Safex Chemicals India Limited IPO

01At a glance

What the company does — a specialty chemicals company focused on agrochemicals, with three verticals: branded formulations sold to farmers through dealers; specialty chemicals; and contract development and manufacturing (CDMO) for global agrochemical companies (DRHP p.20). It had eight plants in FY25 (DRHP p.119).

Who pays it — farmers through 14,956 active dealers, and agrochemical companies in India and abroad; revenue outside India was 29.11% in FY25 (DRHP p.119). The top ten customers were 35.61% of FY25 product sales (DRHP p.41).

Why it is raising money — ₹2,555.86 million to repay the company's borrowings and ₹1,099.96 million to repay those of its subsidiary Shogun Organics, and the rest for general purposes (DRHP p.21).

How fast it has grown — revenue from ₹11,610 million in FY23 to ₹14,046 million in FY24 and ₹15,848 million in FY25 (DRHP p.119).

The one thing to understand — a business built by acquisition that has not yet shown a profit as a group. It paid ₹6,700.09 million for subsidiaries in FY23, including Briar Chemicals in the UK, booked ₹560.49 million of exceptional charges that year, mostly acquisition costs, and a ₹521.35 million goodwill write-down in FY25; with interest and depreciation rising, it reported a loss in every year (DRHP p.44, DRHP p.76, DRHP p.77, DRHP p.437, DRHP p.439).

02The business, in plain words

An agrochemical company makes or buys crop-protection active ingredients, mixes them into branded formulations, and sells them through dealers to farmers; its specialty and contract arms make chemicals to order for other companies.

A global crop-protection company needs a chemical made to its specification → it contracts Safex's CDMO arm → the plant makes and ships the batches → the customer pays under the contract.

Earnings equation: Profit ≈ branded sales × margin + contract and specialty sales × margin − overheads − interest − depreciation on acquired plants. EBITDA margin was 14.70% in FY25 (DRHP p.119).

03Where the money comes from

Source: DRHP p.119. The segment shares are as the document reports them and add to more than 100%.

04The growth record

Source: DRHP p.76, DRHP p.77, DRHP p.119.

05What the growth is made of

Acquisitions, then a margin recovery. Gross margin rose from 41.35% to 51.07% over two years, and specialty chemicals grew from 6.78% to 17.30% of revenue (DRHP p.119). FY25 profit before exceptional items was ₹678.86 million, but exceptional items of ₹539.86 million and tax of ₹281.86 million left a loss (DRHP p.76).

06Earnings quality

Operating cash flow of ₹2,632.78 million over FY23 to FY25 was positive while the company reported losses (our arithmetic, DRHP p.77). Depreciation rose from ₹387.71 million to ₹874.56 million and finance costs from ₹399.69 million to ₹987.31 million (DRHP p.76). Tax expense exceeded pre-tax profit in FY25 (DRHP p.76). At March 2024, the UK subsidiary carried a ₹399.99 million provision for soil and groundwater remediation at its Norwich site (DRHP p.44).

07The balance sheet

Source: DRHP p.22, DRHP p.119.

08What the money is for

Source: DRHP p.21. A pre-IPO placement of up to ₹900.00 million may be made (DRHP p.20).

09Who is selling

Source: DRHP p.21, DRHP p.72. The last row and the promoters' combined holding are our arithmetic. The shares offered are about 22% of the company (our arithmetic). No shares were acquired in the 18 months before the filing (DRHP p.28).

10Promoters

The promoters are Surinder Kumar Chaudhary, Rajesh Kumar Jindal, Neeraj Kumar Jindal and Piyush Jindal, who hold 37.97% (DRHP p.21, our arithmetic). Proceedings against the promoters include three criminal, four regulatory and one civil matter (DRHP p.23).

11Who already owns it

Source: DRHP p.21. The last four rows are our arithmetic.

12What changed just before the IPO

• Goodwill — ₹521.35 million written down in FY25 (DRHP p.437).
• Borrowings — up ₹1,533 million in FY25 (DRHP p.22).
• Flood — inventory loss at the Una plant of subsidiary Him Bio Agro in August 2024 (DRHP p.44).

13Capacity and expansion

Eight plants, including Una in Himachal Pradesh, Pune, and Briar Chemicals' plant at Norwich, UK (DRHP p.44, DRHP p.119). The proceeds repay debt, not capacity (DRHP p.21). Capital spending was ₹343.52 million in FY25 (DRHP p.77).

14Market size and industry structure

The F&S report cited in the offer document values the global agrochemical CDMO market at US$10 billion in 2024 and projects US$15 billion by 2030 (DRHP p.20). Those projections are F&S's, and newboard has not tested them.

15Competitive position

What the document claims, and what it rests on:

• Value chain — from specialty chemicals to branded formulations (DRHP p.20).
• Distribution — about 15,000 active dealers (DRHP p.119).
• Global CDMO — a UK plant serving agrochemical companies (DRHP p.44).

Against that: losses, rising debt and interest, UK environmental liabilities, and a wide set of legal proceedings (DRHP p.23, DRHP p.44, DRHP p.76).

16Peers the company named

Source: DRHP p.122. The table also lists Sumitomo Chemical India, Navin Fluorine International, Vinati Organics and Anupam Rasayan India; the peers' P/E ranges from 26.38 to 134.42, average 60.63 (DRHP p.118, DRHP p.122).

No P/E is possible for the company until a price band is set, and it made a loss in FY25.

17Risks, in plain words

• Losses. A loss in each of the three years (DRHP p.76).
• Debt. Borrowings of ₹8,304 million and finance costs near ₹1 billion (DRHP p.22, DRHP p.76).
• Acquisitions. Goodwill has already been written down (DRHP p.437).
• Environment. Remediation at the UK site (DRHP p.44).
• Investor exit. Most offered shares come from Sarcoline Limited (DRHP p.72).

18Litigation and regulatory matters

Source: DRHP p.23. Most criminal cases filed by the company and its subsidiaries concern dishonoured cheques under the Negotiable Instruments Act (DRHP p.23).

19Related-party transactions

Not read in detail for this study.

20What the offer document does not say

In the sections read for this study, the document does not give:

• Who owns Sarcoline Limited, in the pages read.
• How much remediation at the UK site may finally cost, beyond the provision and insurance (DRHP p.44).
• Which acquisition the written-down goodwill relates to, in the pages read.
• What the criminal and regulatory proceedings against the promoters concern, in the pages read.
• The price band, lot size or issue dates, which is normal at DRHP stage.

21Five questions for management

1. When will the group report a profit after interest and tax?
2. Which acquired business led to the ₹521 million goodwill impairment?
3. How much debt remains after ₹3,656 million is repaid?
4. What is the expected remaining cost of the Norwich remediation?
5. Why is Sarcoline Limited offering 29.1 million of its 67.8 million shares now?

1Sources and cited facts

This study was read from 1 document the company filed. The 30 figures it cites are listed under the document each came from, with the page and the sentence as printed.