247cr and zero borrowings which shows the kind of Cash flow company is generating.
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ParticularsFY21FY20FY19
FCF10911046
PAT19814098
FCF/PAT55%79%47%
  • Clean Science and Technology Ltd is expanding its capacity they have recently set up a unit at its third manufacturing facilty and for unit 4 company has already applied for environmental clearance. Which will add fuel to the already growing business.
  • Based on Peer comparison company seems to be decently valued as although appears cheaper based on PE although costly in terms of PBs but have to also consider company is relatively small…All other aspect (Debt Free, expansion, Management) make it good bet for long term.
Peer ComparisionPEPBD/E ratioROEMcapMcap/sales
Vinati Organics76.513.3019.1%2060821.6
Fine Organics77.812.800.0817.8%93678.3
Atul Ltd41.97.200.0318.8%274827.4
Camlin Fine Science48.44.200.9210.2%24662.1
SRF37.36.500.4420.3%446815.3
Navin Flourine7611.5016.2%1878115.9
PI Industries61.28.500.0518.6%451869.9
Industry Average59.99.10.217.3%24081.610.1
Clean Science48.217.70.045%9560.018.7
Peer ComparisionFY21 PATPAT marginFY21 RevenueRevenue growth FY19 to FY21
Vinati Organics26928.2%954-15.4%
Fine Organics12010.6%11336.9%
Atul Ltd65617.6%3731-7.6%
Camlin Fine Science514.3%118733.1%
SRF119814.3%840018.3%
Navin Flourine25821.9%117918.4%
PI Industries73816.1%457761.1%
Industry Average470.00.23023.016.4%
Clean Science198.438.8%51230.3%
  • Of the total Permanent employees 10% are in R&D also signifying company’s focus on innovation.
  • Clean Science and Technology Ltd IPO’s management is well experience like Pradeep Ramwilas Rathi who is the Chairman has 25 years of experience in chemical Industry and also currently director in Sudarshan Chemicals OR Ashok Ramnarayan Boob who is MD of the company also has 25 years of experience and was ED at Magalam Drugs or Ganapati Dadasaheb Yadav who was awarded Padma Shri .
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CON’s

  • Margins  improvement company told in RHP is product mix & decline in raw material prices . However Clean Science and Technology Ltd IPO started its MEHQ product in FY18 which gives currently 48% of Total revenue in FY21 which was 50% in FY19 and also Seeing product segment share (table Below) not much change there too…so that means declining raw material prices also fuelled notably the improved margins. So sustainability of these robust margins can be an issue.
  • Company usually do not enter into long-term supply contracts with any of  raw material suppliers and typically source raw materials from third-party suppliers or the open market on a spot basis and its raw material are derivatives of crude oil.
  • Company have very high dependence on single product MEHQ which accounts for 48% of Company’s total revenue. Also Clean Science and Technology Ltd IPO’S dependence on Top 10 customers is also high i.e. 48% revenue from Top 10 customers.
  • Although 10% of permanent employees are in R&D but company’s investment in R&D related assets as % of revenue is very low  also R&D related expenses also very low.
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          R&D related assets as % of revenue

  • FY21 0.16%
  • FY20 0.18%
  • FY19 0.13%

        R&D related Expenses as % of revenue

  • FY21 ,FY20 & FY19 around 0.5%

 Important to note that although so much is talked of R&D Clean Science and Technology Ltd IPO just developed 2 new products in last 3 FY and revenue generated from them is just 3%.

  • No long term contract for raw materials. Have helped in last 3 years but can affect adversely also. Also with customers also company have no long term contract .
  • Company in FY20 had to recall particular shipment of its Star Product MEHQ due to detection of Foreign particle and Clean Science and Technology Ltd IPO had to offer discount & replace the shipment. Acts like these opens liability and also as both dependence on MEHQ  coupled with dependence on some customers can cause a major threat.
  • Growing consumption of green chemical(design of chemical products and processes that reduce or eliminate the use or generation of hazardous substances) and company final products use hazardous  substances as raw materials
  • There has been criminal liability against company related to chemical pipe explosion…Repair & Maintenance of maas % revenue stand at 2.5%.
Anchor Book  464cr
Government of Singapore8.62%
Nomura8.62%
Ashoka India8.62%
Blackrock5.39%
Aberdeen Global5.39%
Goldman4.96%
Abu Dhabi Investment3.23%
Axis Fund4.40%
HDFC Fund5.69%
SBI Fund5.68%
Other39.4%
TOTAL100.00%

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Arman Nahar

Arman Nahar

C.A. who is a USA CFA L3 candidate | Cleared L1 & L2 | Doing independent equity research since 2016 | Screens stocks for investment | Makes in-depth valuation models | Crafts portfolios.
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