History of the Chemplast Sanmar IPO

The Chemplast Sanmar IPO closed on 12 August and was subscribed a little over 2 times. However, what is interesting is that Chemplast was a listed company in India till 2012, before it delisted from the stock exchanges. Here is a look at the capital history of Chemplast Sanmar.

Back in 2012, Chemplast had delisted because the global scenario for chemicals had deteriorated drastically after the financial crisis. As a result, the losses had accumulated, debt equity ratio was 6:1 and the net worth had dipped into negative. Hence, the company took a voluntary decision to delist the stock from the bourses in 2012.

Accordingly, an open offer was made setting the buyback floor price at Rs.4.51 per share. However, under pressure from the large shareholders for ceding full control to promoters, the final buyback was done at a price of Rs.15 per share. Back then, the share was at a par value of Rs.1 per share. Today, the par value has been consolidated to Rs.5 per share so that gives an effective comparable delisting price of Rs.75 for 2012.

However, if you consider the current issue price of Rs.530 to Rs.541, it is still a little over 7 times the price at which the stock was delisted. With the outlook for the company still clouded, it raises issues over whether the promoters got the shares too cheap and are now selling it at seven times their cost of acquisition.

This raises a pertinent issue about the conditions under which delisted companies can relist. Currently, the only stipulation by SEBI is that relisting is permitted only after 3 years elapse. However, what is required is a better justification of the relisting and why the company delisted in the first place.