Tatva Chintan Pharma Chem Limited (Tatva Chintan)

 

Incorporated in 1996,

Tatva Chintan Pharma Chem Limited (Tatva Chintan) is a leading manufacturer of Structure Directing Agents (SDAs) and Phase Transfer Catalyst (PTCs) that have various applications in green chemistry. The company also manufactures Electrolyte Salts for super capacitor batteries (SCB) and Pharmaceutical & Agrochemical intermediates and other specialty chemicals (PASC). Its Product have application industries like automotive, petroleum, pharmaceutical, agrochemicals, paints and coatings, dyes and pigments, personal care and flavor and fragrances industries. As of FY21, they offered 47 products under their SDA, 48 products under the PTC, 6 products under the Electrolyte Salts for (SCB) and 53 products under their PASC portfolios. 

Positives: (a) Leading manufacturer of structure directing agents and phase transfer catalysts, with consistent quality. (b) Global presence with a wide customer base across various industries having high entry barriers. (c) Diversified specialized product portfolio requiring strong technical know-how (d) Modern manufacturing facilities with a focus on ‘green’ chemistry processes. (e) Strong R&D capabilities. 

Investment concerns: (a) Outbreak of the COVID-19 could have a significant effect on operations, and could negatively impact the business, revenues & financial condition (b) Unplanned slowdowns or shutdowns in manufacturing operations could have an adverse effect on business (c) Company is subject to quality requirements and strict technical specifications and audits by institutional customers. (d) Increase in the cost of raw materials. 

Outlook & Valuation: Tatva Chintan’s is the largest player in India for PTCs and the only manufacturer in India of SDAs for zeolites which have importance due to preference for green technologies. The company has shown good revenue and earnings growth and has healthy balance sheet with solid return ratios. It is raising funds for Capex and R&D requirements as they believe that there is strong growth opportunity available. Given the client additions, wide portfolio, its capabilities, and favorable outlook for the industry, we believe that Tatva Chintan can maintain healthy growth rates which justifies the ~46x FY21 EPS commanded by the company. Hence, we recommend “SUBSCRIBE” to the issue.

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