Gem Aromatics IPO review

•    The company is engaged in manufacturing specialty ingredients, aroma chemicals and value-added derivatives.
•    It posted growth in its top and bottom lines for the reported periods.
•    It enjoys long term relations with its customers with repeat orders.
•    Based on its recent financial data, the issue appears fully priced.
•    Well-informed investors may park moderate funds for long term.

ABOUT COMPANY:
Gem Aromatics Ltd. (GAL) is an established manufacturer of specialty ingredients, including, essential oils, aroma chemicals and Value-Added Derivatives in India with a track record of over two decades. It offers a diversified portfolio of products, ranging from the Mother Ingredients to its various Value-Added Derivatives. Its products find application across a broad spectrum of industries, such as, oral care, cosmetics, nutraceuticals, pharmaceuticals, wellness and pain management and personal care. 

GAL is one of the prominent essential oils and Value-Added Derivatives manufacturers in India, based on value and volume manufactured, specializing in products that are derived from mint and clove oil. (Source: F&S Report) Its track record, diverse product portfolio and brand recall has helped the company establish several leadership positions within its product portfolio, for instance, in India, it has a dominant presence in essential oil-based products and derivatives that are manufactured from mint, clove, eucalyptus oils and other essential oils. (Source: F&S Report) The largest segments under essential oil are – Orange oil, Mint oil, Clove oil, and Eucalyptus oil. It is present in three of the four major categories. (Source: F&S Report) During FY 2025 in India, it was one of the largest procurers of Piperita oil, and one of the largest processors of DMO, Clove oil, Eugenol and Eucalyptus Oil in terms of volume manufactured. (Source: F&S Report) As on FY 2025, its share of DMO and Eugenol in India was 12% and 65%, respectively, in terms of volume manufactured. (Source: F&S Report)

Its in-house manufacturing and R&D capabilities have contributed towards track record of product innovation and launches and assisted it with maintaining consistent product quality. With over two decades of experience, it has developed expertise in advanced organic synthesis through application of complex chemistries like Grignard’s, amide coupling, Friedel-Crafts reactions, cross-coupling chemistry, photochemical reactions, and methoxylation using green chemistry. GAL’s advanced capabilities also extend to high-pressure reactions, continuous processes, fixed-bed systems, and process automation.

GAL offers 70 products across four product categories, namely, (i) mint and mint derivatives; (ii) clove and clove derivatives; (iii) phenol; and (iv) other synthetic and natural ingredients. It is among the leading supplier in many of the product lines that it operates in. (Source: F&S Report) With a focus on servicing customers and manufacturing quality products, the company commenced operations in Fiscal 1999 in the mint and mint derivative category with products like spearmint and piperita. In order to expand product portfolio, it commenced production and sale under the clove and clove derivative category in 2009. In continuation with its focus on expanding product portfolio, it is in the process of introducing products under the new category, being, citral. 

Further, in 2019, dōTERRA Enterprises, Sàrl (“dōTERRA”), invested in GAL and while the company initially started with supply of spearmint and piperita, during the past three Fiscals, it has supplied 15 products to dōTERRA Global Limited. As of March 31, 2025, it had 295 employees (including 15 contract workers.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO for 13884615 equity shares (worth Rs. 451.25 cr. at the upper cap). The IPO consists of fresh equity shares issue worth Rs. 175 cr. (approx. 5384615 shares at the upper cap), and an Offer for Sale (OFS) of 8500000 equity shares (worth Rs. 276.25 cr. at the upper cap). The company has announced a price band of Rs. 309 – Rs. 325 per equity shares of Rs. 2 each. The issue opens for subscription on August 19, 2025, and will close on August 21, 2025. The minimum application to be made is for 46 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 26.58% of the post-IPO paid up equity capital. From the net proceeds of the fresh issue, the company will utilize Rs. 140 cr. for repayment/prepayment of certain borrowings, and the rest for general corporate purposes.

The sole Book Running Lead Manager (BRLM) to this issue is Motilal Oswal Investment Advisors Ltd., while KFin Technologies Ltd. is the registrar to the issue. Motilal Oswal Financial Services Ltd. is a syndicate member.

The company has issued initial equity shares at par value. It has also issued further shares in the price range of Rs. 14 – Rs. 204.20 per share (based on Rs. 2 FV) between January 2017, and May 2019. It has also issued bonus shares in the ratio of 19 for 1 in January 2001, and 17 for 4 in July 2023. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. NIL, Rs. 0.61, Rs. 0.81, Rs. Rs. 0.95, and Rs. 38.90 per share. 

Post-IPO, its current paid-up equity capital of Rs. 9.37 cr. will stand enhanced to Rs. 10.45 cr. Based on the upper cap of the IPO price band, the company is looking for a market cap of Rs. 1697.71 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit, of Rs. 425.09 cr. / Rs. 44.67 cr. (FY23), Rs. 454.23 cr. / Rs. 50.10 cr. (FY24), and Rs. 505.64 cr. / Rs. 53.38 cr. (FY25). The company marked growth in its top and bottom lines for the reported periods.

For the last three fiscals, the company has posted an average EPS of Rs. 10.85 and an average RoNW of 20.79%. The issue is priced at a P/BV of 5.36 based on its NAV of Rs. 60.61 as of March 31, 2025, and at a P/BV of 3.70 based on its post-IPO NAV of Rs. 87.86 per share (at the upper cap).

If we attribute FY25 earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 31.80. Based on FY24 earnings, the P/E stands at 33.89. The issue appears fully priced.

The company has posted PAT margins of 10.51% (FY23), 11.03 % (FY24), 10.56 % (FY25), and RoCE margins of 22.85 %, 21.10 %, 16.02 %, respectively for the referred periods.

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It has already adopted a dividend policy in September 2023. based on its financial performance and future prospects.

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Clean Sciences, Privi Speciality, Camlin Fine, Yasho Ind., S H Kelkar, and Oriental Aromatics, as their listed peers. They are trading at a P/E of 42.3, 45.4, 103.0, 172.0, 23.1, and 45.7 (as of August 14, 2025). However, they are not truly comparable on an apple-to-apple basis. This compare appears to be an eyewash.

MERCHANT BANKER’S TRACK RECORD:
The BRLM associated with this offer has handled 21 issues in the last three fiscals, out of which 4 issues closed below the issue price on listing date.