Chemkart India BSE SME IPO review (May apply)

•    The company is engaged in trading of various nutritional health and sports supplement products.
•    It posted growth in its top and bottom lines for the reported periods.
•    However, boosted bottom lines from FY24 onwards raise eyebrows as it is operating in a highly competitive and fragmented segment.
•    Based on its recent financial data, the issue appears fully priced. 
•    Well-informed/cash surplus investors may park moderate funds for long term.

ABOUT COMPANY:
Chemkart India Ltd. (CIL) is a one stop destination for various nutritional, Health and sports supplement products, which are largely biased towards the food products providing health benefits in addition to their nutritional values, reflecting its ability in catering to nutritional as well as health needs of the end customers. It offers products across mainly seven product categories, i.e., Amino Acids, Health Supplement, Herbal Extract, Nucleotide, Protein, Sports Nutrition, and Vitamin. Thus, positioning itself favourably to adapt to the growing awareness with respect to the needs of nutrition in the food products. 

CIL specializes in one of the products mainly amino acid (i.e., the process where Amino acids act as the molecules that combine to form proteins). It targets the Business to Business (B-to-B) platform which uses its products into manufacturing of finished supplements which includes sports supplements, health supplements, vitamins, protein products etc. CIL’s product assortment and customer-centric approach aims to fulfil the daily and aspirational requirements of the end customers with a focus on variety, affordability, quality and convenience. 

Since the commencement of its operations, the company has developed good standing relationships with customers. It is also engaged actively with suppliers to improve its supply chain processes. It derives over 95% revenue from trading activities alone. As of March 31, 2025, it had 40 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book-built route combo IPO of 3229200 equity shares of Rs. 10 each to mobilize Rs. 80.08 cr. The issue opens for subscription on July 07, 2025, and will close on July 09, 2025. The IPO consists of 2600000 fresh equity shares (worth Rs. 64.48 cr. at the upper cap) and an Offer for Sale of 629200 equity shares (worth Rs. 15.60 cr. at the upper cap). The minimum number of shares to be applied is for 1200 shares and in multiples of 600 shares, thereafter. The company has announced a price band of Rs. 236 – Rs. 248 per share. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.69% of the post-IPO paid-up capital of the company. From the net proceeds of the fresh equity share issue, the company will utilize Rs. 34.68 cr. for capex on new unit facility through investment in wholly owned subsidiary Easy Raw Materials Pvt. Ltd., Rs. 20.00 cr. for repayment/prepayment of certain borrowings, and the rest for general corporate purposes. 

The IPO is solely lead managed by Smart Horizon Capital Advisors Pvt. Ltd., and Bigshare Services Pvt. Ltd., is the registrar to the issue. Alacrity Securities Ltd. is the market maker, and Smart Horizon group’s Shreni Shares Ltd. is a syndicate member.

The company has issued entire initial equity shares at par value, and has also issued bonus shares in the ratio of 6 for 1 in December 2024. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 1.43 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 9.50 cr. will stand enhanced to Rs. 12.10 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 300.06 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit of Rs. 131.69 cr. / Rs. 7.66 cr. (FY23), Rs. 132.83 cr. / Rs. 14.52 cr. (FY24), Rs. 205.46 cr. / Rs. 24.26 cr. (FY25). The company posted growth in its top and bottom lines for the reported periods. But sustainability of boosted profits from FY24 onwards remains a major concern. 

For the last three fiscals, the company has reported on a simple average EPS of Rs. 19.21 and an average RoNW of 48.25%. The issue is priced at a P/BV of 4.42 based on its NAV of Rs. 56.10 as of March 31, 2025, but its post-IPO NAV data is missing from the offer document.

If we attribute FY25 super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 12.37. Based on FY24 earnings, the P/E stands at 20.67. The issue relatively appears fully priced. 

For the reported periods, the company has posted PAT margins of 0.06 times (FY23), 0.11 times (FY24), 0.12 times (FY25), and RoCE margins of 0.43 times, 0.51 times, 0.49 times, respectively for the referred periods.

DIVIDEND POLICY:
The company has not paid any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy, based on its financial performance and future prospects. 

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has no listed peers to compare with.

MERCHANT BANKER’S TRACK RECORD:
This is the 8th mandate from Smart Horizon in the last two fiscals including the ongoing one.  From the last 7 listings, 1 listed at discount and 1 at par while the rest with a premium ranging from 4.44% to 90.00%, on the listing date.