NEOCHEM BIO SOLUTIONS LIMITED IPO Explain

Neochem Bio Solutions IPO Overview

Specialty performance chemicals manufacturer (40+ yrs legacy) raising ₹44.97 cr via 100% fresh issue of 45.89L shares. Price: ₹93-98. Lot: 1,200 shares (₹2.35L min, 2 lots). Funds for working capital (₹23.9 cr), debt repayment (₹10 cr).

Founded 2006 (incorp), 40+ yrs experience. 350+ formulations: Polymers, Surfactants, Silicones, Esters/Bio-based.

Industries: Textile, HPC, cleaners, water treatment, paints, construction. 22,000 MTPA capacity, 6,763 sqm Ahmedabad facility, ZLD. 254 clients FY24, 50+ distributors, 12 countries export.

FY25: ₹86.15 cr revenue (+39%), ₹7.75 cr PAT (+330%!).

Anchor: ₹12.77 cr raised.

Lead: Vivro Financial. Analyst: “Marked growth”. Explosive PAT jump concerns, leverage, fragmented market. Competes with Aether, Rossari, Galaxy Surfactants.

IPO DETAILED INFORMATION

Issue Details

Parameter	Details
IPO Type	SME
IPO Open Date	2 December 2025 (Monday)
IPO Close Date	4 December 2025 (Wednesday)
Anchor Investor Date	1 December 2025 (Sunday) – COMPLETED
Allotment Date	5 December 2025 (Thursday) – Expected
Credit to Demat	8 December 2025 (Monday) – Expected
Refund Initiation	TBD
Listing Date	9 December 2025 (Tuesday) – Tentative
Price Band	₹93 – ₹98 per share
Face Value	₹10 per share
Lot Size	1,200 shares
Min Investment (Retail)	₹2,35,200 (2 lots / 2,400 shares at upper band)
sHNI Investment	₹3,52,800 (3 lots / 3,600 shares) minimum
bHNI Investment	TBD
Issue Size	₹44.97 crore total (at upper band)
Fresh Issue	₹44.97 crore (100% fresh issue) – 45,88,800 shares
Offer for Sale (OFS)	NIL
Total Shares Offered	45,88,800 equity shares
Listing	NSE SME (Emerge Platform)
Post-Issue Market Cap	~₹183 crore (at upper price band)
P/E Ratio	~15x (FY25 basis – Reasonable)
EPS	₹6.80 (annualized Sep 2025)
ROE	35.51% (FY25) – Excellent!
ROCE	29.67% (FY25) – Very strong!
Expected Listing Price	₹104-108 (6-10% gains expected)
Anchor Investment	₹12.77 crore raised from 7 anchor investors on Dec 1 (13,03,200 shares – 28.4%)

Anchor Investors (Announced Dec 1):

Sanshi Fund-I
Mavira Growth Opportunities Fund
5 other notable entities

Issue Break-up

Category	Allocation	Shares
QIB (Qualified Institutional Buyers)	21,74,200 shares (ex-anchor: 8,71,000)	47.39% (18.98% ex-anchor)
NII (Non-Institutional Investors)	6,55,200 shares	14.28%
Retail Individual Investors	15,26,400 shares	33.26%
Anchor Investors	13,03,200 shares	28.40%
Market Maker (Rikhav Securities Ltd.)	2,32,800 shares	5.07%

Note: Strong anchor allocation (28.4%) with ₹12.77 cr raised from 7 notable investors. Standard SME IPO allocation pattern.

Objects of the Issue (Fund Utilization)

Fresh Issue Proceeds (₹44.97 crore gross / ~₹37.9 cr net after expenses) will be used for:

Funding Long-Term Working Capital Requirements – ₹23.90 crore (63.1% of net proceeds)
- Raw material procurement (polymers, surfactants, silicones, esters)
- Inventory management for 350+ formulations
- Trade receivables management
- Major focus on working capital indicates high intensity
- Support for scaling operations and larger order fulfillment
Repayment/Prepayment of Outstanding Borrowings – ₹10.00 crore (26.4% of net proceeds)
- Debt reduction from banks and financial institutions
- Outstanding borrowings significant (leverage reduction needed)
- Reducing finance costs and improving financial health
General Corporate Purposes – ₹4.00 crore (10.5% of net proceeds)
- R&D, technology upgrades, marketing, contingencies

Strategic Focus:

Heavy working capital focus (63.1%) typical of chemicals manufacturing
Significant debt repayment (26.4%) indicates over-leverage
Only 10.5% for general corporate purposes
No major capex plans – utilizing existing 22,000 MTPA capacity
Largely a financial strengthening IPO vs growth-focused expansion

Note: This is a 100% fresh issue with no OFS. All proceeds go to the company.

Lead Managers & Registrar

Book Running Lead Manager (BRLM):

Vivro Financial Services Private Limited
Address: Vivro House, 11 Shashi Colony, Opp Suvidha Shopping Center, Paldi, Ahmedabad – 380007, Gujarat
Phone: +91-79-40404242
Website: www.vivro.net

Registrar:

MUFG Intime India Private Limited (formerly Link Intime India)
Address: C-101, 247 Park, L B S Marg, Vikhroli (West), Mumbai – 400083, Maharashtra
Phone: +91-22-4918 6270, +91 8108114949
Email: [email protected]
Website: www.in.mpms.mufg.com

Market Maker:

Rikhav Securities Limited

Promoters & Management

Key Promoters (2 Promoters):

Mr. Swapnil Rameshbhai Makati – Managing Director
- Leading the company’s operations and IPO journey
- Driving R&D, operational efficiencies, and capacity optimization
Mrs. Hemangini Swapnil Dathia – Promoter
- Family promoter

Company History:

Incorporated in 2006 (19 years as company)
Legacy: 40+ years of experience in specialty chemicals industry
Operating History: Built on foundation of decades of chemical manufacturing expertise
Evolution: From traditional chemical supplier to specialty performance chemicals manufacturer with 350+ customized formulations
Workforce: Estimated 100-150 employees (not explicitly stated)
Infrastructure: Modern manufacturing facility with partial automation, R&D lab, Application Research Center
Certifications: ISO certifications, quality standards compliance

Company Contact:

Registered Office: 303, W1, Opp. Vikramnagar Colony, Off. Iscon-Ambli Road, Ambli, Ahmedabad – 380058, Gujarat
Manufacturing Facility: Saket Industrial Estate, Village Moraiya, Ta. Sanand, Dist-Ahmedabad (22,000 MTPA capacity, 6,763 sq. meters)
Phone: +91 079 35217792
Website: www.neochem.in

COMPANY OVERVIEW

Establishment & Background:

Incorporated in 2006 (19 years as company)
Legacy: 40+ years of experience in specialty performance chemicals industry
Industry: Specialty Performance Chemicals Manufacturing
Headquartered in Ahmedabad, Gujarat
Manufacturing: Moraiya, Ahmedabad (22,000 MTPA capacity on 6,763 sq. meters)
Zero Liquid Discharge (ZLD) company – environmentally sustainable operations
Workforce: Estimated 100-150 employees

Business Model:

Specialty Performance Chemical Manufacturer with diversified portfolio
350+ Customized Formulations across Four Primary Categories:
1. Polymers: Thickeners, film formers, stabilizers, rheology modifiers
2. Surfactants: Wetting agents, emulsifiers, dispersants, detergents, foaming agents
3. Silicones: Water repellents, softeners, defoamers, release agents
4. Esters & Bio-Based Sustainable Solutions: Eco-friendly alternatives, green chemistry formulations
Target Industries (Diverse End-Use Applications):

Textile & Garment Washing (Primary): Pre-treatment, dyeing, finishing, printing, coating auxiliaries for all fabric/garment substrates
Home & Personal Care (HPC): Shampoos, conditioners, body wash, skin care formulations
Institutional & Industrial Cleaners: Room care, laundry, kitchen hygiene, personal hygiene solutions
Water Treatment: Coagulants, flocculants, anti-scalants, biocides
Paints & Coatings: Additives, dispersants, rheology modifiers
Paper & Pulp: Processing chemicals, retention aids
Construction: Concrete admixtures, waterproofing agents
Rubber: Processing aids, vulcanizing agents
Dyes & Pigments: Dispersing agents, leveling agents
Manufacturing Infrastructure:

Installed Capacity: 22,000 MTPA (metric tons per annum)
Facility Area: 6,763 square meters at Saket Industrial Estate, Moraiya, Ahmedabad
Warehousing: 1,350 MT storage capacity
Automation: Partially automated manufacturing operations
Sustainability: Zero Liquid Discharge (ZLD) facility
Supports: Both liquid and powder formulations
R&D & Innovation:

In-house R&D laboratory
Application Research Center with advanced testing infrastructure
Focus on sustainable chemistry and bio-based solutions
Customized product development tailored to customer requirements
Environmentally compliant formulations
Distribution Network:

Domestic: 50+ authorized distributors pan-India
Related Party: Neochem Specialties (reselling agent owned by promoter)
Direct Supply: To customers across industries
Export: 12 countries globally (international presence)
Customer Base:

254 clients served in FY 2024 across diverse industries
Expanding customer base across geographies
Long-standing relationships with textile, HPC, industrial cleaning companies

Market Position:

Positioned as specialty performance chemicals manufacturer in growing Indian chemicals market
Indian specialty chemicals market: ₹3+ lakh crore, projected to grow at 12-14% CAGR
Competing with established players: Aether Industries, Rossari Biotech, Fine Organic Industries, Galaxy Surfactants, Godrej Industries
Niche player with 350+ formulations serving multiple end-use industries
40+ years legacy provides credibility and established customer relationships
Focus on sustainable and bio-based solutions differentiates from traditional chemical suppliers

Operations:

Manufacturing Facility: Saket Industrial Estate, Village Moraiya, Ta. Sanand, Dist-Ahmedabad
Installed Capacity: 22,000 MTPA on 6,763 sq. meters
Warehousing: 1,350 MT capacity
Zero Liquid Discharge (ZLD): Environmentally sustainable operations
Quality: ISO certifications, quality management systems
Innovation: In-house R&D lab, Application Research Center

Company Strengths

Explosive Revenue & Profit Growth – Revenue +39%, PAT +330%! (FY24 to FY25):
- FY25 revenue: ₹86.15 cr (+38.9% vs ₹62.01 cr FY24)
- FY25 PAT: ₹7.75 cr (+330.6% vs ₹1.80 cr FY24) – more than quadrupled!
- Analyst Dilip Davda notes: “The company marked growth in its top and bottom lines”
- Profit margin expansion: 2.90% (FY24) → 9.00% (FY25) – significant improvement
- Demonstrates strong operational leverage and efficiency
- Consistent trajectory showing scalability
Massive Anchor Support – ₹12.77 Cr Raised from 7 Investors (28.4% of Issue):
- Very significant institutional backing with ₹12.77 crore anchor investment
- 13,03,200 shares subscribed by 7 notable anchor investors on Dec 1, 2025
- Key Anchors: Sanshi Fund-I, Mavira Growth Opportunities Fund, 5 others
- 28.4% of total issue allocated to anchors – one of highest in recent SME IPOs
- Validates company fundamentals and growth story
- Provides stability and reduces under-subscription risk
Modest GMP (₹6-10) – 6-10% Expected Listing Gains:
- GMP of ₹6-10 as of Nov 27-Dec 2 (6.1-10.2% premium)
- High of ₹10 on Nov 27, current ₹6-7 range
- Expected listing price: ₹104-108
- Positive grey market sentiment (unlike many flat GMPs in batch)
- Indicates moderate investor confidence
- Potential for 6-10% Day 1 listing gains
40+ Years Legacy in Specialty Chemicals Industry:
- 40+ years of experience in performance chemicals manufacturing
- Incorporated as company in 2006 (19 years) but built on 4-decade foundation
- Long-standing track record provides significant credibility
- Survived multiple economic cycles and industry disruptions
- Established customer relationships and supplier networks
- Multi-generational expertise in chemical formulations
Diversified Product Portfolio – 350+ Formulations Across 4 Categories:
- Wide range: 350+ customized formulations
- Four categories: Polymers, Surfactants, Silicones, Esters & Bio-based solutions
- Serves 9+ end-use industries (textile, HPC, cleaners, water treatment, paints, construction, paper, rubber, dyes)
- Reduces dependency on single product or industry
- Cross-selling opportunities across customer base
- Ability to customize formulations for specific client needs
Excellent Return Ratios – ROE 35.51%, ROCE 29.67%:
- ROE: 35.51% (FY25) – exceptional return on equity
- ROCE: 29.67% (FY25) – very strong return on capital employed
- Both metrics significantly above industry averages
- Indicates efficient capital allocation and high profitability
- Asset-light model with good cash generation potential
Strong Distribution Network – 50+ Distributors, 12 Countries Export:
- Pan-India presence through 50+ authorized distributors
- Direct supply to customers across industries
- Export to 12 countries – international diversification
- 254 clients served in FY 2024 across sectors
- Multi-channel approach reduces dependency on single route
- Geographic expansion easier with established distribution
Sustainable Operations – Zero Liquid Discharge (ZLD) Facility:
- Zero Liquid Discharge (ZLD) company – environmentally sustainable
- Focus on bio-based and sustainable chemistry formulations
- Meets increasingly stringent environmental regulations
- Attractive for environmentally conscious customers
- Differentiator vs traditional chemical manufacturers
- Future-proof as green chemistry regulations tighten
R&D & Innovation Capabilities – In-House Lab & Application Center:
- In-house R&D laboratory with advanced testing infrastructure
- Application Research Center for product development
- Customized formulation capabilities based on customer requirements
- Focus on sustainable and eco-friendly solutions
- Innovation pipeline for new product development
- Technical expertise to serve evolving industry needs
Reasonable Valuation – P/E ~15x:

Issue priced at P/E of ~15x (FY25 basis) – reasonable for specialty chemicals
Comparable peers trade at 15-30x P/E
Strong growth (revenue +39%, PAT +330%) justifies valuation
Margin of safety vs aggressive pricing seen in other SME IPOs

Key Risks & Challenges

Explosive PAT Jump +330% – Sustainability Concerns:
- Critical Concern: PAT surged from ₹1.80 cr (FY24) to ₹7.75 cr (FY25) – more than 4x in one year!
- PAT margin: 2.90% (FY24) → 9.00% (FY25) – very rapid expansion
- Such dramatic profit jumps in SME IPOs often indicate pre-IPO earnings inflation
- Questions: Can 9% PAT margins sustain in competitive commodity chemicals space?
- Operating in fragmented market with thin margins typical
- Risk of profit normalization post-listing
- Need to scrutinize quality of earnings
Heavy Working Capital Focus – 63% of IPO Proceeds:
- ₹23.90 crore (63.1% of net proceeds) allocated to working capital – major red flag
- Indicates severe cash flow strain and liquidity issues
- Chemicals business inherently working capital intensive
- Raw material costs, inventory, long receivable cycles
- Continuous liquidity requirements may necessitate future fundraising
- Cash generation capability questionable despite high profitability
High Leverage – ₹10 Cr (26.4%) for Debt Repayment:
- ₹10 crore (26.4% of net proceeds) allocated to debt repayment
- Indicates significant over-leverage
- Outstanding borrowings substantial enough to require IPO proceeds
- Even post-IPO, likely considerable debt remains
- Finance costs impacting profitability
- Failure to service debt = operational disruption
Highly Competitive & Fragmented Specialty Chemicals Market:
- Competing with established listed players:
  - Aether Industries: ₹18,000+ cr market cap, advanced chemistry
  - Rossari Biotech: ₹5,000+ cr market cap, specialty chemicals focus
  - Fine Organic Industries: ₹12,000+ cr market cap, oleochemicals
  - Galaxy Surfactants: ₹25,000+ cr market cap, surfactants leader
  - Godrej Industries: Large conglomerate with chemicals division
- Plus hundreds of regional and unorganized chemical manufacturers
- Price-based competition eroding margins
- Difficult to differentiate in commodity-like chemical formulations
- Customer bargaining power high in fragmented market
Customer Concentration Risk – 254 Clients But Likely Top 10-20 Dominate:
- Served 254 clients in FY 2024 but concentration likely high
- Typical B2B chemicals companies have 50-70% revenue from top 10 customers
- Loss of even 2-3 major clients = significant revenue impact
- No long-term contracts mentioned
- Customer switching costs low in specialty chemicals
- Relationship-dependent business vulnerable to competition
Raw Material Price Volatility – Petrochemical Dependency:
- Specialty chemicals use petrochemical derivatives as raw materials
- Subject to crude oil price fluctuations and global commodity cycles
- Supply chain disruptions impact availability
- Limited pricing power to pass on cost increases due to competition
- Margin compression risk during inflationary cycles
- No hedging strategies or long-term supply contracts mentioned
Industry Cyclicality – Linked to Manufacturing, Construction, Textiles:
- End-use industries (textile, construction, paints, paper) are cyclical
- Economic slowdowns impact demand for performance chemicals
- Textile industry in India facing headwinds (competition from Bangladesh, Vietnam)
- Construction sector volatile based on government spending and real estate
- Automotive and industrial sectors subject to business cycles
- Company vulnerable to multi-industry slowdowns
Regulatory & Environmental Compliance Risks – Chemical Manufacturing:
- Subject to strict environmental regulations (pollution control, waste management)
- Chemical Accidents (Prevention & Control) Rules, Environment Protection Act
- Hazardous chemicals handling and storage regulations
- ZLD compliance ongoing operational cost
- Non-compliance penalties and shutdowns risk
- Tightening regulations increase compliance costs
Related Party Transactions – Neochem Specialties (Promoter-Owned):
- Distribution through Neochem Specialties, a reselling agent owned by promoter
- Related party transactions create potential conflict of interest
- Pricing and terms may not be arm’s length
- Dependency on promoter-owned entity for distribution
- Regulatory scrutiny on related party deals
Limited Export Diversification – 12 Countries But Revenue Split Not Clear:

Exports to 12 countries but contribution unclear
Domestic market likely 80-90% of revenue (typical for Indian chemical SMEs)
Limited international presence vs larger peers
Export expansion requires significant investment
Forex risk on international sales

Single Manufacturing Facility – Concentration Risk:

All production from single 6,763 sq. meter facility in Moraiya, Ahmedabad
No geographic diversification or backup facility
Vulnerable to natural disasters, fire, equipment breakdown, labor disputes
Any disruption = complete production halt
Business continuity risk
Supply chain impact on 254 clients across industries

SME Listing Liquidity Risk – Limited Trading Volumes:

NSE SME listing = lower liquidity vs mainboard
Institutional participation limited due to SME status
Trading volumes typically low
Wide bid-ask spreads
Exit opportunities constrained
Difficult to sell large quantities

CONCERNS: Explosive PAT growth +330% (₹1.80 cr → ₹7.75 cr) raises sustainability questions. Heavy working capital focus (63.1% or ₹23.9 cr of IPO for WC indicates cash strain). High leverage (26.4% or ₹10 cr for debt repayment). Competing in fragmented specialty chemicals market with giants like Aether (₹18K cr), Rossari (₹5K cr), Galaxy Surfactants (₹25K cr). Customer concentration, raw material volatility, single facility risk. POSITIVES: Strong anchor backing (₹12.77 cr from 7 investors), 40+ years legacy, 350+ formulations, ROE 35.51%, ROCE 29.67%, ZLD facility, modest GMP (₹6-10, 6-10%), reasonable P/E ~15x. Analyst notes “marked growth in top and bottom lines.”

Disclaimer: This information is based on publicly available sources including SEBI RHP filings, analyst reports, and company disclosures. Investors should conduct their own research and consult with financial advisors before making investment decisions. Past performance is not indicative of future results. SME investments carry higher risks than mainboard listings.