PCBL surges 6% on plan to acquire Aquapharm Chemicals for Rs 3,800 crore

Thus far in the month of November, the stock price of PCBL has rallied 35 per cent, while since April it has been more than doubled or zoomed 133 per cent

Shares of PCBL surged 6 per cent to hit a record high of Rs 269.85 on the BSE in Wednesday’s intra-day trade after the company announced on Tuesday it plans to acquire speciality chemical company Aquapharm Chemicals Pvt. Ltd. (ACPL) for Rs 3,800 crore.

Thus far in the month of November, the stock price of PCBL has rallied 35 per cent, while since April it has more than doubled or zoomed 133 per cent.

In an exchange filing, PCBL said the board approved the acquisition, which falls well within the larger chemical space of the listed entity.

This acquisition of ACPL marks the company’s foray into global specialty segments of water treatment chemicals and oil & gas chemicals and it is the first milestone in achieving the vision of creating a multi-platform global specialty chemical business portfolio, it said. 

 

The proposed transaction shall be financed through a mix of internal accruals and external fund raise by the company and/or its affiliates/associates. 

ACPL is a global speciality chemical company operating in the domain of water treatment chemicals (like phosphonates, biodegradable chelating agents, etc.) and oil & gas chemicals (imidazoline, quats) with application in water treatment, detergents, industrial cleaners, oil fields, municipal water treatment, pulp and paper, water softening, surface cleaning, pharma, agrochem applications.

It has manufacturing plants in India, US and Saudi Arabia.

PCBL has acquired this company at a valuation of 1.9x P/S, 9x EV/EBITDA and 14x PE on FY23 basis. It is being acquired in all cash deal and will be initially funded through debt on PCBL books.

PCBL expects to cumulatively generate around Rs 4,000 of EBITDA/CFO over next 30 months (PCBL+ACPL) which will help indirectly fund the acquisition (repay debt), according to ICICI Securities.

ACPL clocked sales of Rs 2,009 crore as of FY23, gross margins of 31 per cent, EBITDA of Rs 417 crore (EBITDA margins 21 per cent) and PAT of Rs 280 crore. PCBL expects to close this transaction in about 3 months.

“The acquisition price looks decent and is broadly in line with what PCBL trades and with better margins. It is however an unrelated diversification. The company also hinted at some sizeable acquisition on the Li-on battery front. We would want the present acquisition to consummate and then take a definitive call,” ICICI Securities said in a note.