Can Prasol Chemicals IPO deliver long-term growth for high-risk investors?

ET Intelligence Group: Prasol Chemicals, a specialty chemicals company, plans to raise ₹80 crore through a fresh issue towards repayment of debt. It will also raise ₹420 crore through an offer for sale. The promoter group’s stake will fall to 77.5% after the IPO from 89.2%. The company operates two manufacturing facilities in Maharashtra. While it manufactures over 150 specialty chemicals, over 40% revenue is contributed by a single product category. It exports to 69 countries and derives over a quarter of revenue from international markets. Top 10 customers accounted for 23.7% of revenue while top 10 suppliers account for nearly 69% of raw material purchases. The capacity utilisation at Mahad plant improved to 44.1% in FY26 from 12.7% in FY24 but remained relatively low. Given these factors, investors with high-risk appetite may apply.

Business
Incorporated in 1992, Prasol Chemicals is focused on manufacturing acetone-based and phosphorus-based derivatives, catering to diverse end-use industries such as performance chemicals (including lubricant additives and mining chemicals), pharmaceuticals, agrochemicals, paints, inks, construction & adhesives (PICA), and home and personal care. Its product portfolio includes 21 acetone-based chemicals, 53 phosphorous-based chemicals, and 76 other specialty chemicals. In FY26, acetone-based specialty chemicals contributed 42.8% of revenue, phosphorus-based specialty chemicals 38.3%, and other specialty chemicals 18.3%.

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Financials

Revenue from operations grew 18.6% annually to ₹1,232.6 crore and net profit surged 114.1% annually to ₹83.1 crore between FY24 and FY26. Operating profit before interest, tax, depreciation and amortization (EBITDA) jumped 51.7% to ₹139.3 crore during the same period. EBITDA margin improved to 11.3% in FY26 from 6.9% in FY24. Cash flow from operations dropped to ₹49.5 crore in FY26 from ₹115.6 crore in FY24, largely due to working-capital swings, rising receivables and inventory as the company scaled up operations and expanded sales. Working capital days increased to 49 days in FY26 from 35 days in FY24.

Valuation

Considering the post-IPO equity and net profit for FY26, the company demands a price-earnings (P/E) multiple of 48, compared with 27-197 for its peers such as Aarti Industries, Atul, Laxmi Organic Industries, Vinati Organics, Privi Specialty Chemicals, Yasho Industries and Excel Industries.