Tatva Chintan IPO: Tatva Chintan to use IPO proceeds for growth, not to repay debt: Chintan Shah

You are in the speciality chemical space and manufacture SDA, PTC and electrolyte salts. Give us an overview about your products. Which sectors do you cater to?
The anchor list has been published and we would like to take this opportunity to thank all the market anchor investors who have believed in our story and have put a lot of faith in a small but rapidly growing company like Tatva Chintan. We have some of the very marquee names among top mutual funds in India as well as top FIIs, very large insurance funds etc as anchor investors. Many more anchor investors were interested in investing in the company but due to Sebi regulations and the size constraint of the IPO, we could accommodate some of them. But I would definitely like to thank all the anchor investors who had shown us a good amount of interest in our company.

We phase transfer catalysts which are used in pharmaceuticals and agrochemicals. They also help the environment due to their use in BS-VI emission control. We can also utilise these products for making defining catalysts to convert certain chemical processes into green chemistry. In terms of organic electrolytes, these have applications going into super capacitor batteries which have applications in automotive as well as in storage of renewable energy.

We have a segment where we produce certain specialty chemicals and pharma and agro intermediates. By virtue of having so many verticals within our business, we have a very strong and large customer base across many verticals of the chemical industry. Globally we worked with large MNCs like Bayer, Merck, Tosoh. Domestically we have worked with well known names like , Divi’s Laboratories, Laurus Laboratories, Asian Paints.

Who are your top customers?
We are very well diversified. We have customers across pharmaceutical industries, agro chemicals, dyes intermediates, paints and coatings, epoxy resins, manufacturers etc. The application of our products are also versatile including pharmaceuticals, agrochemicals, automotive refining. Our top 10 customers are well known names.

When raw material prices increase, are you able to pass on the hike? How do you hedge the risk over the medium term basis?
That is a very simple logic. Let us talk of the BS VI emission application area where we are supplying our structure directing agents. Now the cost of this structure directing agents vis-à-vis the automobile in which the end application goes, is very negligible in terms of cost to the final application of auto. Logically, this kind of minor price increases in our products really does not matter a lot and we can successfully pass it on.

What are your R&D commitments? How are you going about patenting?
We are doing some very unique things within the Indian industry. It is difficult to find a competitor for the kind of products that we are doing in terms of organic electrolytes or specialty amines where we are pretty much active. This is very much a logical conclusion to say that we do a good work in terms of R&D and by virtue of that only we are able to consistently deliver the new products to the market.

Any Indian company which is strong on R&D has a good future and we believe in this and we continue to spend on our R&D to remain ahead in the market and we also continue to develop newer technologies for our future. We would continue to spend heavily on our R&D in terms of 2% to 3% of revenue and definitely that would translate into a strong top line growth.

Your debt has breached the Rs 100-crore level. Do you plan to take more post the IPO as there are repayment plans?
In terms of long-term debts, we are at about Rs 38-40 crore which eventually gets paid off in due course. We took a conscious decision not to repay any of our debts via the IPO proceeds. We felt that with the kind of growth we have, it is more important to invest this money into future and positive growth. We are allocating most of the money for developing our production capabilities and increasing our R&D capabilities. The long term debts definitely gets repaid within the next two to three years and we do not foresee the need to create any long term debts in the near future.

You have raised about Rs 150 crore from the anchor investors at Rs 1,083 per share. Could you share how your anchor book has shaped up and also your interactions with the investors? Any key takeaways from that?
We have one of the best anchor books I can foresee. Topmost investment companies have put their full trust and invested in our really small company. In terms of the overall market, we are a really small company but a very fast growing one.

I feel this kind of investment atmosphere would encourage a lot of other smaller companies like us to come forward and participate in the IPO and have access to this kind of funds which can contribute to the growth of their companies in a faster way.