Unilex Colours and Chemicals IPO Review: A Look into the Pigments and Chemicals Sector

Unilex Colours and Chemicals IPO will be open for subscription from September 25 to September 27, 2024. With an issue size of ₹31.32 crore, this IPO offers an opportunity for investors to enter the pigments and chemicals manufacturing industry, where Unilex Colours has carved a niche with its diverse product range and expanding customer base.

About Unilex Colours and Chemicals

Established in 2001, Unilex Colours and Chemicals is involved in the manufacturing and trading of pigments, chemicals, and food colours. Their products cater to a variety of industries, including plastics, rubber, textiles, printing inks, paints, and coatings. The company’s product range includes:

  • Pigments such as Pigment green 7, ultramarine blue, and azo pigments.
  • Food colours like tartrazine, sunset yellow, and allura red.

While Unilex manufactures some pigments in-house, it also sources additional products from third-party manufacturers to cater to client demands.

Strengths and Competitive Advantages

  1. Well-Equipped Manufacturing Facility: Unilex’s manufacturing unit is equipped with modern machinery, including ball mills, reaction vessels, dryers, and air classifiers. This ensures efficient production and quality control.
  2. ISO Certification: The company’s manufacturing facility is ISO 9001:2015 certified, which speaks to its adherence to high-quality manufacturing standards.
  3. R&D Investment: Unilex continues to invest in research and development (R&D) to enhance product quality and maintain competitiveness in a highly dynamic market.
  4. Diverse Product Offerings: While the company manufactures its own pigments, it also sources a wide range of pigments and chemicals from other suppliers, enabling it to meet the diverse needs of its clients across different industries.
  5. Financial Growth: Unilex has shown consistent profit growth, with PAT increasing from ₹4.71 crore in FY22 to ₹6.17 crore in FY24, demonstrating improved profitability even though revenue has fluctuated.

Risks and Challenges

While Unilex Colours and Chemicals offers many strengths, there are some key risks associated with the business:

  1. Concentration of Revenue: A significant portion of the company’s revenue comes from its top five products, which contributed 79.94% of revenue in FY24. Any reduction in demand for these key products could impact overall performance.
  2. Dependency on Manufacturing Facility: The company’s entire manufacturing operation is dependent on its facility in Palghar, Maharashtra. Any disruption to this facility could severely impact production and revenue.
  3. Customer Concentration: The top 10 customers account for 34.08% of the company’s revenue. Losing any major customer could have a significant adverse impact, as Unilex does not have long-term contracts with these clients.
  4. High Export Dependency: The majority of Unilex’s revenue is derived from exports (79.44% in FY24). Any changes in global political or economic conditions could affect export demand, leading to financial volatility.
  5. Legal Proceedings: The company is involved in ongoing legal tax proceedings. Adverse judgments could impact its financial position and future prospects.

Financial Overview

Unilex Colours and Chemicals has reported steady profitability in recent years, even though revenue has shown minor fluctuations.

Financial MetricFY22FY23FY24
Revenue (₹ Cr)145139144
Total Assets (₹ Cr)76.7070.7290.68
Profit After Tax (₹ Cr)4.714.976.17

Key Performance Indicators

MetricValue
Return on Equity (ROE)17.93%
Return on Capital Employed (ROCE)6.32%
Debt/Equity Ratio0.59
Profit After Tax Margin4.29%

IPO Application Details

Investors can apply for the IPO in the following price band:

Application TypePrice BandApply Upto
Regular₹82 – ₹87₹2 Lakh
High Networth Individual (HNI)₹82 – ₹87₹2 – 5 Lakh

IPO Specifications

IPO DateSeptember 25, 2024 – September 27, 2024
Face Value₹10 per share
Price Band₹82 to ₹87 per share
Lot Size1,600 Shares
Total Issue Size3,600,000 shares
Issue Size₹31.32 crore
Listing AtNSE SME

Promoter Holdings

The company’s promoters—Purushottam Brijlal Sharma, Narendra Parameswarappa Kotehall, and others—will see their stake reduced post-issue from 100.00% to 73.56%.

IPO Reservation

Investor CategoryShares Offered
QIB6,81,600 (18.93%)
NII (HNI)5,12,000 (14.22%)
Retail Investors11,93,600 (33.16%)
Anchor Investor10,20,800 (28.36%)

Lot Size and Investment Limits

Application TypeLotsSharesAmount
Retail (Min)11,600₹139,200
HNI (Min)23,200₹278,400

IPO Objectives

The company plans to use the proceeds from the IPO for the following purposes:

  1. Working capital requirements
  2. Repayment of borrowings
  3. General corporate purposes

Analyst Review

According to Dilip Davda, Unilex Colours and Chemicals operates in a competitive and fragmented segment, which poses challenges. The company has shown growth in profitability, especially in FY24, although its top line has seen inconsistency. Based on its FY24 earnings, the IPO is considered fully priced, but informed investors may find it suitable for medium-term investment.

Conclusion

Unilex Colours and Chemicals IPO offers investors exposure to a niche market in the pigments and chemicals sector. With a focus on exports and a wide range of products, the company has potential for growth, but it faces risks related to its dependence on key products and top customers. Investors looking for a moderate-risk, medium-term investment opportunity may find this IPO appealing.

For more details, contact the IPO registrar:

Link Intime India Private Ltd
Phone: +91-22-4918 6270
Email: unilex.smeipo@linkintime.co.in
Website: Link Intime IPO Services

Leave a Comment