PARAGON FINE AND SPECIALITY CHEMICAL LIMITED | INITIAL PUBLIC OFFERNING

Paragon Fine and Speciality Chemicals Limited is a well-established custom synthesis and manufacturing firm specializing in the production of chemical intermediates with a focus on complex and specialized chemistry. The company was founded as a partnership in 2003 and has since transformed into a leading provider of custom synthesis and manufacturing services for a wide range of industries, serving both Indian and international clients. Paragon Limited places a strong emphasis on integrating chemistry with technology and efficient systems to ensure sustainable product development. The company's product portfolio spans various sectors, including pharmaceuticals, agrochemicals, cosmetics, pigments, and dyes, offering a diverse array of chemical intermediates tailored to meet the unique needs of its clients.

PARAGON FINE AND SPECIALITY CHEMICAL LIMITED | INITIAL PUBLIC OFFERNING

On 18th October, 2023 Paragon Fine and Speciality Chemicals Limited officially issued its Prospectus mentioning the important details regarding its recent Initial Public Offering (hereinafter referred as IPO) which had started from Thursday, 26 October, 2023 and will close on Monday, 30 October, 2023. Before delving deeply into the details of the IPO. Let us briefly look at the Business Operation of ‘Paragon Fine and Speciality Chemicals Limited.’

ABOUT BUSINESS OPERATION

Paragon Fine and Speciality Chemicals Limited is a well-established custom synthesis and manufacturing firm specializing in the production of chemical intermediates with a focus on complex and specialized chemistry. The company was founded as a partnership in 2003 and has since transformed into a leading provider of custom synthesis and manufacturing services for a wide range of industries, serving both Indian and international clients. Paragon Limited places a strong emphasis on integrating chemistry with technology and efficient systems to ensure sustainable product development. The company's product portfolio spans various sectors, including pharmaceuticals, agrochemicals, cosmetics, pigments, and dyes, offering a diverse array of chemical intermediates tailored to meet the unique needs of its clients.

Paragon Limited's manufacturing facility, strategically located in the Viramgam District of Ahmedabad, Gujarat, covers approximately 7000 square meters. This state-of-the-art facility is equipped with a variety of reactors capable of producing a wide range of chemical products. Additionally, the company maintains a pilot plant with two glass-lined assembly units and three reactors designed for batch reaction technology. Paragon Limited employs a wide array of chemistry compositions such as Acetylation, Amination, Catalytic Hydrogenation, Chlorosulfonation, Methoxylation, Nitration, Amidation, Ethoxylation, Sulphonation, and more, enabling them to address the intricate and advanced requirements of a broad spectrum of end products and applications. At the heart of Paragon Limited's success lies its dedicated in-house Research and Development (R&D) facility. This facility is fully equipped with laboratories focused on catalytic process development and new chemical screening. The R&D team plays a crucial role in driving innovation and efficiency, from the initial conceptualization of a product to its commercialization. It is worth noting that the Department of Scientific and Industrial Research has recognized the excellence of Paragon Limited's in-house R&D facility. It is the company's robust research and development efforts and technological capabilities, Paragon Limited boasts a diversified product portfolio. Their R&D team has successfully executed multi-step synthesis and scale-up processes for numerous new molecules in the field of specialty intermediates. As a result, the company has expanded its commercialized product range from approximately 100 products in Fiscal 2021 to around 140 products in Fiscal 2023. As of March 31, 2023, Paragon Limited employs a team of 14 technocrats, each holding degrees such as Bachelor of Science, Master of Science, B. Pharma, or Bachelor of Engineering. Paragon Limited holds the distinction of being a One Star Export House, with a strong global presence in countries such as the USA, Israel, Spain, United Kingdom, China, Switzerland, Taiwan, Thailand, Mexico, Japan, Russia, France, Indonesia, Latvia, and Germany. The company's commitment to excellence in custom synthesis and manufacturing, combined with its dedication to cutting-edge research and development, has solidified its position as a trusted and innovative partner in the chemical industry.

PRODUCTS AND SERVICES

Paragon Fine and Speciality Chemicals Limited specializes in the production of six distinct categories of chemical intermediates to cater to various industries.

1. AGRO INTERMEDIATES: The company formulates Agro Intermediates with a strategic focus on enhancing crop protection and boosting agricultural productivity. These tailored formulations are designed to promote the development of safe and effective agrochemicals, ultimately supporting the adoption of sustainable agricultural practices.

2. Pharma Intermediates: Paragon Fine and Speciality Chemicals Limited offers a range of chemical intermediates specifically crafted for the pharmaceutical industry. These intermediates play a crucial role in the synthesis of pharmaceutical products, ensuring the quality and efficacy of medications.

3. Speciality Intermediates: The company provides Speciality Intermediates that are tailored to meet the unique and complex requirements of various industrial applications. These intermediates are developed to enable the production of specialized products with precision and efficiency.

4. Pigment Intermediates: Paragon Fine and Speciality Chemicals Limited Produces Pigment Intermediates designed for the pigment industry. These intermediates serve as essential components in the creation of pigments used in various applications, including paints, coatings, and other colour-related products.

5. Cosmetic Intermediates: The company also manufactures Cosmetic Intermediates, which are instrumental in the formulation of cosmetic and personal care products. These intermediates contribute to the development of safe and effective cosmetic formulations, meeting the high standards of the beauty and personal care industry.

6. Dye Intermediates: Paragon Fine and Speciality Chemicals Limited's Dye Intermediates play a crucial role in the dyeing and colouring industry. These intermediates are engineered to ensure vibrant and lasting coloration in textiles and various other materials.

BOARD OF DIRECTOR AND PROMOTERS OF THE COMPANY

The Board of Directors (BOD) and Promoters of Paragon Fine and Speciality Chemicals Limited comprise a group of key individuals who play pivotal roles in the company's leadership and management. This group includes:

1. Dr. Pravinchandra Jasmat Vasolia is one of the prominent figures on the company's Board of Directors and among its core Promoters. His expertise and insights contribute significantly to the strategic direction and decision-making processes of the organization.

2. Vallabh Ratanji Savaliya is another integral member of the Board of Directors and a key Promoter of the company. His active involvement and leadership within the company have a profound impact on its operations and growth.

3. Kishorkumar Panchabhai Patolia is a distinguished member of the Board of Directors and a Promoter of Paragon Fine and Speciality Chemicals Limited. His contributions and experience play a crucial role in shaping the company's business strategies and initiatives.

4. Rutesh Vallabhbhai Savalia is a significant presence on the Board of Directors and is also listed as a Promoter of the company. His valuable insights and contributions help steer the company toward its goals and objectives.

5. Shivam Kishorbhai Patolia is an essential part of the company's leadership as a member of the Board of Directors and a Promoter. His active participation and expertise contribute to the overall success and growth of Paragon Fine and Speciality Chemicals Limited.

These individuals collectively form the leadership team that guides the company, ensuring that it remains on a path of growth, innovation, and success.

INDUSTRY OUTLOOK

Paragon Fine and Speciality Chemicals Limited is an integral player within the dynamic and evolving Indian chemical industry. This industry has experienced notable shifts, with mostchemicals being de-licensed, except for a select few considered hazardous. Notably, alkali chemicals hold a significant share, accounting for approximately 71.9% of total production in the fiscal year 2022. Moreover, the production of polymers constitutes a substantial portion of the key petrochemical segment, contributing around 59% in 2019.

Furthermore, the agrochemical industry in India depends significantly on the import of raw materials and intermediates, with substantial imports from China. This sector presents an attractive investment opportunity for import substitution and capacity expansion to meet the growing demands of the agricultural sector.

In the pharmaceutical industry, India boasts the world's 3rd largest volume of pharmaceutical production, valued at $50 billion. The country also plays a pivotal role in global pharmaceutical exports, contributing 3.5% of total drugs and medicines shipped to over 200 countries. To bolster domestic production, enhance drug security, and stimulate investment in critical drug categories, the Department of Pharmaceuticals has introduced incentivizing schemes for both global and domestic players. Within this dynamic industry landscape, Paragon Fine and Speciality Chemicals Limited stands as a key player, specializing in the production of chemical intermediates. The company is strategically positioned to leverage the industry's growth and make significant contributions to India's chemical and pharmaceutical sectors, serving a pivotal role in this thriving economic ecosystem.

COMPETITION

Paragon Fine and Speciality Chemicals Limited operates within a highly specialized industry characterized by substantial entry barriers. These barriers encompass several critical factors, such as the need for customer validation and approvals, elevated customer expectations regarding process innovation and cost reduction, stringent quality standards, and exacting product specifications. In this competitive landscape, the company faces diverse rivals whose nature and scale of competition vary across markets, geographic regions, and product types. To maintain a competitive edge in these challenging markets, Paragon Fine and Speciality Chemicals Limited continuously endeavours to optimize its production costs, enhance transportation and distribution efficiencies, and elevate overall operational performance.

Within this niche industry, there are both large and small manufacturers that develop products like those offered by the company. These industry players may possess more substantial financial resources, advanced technology, robust research and development capabilities, extensive market reach, and diversified portfolios of products across various geographic regions. These attributes often enable them to respond more effectively to market dynamics and technological trends.

While Paragon Fine and Speciality Chemicals Limited does not engage in direct competition with any specific listed Indian company that exactly mirrors its range of chemistries, scope of services, and product offerings, it does share some similarities with other listed companies operating in a similar domain. Notable among these industry peers are Aether Industries Limited, Anupam Rasayan India Limited, Bodal Chemicals Limited, and Deepak Nitrite Limited. These companies, like Paragon Fine and Speciality Chemicals Limited, are involved in the production and sale of specialized chemical products, contributing to a competitive landscape that demands continuous innovation, operational excellence, and adaptability to meet the evolving needs of the industry and its diverse customer base.

FINANCIAL ASPECT

When considering an investment in a company, investors invariably scrutinize the Key Financial Indicators to make informed decisions. Among these, Revenue from Operationsstands out as a pivotal figure. Notably, in the Financial Year 2022-23, Paragon Fine and Speciality Chemicals Limited has generated a remarkable revenue of INR 10226.62 (inLakhs). And in the FY 2021-22 it had a revenue of INR 8282.94 (in Lakhs). Their profit for the FY 2022-23 stands at INR 989.21 (in Lakhs). And the profit for the FY 2021-22 stands at INR 449.02 (in Lakhs).

Paragon Fine and Speciality Chemicals Limited's financial performance for the fiscal year 2022-23 exhibited significant growth. The total income for this period reached Rs. 10,501.19 Lakhs, reflecting a notable increase of 24.16% compared to the previous fiscal year 2021-22when it stood at Rs. 8,457.92 Lakhs. This remarkable expansion in total income was primarily attributed to the company's expanded business operations within the domestic market. The total income encompasses both revenue from operations and other income. Specifically, the net revenue from operations for the fiscal year 2022-23 witnessed a substantial increase, reaching Rs. 10,226.62 Lakhs. This represents a growth of 23.47% in comparison to the Rs. 8,282.94 Lakhs achieved in the financial year 2021-22. The primary drivers for this increase were elevated sales in several key segments:

1. Cosmetics Intermediates: Sales increased from Rs. 590.15 Lakhs in FY 2021-22 to Rs. 630.07 Lakhs in FY 2022-23, marking a growth of 6.76%.

2. Dyes Intermediates: Sales surged from Rs. 5,187.98 Lakhs in FY 2021-22 to Rs. 7,044.37 Lakhs in FY 2022-23, indicating an impressive growth of 35.78%.

3. Pharma Intermediates: Sales grew from Rs. 6.31 Lakhs in FY 2021-22 to Rs. 6.66 Lakhs in FY 2022-23, reflecting an increase of 5.55%.

However, along with increased revenue, total expenses for the fiscal year 2022-23 also rose to Rs. 9,144.67 Lakhs from Rs. 7,840.85 Lakhs in the previous fiscal year, marking a 16.63% increase. This expense growth was directly linked to the company's expanded business activities.

As a result of these financial developments, the profit after tax (PAT) experienced substantial growth, surging by 120.30% from a net profit of Rs. 449.02 Lakhs in the financial year 2021-22 to an impressive net profit of Rs. 989.21 Lakhs in the financial year 2022-23. Consequently, the PAT Margin also expanded, reaching 9.67% in the fiscal year 2022-23, compared to 5.42% in the fiscal year 2021-22. These financial achievements underscore the company's robust performance and its ability to effectively capitalize on business opportunities, driving both revenue growth and profitability. For a more comprehensive understanding of the financial aspects of Paragon Fine and Speciality Chemicals Limited, the following table provides valuable insights of financial ratios for a comprehensive assessment of the company's financial condition and performance.

OBJECTIVE OF THE IPO​

The company's decision to go public and list its Equity Shares on the NSE Emerge (SME Platform) is driven by several strategic objectives aimed at enhancing its corporate image, brand visibility, and shareholder value. Other than this the company's intentions behind the initial public offering (IPO) are as follows:

1. Funding Capital Expenditure: The IPO will serve as a source of funds to support critical capital expenditure requirements. Specifically, it will be directed towards civil construction work within the existing factory premises, enhancing infrastructure and operational capabilities.

2. Debt Repayment: Part of the proceeds from the IPO will be allocated for the complete or partial repayment of existing borrowings. This move will contribute to optimizing the company's financial structure and reducing interest expenses, ultimately strengthening its financial position.

3. Expansion Initiatives Paragon Fine and Speciality Chemicals Limited intends to utilize IPO funds for the acquisition and installation of additional plant and machinery. This investment in expansion aims to increase production capacity and operational efficiency to meet growing market demands.

4. Working Capital Needs: A portion of the IPO proceeds will be earmarked to support working capital requirements. Adequate working capital is crucial for smooth day-to-day operations, ensuring that the company can meet its obligations and seize business opportunities.

5. General Corporate Purpose: The IPO will also provide a pool of capital for general corporate purposes, which may encompass a wide range of initiatives aimed at strengthening the company's overall operations, research and development, and strategic growth.

IMPORTANT DATES

DETAILS OF THE IPO

The current Public Issue offered by Paragon Fine and Speciality Chemicals Limited involves the issuance of up to 51,66,000 Equity Shares, duly authorized by the company's Board of Directors. Each Equity Share has a face value of ₹10. The Issue Price has been set with a Price Band, ranging from ₹95 per Equity Share at the lower end ("Floor Price") to ₹100 per Equity Share at the higher end ("Cap Price"). Allotment of Equity Shares through this Issue will be carried out in multiples of 1200 Equity Shares.

The structure of the Issue consists of two key components:

1. Market Maker Reservation Portion: This segment involves the reservation of up to 2,61,600 Equity Shares, each with a face value of ₹10, exclusively for subscription by the designated Market Maker.

2. Net Issue to Public: The remaining portion of the Issue comprises up to 49,04,400 Equity Shares, also with a face value of ₹10 each. These Equity Shares are made available for subscription by the public.

The combined effect of the Issue and the Net Issue will result in a total of 26.40% and 25.07% of the post-Issue paid-up equity share capital of Paragon Fine and Speciality Chemicals Limited, respectively. These allocations represent the distribution of shares to various categories of investors as follows:

This well-structured allocation approach aims to accommodate a diverse range of investors, ensuring equitable access to Paragon Fine and Speciality Chemicals Limited's Equity Shares during this Public Issue.

RISKS INVOLVED

The operational sustainability of Paragon Fine and Speciality Chemicals Limited is intricately linked to several critical factors, and the company is exposed to various risks that could potentially impact its business:

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