Safex Chemicals, one of India’s rapidly growing agrochemical companies backed by ChrysCapital, has filed its draft red herring prospectus (DRHP) with SEBI to raise funds via an initial public offering (IPO). The IPO will comprise a fresh issue of equity shares worth ₹450 crore along with an offer for sale (OFS) component by existing shareholders, indicating the company’s push towards further market expansion, debt reduction, and acquisition-based growth in the coming years.
IPO Details
According to the DRHP filed with SEBI, the IPO will include:
- Fresh Issue: Equity shares aggregating up to ₹450 crore.
- Offer for Sale (OFS): Existing promoters and investors are likely to dilute part of their holding. However, the exact OFS size has not yet been publicly disclosed.
Utilisation of Fresh Issue Proceeds
Safex Chemicals plans to use the net proceeds from the fresh issue primarily for:
- Debt repayment: To strengthen its balance sheet.
- Funding working capital requirements: To scale up manufacturing and distribution.
- General corporate purposes and inorganic acquisitions: For long-term growth and market consolidation.
Company Profile
Founded in 1991, Safex Chemicals has evolved as a significant player in India’s agrochemical sector. Its focus areas include crop protection products such as insecticides, herbicides, fungicides, and plant growth regulators.
| Particulars | Details |
|---|---|
| Established | 1991 |
| Promoters | Rajesh Aggarwal, Anupam Shukla, Nitin Sharma |
| Key Investor | ChrysCapital |
| Product Portfolio | Over 100 formulations |
| Manufacturing Units | 6 units across Haryana, Jammu, and Gujarat |
| FY23 Revenue | ₹1,243 crore |
| FY23 Net Profit | ₹112 crore |
ChrysCapital’s Backing and Acquisition Strategy
ChrysCapital had acquired a significant minority stake in Safex Chemicals in 2021. The investment catalysed multiple strategic acquisitions by Safex, such as Shogun Organics and Briar Chemicals (UK), expanding its formulation and backward integration capabilities.
Recent M&A Highlights
| Year | Acquisition | Key Benefit |
|---|---|---|
| 2021 | Shogun Organics | Strengthened household insecticide portfolio |
| 2022 | Briar Chemicals (UK) | Enhanced backward integration and export footprint |
Market Opportunity
India’s agrochemical sector is projected to grow at a CAGR of 8-10% between FY24 and FY28, driven by rising crop protection demand, increased farmer awareness, and the push for food security. Safex Chemicals aims to capitalise on:
- Low per-hectare pesticide usage in India compared to global average.
- Government’s thrust on doubling farmer income.
- Export opportunities, especially in Latin America and Africa.
Competitive Landscape
| Company | FY23 Revenue (approx) | Key Segment |
|---|---|---|
| UPL | ₹46,000 crore | Crop protection & seeds |
| PI Industries | ₹6,400 crore | Custom synthesis & agrochemicals |
| Rallis India | ₹2,600 crore | Crop protection |
| Safex Chemicals | ₹1,243 crore | Crop protection formulations |
Despite being smaller than listed peers like UPL and PI Industries, Safex Chemicals has demonstrated faster growth, largely due to its aggressive acquisition strategy and diversified product portfolio.
Financial Performance
Safex Chemicals has reported consistent revenue and profit growth over the last three financial years, with improving operational efficiency.
| Financial Year | Revenue (₹ crore) | EBITDA Margin (%) | Net Profit (₹ crore) |
|---|---|---|---|
| FY21 | 740 | 10.5 | 60 |
| FY22 | 950 | 11.8 | 85 |
| FY23 | 1,243 | 12.3 | 112 |
Key Risks Highlighted in DRHP
- Regulatory risks: Agrochemical industry is subject to strict regulatory approvals.
- Raw material volatility: Global supply chain disruptions can impact margins.
- High working capital requirements: Typical of the agrochemical distribution business model.
- Concentration risk: Top products contribute significantly to revenue.
Expert Views
Industry analysts believe Safex Chemicals’ IPO could attract strong institutional and retail investor interest owing to:
- The company’s strong market position.
- Proven inorganic growth record.
- ChrysCapital’s backing ensuring governance and expansion discipline.
However, some caution about the company’s high working capital cycle and integration risks from multiple acquisitions.
IPO Market Sentiment
Safex Chemicals’ IPO plans come at a time when India’s primary market is witnessing heightened activity with agrochemical, speciality chemical, and manufacturing companies tapping the markets to raise funds for expansion and deleveraging.
Outlook
With its proposed IPO, Safex Chemicals seeks to:
- Strengthen its balance sheet by reducing debt.
- Fuel expansion across domestic and global markets.
- Enhance R&D to launch patented and high-margin molecules.
This aligns with its vision to become one of India’s top five agrochemical companies by market share by FY28.
Disclaimer: This news report is for information purposes only and does not constitute investment advice, recommendation, or an offer to buy or sell any securities. Investors must consult their financial advisors and refer to SEBI-approved documents before making investment decisions. The publication is not responsible for any investment based on this report.
