Phychem Technologies IPO (31 Aug- 2 Sep) Analysis

Shanti Inorganics Limited is an Ahmedabad based manufacturer of sulphur based inorganic chemicals, incorporated in January 2010 as a successor to a predecessor partnership firm 'Shanti Industries' that has been operating in the same business since 2000. The company is registered and manufactures at Plot No. 2015, Phase III GIDC, Vatva, Ahmedabad, a dedicated chemicals industrial zone in Gujarat.

LIVE OFFER  |  RHP DATED AUGUST 21, 2026

Anchor: August 28, 2026  |  Opens: August 31, 2026  | Closes: September 2, 2026

NSE Emerge (SME)  |  Book Built Issue  | Pure Fresh Issue

 The company produces four core products, each serving distinct industrial applications. Ammonium bisulphite solution is primarily used as a dechlorinating agent in water treatment plants and in the manufacture of caramel colour for food and beverages.

Sodium bisulphite (in both powder and solution forms) serves as a food preservative, an oxygen scavenger in oil drilling fluids, a cyanide removal agent in gold mining operations, and a reducing agent in textile dyeing. Sodium meta bisulphite functions as a preservative in seafood processing and biscuit manufacturing, as well as in oil drilling, water treatment dechlorination, and acrylic fibre bleaching.

Sodium sulphite anhydrous is used as a food antioxidant, in electroplating baths, in detergent formulations, in disperse dye production, and as a boiler feed water oxygen scavenger.

The company serves 14 industry verticals. In FY 2026, Food and Beverages was the largest segment at 35.84% of revenue, followed by Chemicals (22.38%), Oil Drilling (12.82%), Ceramics (8.99%), Pharmaceuticals (8.11%), and Agrochemicals (5.09%). The remaining segments   Water Treatment, Petrochemicals, and Cosmetics   together account for less than 5% of revenue.

The manufacturing base currently comprises two units. The Vatva Unit has an installed capacity of 18,800 MTPA and operated at 92.60% utilisation in FY 2026. The Bavla Unit (Phase I, sodium sulphite) has capacity of 18,000 MTPA but was at just 15.01% utilisation in FY 2026, reflecting its recent commissioning. Phase II at Bavla   adding 78,544 MTPA across sodium meta bisulphite, sodium bisulphite, and ammonium bisulphite   is under construction and targeted for commissioning by June 2027. Total post expansion capacity would reach 1,15,344 MTPA.

Exports constitute 42.57% of FY 2026 revenue, with sales to 15 or more countries. Key export destinations include Eswatini (13.55%), Malaysia (11.05%), UAE (8.54%), Qatar (3.79%), Nigeria (1.86%), and Russia (1.08%). The company also exports to Colombia, Turkey, Puerto Rico, Iraq, Vietnam, and Azerbaijan. In FY 2026, the company had 64 domestic customers and 20 international customers. The company holds ISO 9001:2015, NSF, KOSHER, HACCP, and HALAL certifications, enabling it to supply food grade products to international markets.

IPO BASICS

This is a 100% Book Built Issue and a pure fresh issue   there is no Offer for Sale component, meaning no existing shareholders are selling shares through this offering. The total issue size is 56,91,200 equity shares of Rs. 10 face value each. Of these, 54,06,400 shares form the net issue to the public and 2,84,800 shares are reserved for the market maker. Prior to the issue, the company had 1,15,56,200 equity shares outstanding; the fresh issue represents 33.00% of the post issue paid up capital.

The offer is listed on NSE Emerge, the SME platform of the National Stock Exchange, under Chapter IX of SEBI (ICDR) Regulations, 2018   specifically Regulations 229(2) and 253(1). The Book Running Lead Manager is Vivro Financial Services Private Limited, and the Registrar to the Issue is KFin Technologies Limited. The anchor bid date is August 28, 2026, with the public bidding window open from August 31 to September 2, 2026.

The promoters are Manojkumar Jayantilal Patel, who serves as Chairman and Managing Director and held 60.24% of pre issue capital, and Avnish Manojkumar Patel, who serves as Joint Managing Director and held 14.61% of pre issue capital. Together they control approximately 74.85% of the company before the IPO.

USE OF PROCEEDS

All IPO proceeds accrue to the company as this is a pure fresh issue. The stated objects of the issue are two in number.

The primary object is funding capital expenditure for the Phase II Bavla Unit expansion, for which Rs. 4,250.00 Lakhs of IPO proceeds are earmarked. The total project cost for the Phase II expansion is Rs. 10,770.88 Lakhs. Of this, Rs. 2,123.15 Lakhs has already been deployed from internal accruals.

The balance is to be funded through the IPO (Rs. 4,250.00 Lakhs), an HDFC Bank term loan (Rs. 3,400.00 Lakhs), a private placement (Rs. 1,242.18 Lakhs), and further internal accruals (Rs. 1,878.70 Lakhs). The Phase II expansion will add 78,544 MTPA of capacity across sodium meta bisulphite, sodium bisulphite, and ammonium bisulphite, with a target commissioning date of June 2027.

The secondary object is General Corporate Purposes, capped at the lower of 15% of gross issue proceeds or Rs. 1,000 Lakhs as required under SEBI regulations. The GCP amount will be finalised post price discovery.

FINANCIAL PERFORMANCE

All figures are from the Restated Financial Statements prepared under Indian GAAP and restated in accordance with SEBI ICDR Regulations, 2018. Figures are in Rs. Lakhs unless otherwise noted.

Revenue and Profitability

Metric	FY 2024	FY 2025	FY 2026
Revenue from Operations (Rs. L)	4,486.72	5,710.57	7,122.02
Total Income (Rs. L)	4,506.10	5,845.98	7,293.39
EBITDA (Rs. L)	872.49	1,205.85	1,539.72
EBITDA Margin (%)	19.45%	21.12%	21.62%
PAT (Rs. L)	511.54	799.36	1,022.00
PAT Margin (%)	11.40%	14.00%	14.35%
EPS  to  Adjusted (Rs.)	5.03	7.86	9.36

Revenue from operations grew at a CAGR of 25.99% between FY 2024 and FY 2026, rising from Rs. 4,487 Lakhs to Rs. 7,122 Lakhs. This growth has been accompanied by meaningful margin expansion   EBITDA margin widened from 19.45% to 21.62% and PAT margin from 11.40% to 14.35% over the same period. For the stub period April to May 2026 (2 months), the company reported revenue of Rs. 1,598.27 Lakhs and PAT of Rs. 249.96 Lakhs, implying an annualised PAT margin of approximately 15.63%, consistent with the improving trajectory.

Balance Sheet and Leverage

Metric	FY 2024	FY 2025	FY 2026
Net Worth (Rs. L)	1,760.36	2,559.72	4,823.90
Total Debt (Rs. L)	2,434.04	2,538.03	3,067.40
Debt to Equity Ratio	1.38	0.99	0.64
ROCE (%)	27.59%	27.16%	23.40%
ROE (%)	34.00%	37.01%	27.68%

Net worth has grown substantially   from Rs. 1,760 Lakhs in FY 2024 to Rs. 4,824 Lakhs in FY 2026   driven entirely by retained earnings. Total debt increased modestly in absolute terms but the debt to equity ratio improved sharply from 1.38x to 0.64x, reflecting the rapid accumulation of equity from profits.

As of the stub period ending May 2026, net worth stood at Rs. 5,074 Lakhs and total debt at Rs. 3,485 Lakhs, giving a D/E of 0.69x   slightly higher than March 2026 due to Phase II capex drawdowns.

Return ratios have been strong but show some compression as the equity base grows ahead of earnings from new capacity. ROCE declined from 27.59% in FY 2024 to 23.40% in FY 2026, while ROE fell from 34.00% to 27.68% over the same period. This compression is a natural feature of the pre revenue phase of large capacity expansion   ROCE and ROE should recover once Phase II becomes operational.

Cash Flows

Cash Flow (Rs. L)	FY 2024	FY 2025	FY 2026
Operating Cash Flow	347.37	1,553.49	609.57
2-Month Stub (Apr to May 2026)			999.46

Operating cash flow has been positive across all three years. FY 2025 was notably strong at Rs. 1,553 Lakhs, while FY 2026 OCF at Rs. 610 Lakhs reflects higher working capital consumption as the company scaled revenue rapidly and funded Phase II related procurement. The two month stub period shows OCF of Rs. 999 Lakhs   a strong near term signal.

PEER COMPARISON

The RHP does not identify any listed comparable peers. The two companies cited   Shalibhadra Dyechem Private Limited and Nilkanth Organics Private Limited   are both unlisted private companies. All peer data is therefore available only up to FY 2025, and no listed market valuation benchmarks are available within the RHP.

Company	EBITDA Margin	PAT Margin	D/E Ratio
Shanti Inorganics (FY26)	21.62%	14.35%	0.64x
Shalibhadra Dyechem Pvt. Ltd. (FY25)	5.49%	1.51%	3.62x
Nilkanth Organics Pvt. Ltd. (FY25)	13.37%	6.46%	1.93x

Shanti Inorganics compares favourably against both private peers on every margin and returns metric. Its EBITDA margin of 21.62% is nearly four times that of Shalibhadra Dyechem and significantly above Nilkanth Organics' 13.37%. PAT margin at 14.35% is several multiples above both peers.

Its debt to equity of 0.64x is dramatically better than Shalibhadra's 3.62x and Nilkanth's 1.93x. ROCE and ROE are also comfortably higher. The absence of listed peers limits the ability to benchmark valuation, but on operational metrics the company appears to be among the more efficient operators in its chemical sub segment.

KEY RISKS

a) End Use Industry and Customer Concentration

Three segments   Food and Beverages (35.84%), Chemicals (22.38%), and Oil Drilling (12.82%)  together account for over 70% of FY 2026 revenue. A slowdown or regulatory change in any one of these, particularly food additives or oil drilling activity, could materially impact revenue. Customer concentration amplifies this: the top 10 customers contributed 63.35% of FY 2026 revenue and the company does not maintain long term supply agreements with most of them. Loss of a key account without replacement has a direct and disproportionate revenue impact.

b) Raw Material Price Volatility and Supplier Dependence

The three principal raw materials   sulphur dioxide (36.51% of raw material costs), anhydrous ammonia (15.06%), and soda ash (7.02%)   are globally traded commodities with prices linked to energy, mining, and chemical feedstock cycles. The company has no long term supply agreements, and the top 5 suppliers accounted for 70.08% of FY 2026 purchases. Sudden input price increases or supply disruptions cannot be hedged contractually and must either be absorbed in margins or passed through to customers, the latter being more difficult in competitive commodity chemical markets.

c) Capex Execution Risk  to  Phase II Bavla Unit

The primary use of IPO proceeds is funding the Rs. 10,770.88 Lakhs Phase II expansion at the Bavla facility, targeting 78,544 MTPA of additional capacity and a June 2027 commissioning date. The expansion involves civil construction, equipment procurement, regulatory clearances, and trial production ramp up   all of which carry execution risk. Delays in commissioning, cost overruns, or lower than planned capacity utilisation in the initial period would defer the expected revenue and returns from the invested capital.

d) Export Risk and Foreign Currency Exposure

Exports account for 42.57% of FY 2026 revenue across 15 or more countries. This diversification, while positive, creates exposure to geopolitical disruption, trade policy changes, logistical constraints, and foreign exchange fluctuation. The company's export destinations include markets such as Russia (1.08%), which carry heightened geopolitical and sanctions related risk, and developing markets such as Nigeria and Colombia where payment and sovereign risk may be elevated.

e) Compliance and Regulatory History

The RHP discloses past non compliance with Section 203(3) of the Companies Act, 2013 (KMP holding multiple positions simultaneously) and Section 135 (CSR expenditure requirements), both of which have adjudication proceedings pending. The company has also had delays in ROC filings in prior years. While corrective actions have been taken, pending adjudications create residual uncertainty around penalties. GIDC Vatva, where the primary facility is located, is a government demarcated industrial zone; future zoning or environmental policy changes affecting the site would be outside the company's control.

f) Group Company Overlap and Absence of Non Compete

Promoters are associated with group entities operating in chemical trading and manufacturing   businesses that are adjacent to Shanti Inorganics' own operations. There is no non compete agreement between the promoters and the company. This creates a structural risk of undisclosed business diversion, conflicts of interest in customer or supplier dealings, or management attention being shared across group activities.

g) Hazardous Manufacturing Operations

Production involves sulphur dioxide and anhydrous ammonia   both classified as toxic and hazardous industrial gases. The Vatva facility operates in close proximity to other industrial units in the GIDC zone. Any industrial accident, gas leak, or fire event could result in regulatory shutdown, civil liability, and reputational damage. The company is subject to ongoing environmental and safety inspections, and adverse findings could disrupt or suspend operations.

KEY POSITIVES

a) Strong and Consistent Revenue Growth

Revenue from operations has grown at a CAGR of 25.99% over FY 2024 to 2026   from Rs. 4,487 Lakhs to Rs. 7,122 Lakhs   without any year on year decline. This sustained pace of growth, well above Indian GDP and chemical sector averages, reflects both volume gains and the company's ability to penetrate new geographies and customer segments.

b) Expanding Margins and PAT Growth

EBITDA margin expanded from 19.45% in FY 2024 to 21.62% in FY 2026, and PAT margin from 11.40% to 14.35%. PAT nearly doubled over two years   from Rs. 512 Lakhs to Rs. 1,022 Lakhs   as the company benefited from operating leverage and an improving product mix. These margins are high relative to the identified private company peer set, suggesting structural differentiation in the company's products or customer relationships.

c) Rapidly Improving Balance Sheet

The debt to equity ratio has fallen sharply from 1.38x in FY 2024 to 0.64x in FY 2026, driven entirely by earnings led equity accretion rather than debt reduction. Net worth tripled over two years   from Rs. 1,760 Lakhs to Rs. 4,824 Lakhs. This trajectory indicates that the business is self financing a significant portion of its growth through retained profits.

d) Diversified Export Revenue Across 15 or More Countries

Exports at 42.57% of revenue spread across markets in Africa (Eswatini, Nigeria), Southeast Asia (Malaysia, Vietnam), the Middle East (UAE, Qatar, Iraq), and the Americas (Colombia, Puerto Rico) reduce dependence on any single geography. This diversification also provides partial insulation against domestic demand slowdowns and enables the company to capture price differentials across markets.

e) Premium Quality Certifications Enabling High Value Markets

Holding ISO 9001:2015, NSF, KOSHER, HACCP, and HALAL certifications simultaneously is uncommon for a company of this size. These certifications collectively qualify Shanti Inorganics to supply food grade, water treatment grade, and export market grade product to buyers who require documented compliance   effectively creating a qualifications based barrier to competition from smaller or less certified domestic producers.

f) Experienced Promoter Management

The Chairman and Managing Director, Manojkumar Jayantilal Patel, has over 26 years of experience in sulphur based inorganic chemicals. The Joint MD, Avnish Manojkumar Patel, has over 17 years in the same field. The company's predecessor partnership, Shanti Industries, operated since 2000   giving the management team a combined institutional knowledge of over two decades in customer relationships, manufacturing know how, and raw material sourcing.

g) Large Scale Capacity Expansion Underway

The Phase II Bavla expansion, once commissioned, will increase total installed capacity from 36,800 MTPA to 1,15,344 MTPA   a more than threefold increase. At current revenue per tonne implied by FY 2026 figures, this headroom is substantial. The Vatva Unit is already at 92.60% utilisation, confirming that demand for existing products exists and the expansion is capacity driven rather than speculative. Successful commissioning and ramp up would significantly re rate the company's scale and profitability.

This report is prepared for analytical and informational purposes only. It is not an offer to buy or sell securities. Investors are advised to read the Red Herring Prospectus in its entirety and consult their own financial advisors before making investment decisions. Past financial performance is not a guarantee of future results.