Gem Aromatics IPO Subscription Begins: Price Band, Valuation, Key Risks

Gem Aromatics Ltd’s ₹451.3 crore IPO opened for subscription today and will close on August 21, with a price band translating to a minimum retail investment of about ₹14,950 per lot. The issue comprises a fresh issue of ₹175 crore (53 lakh shares) and an offer for sale worth ₹276.3 crore (85 lakh shares).

Issue Details and Valuation ✦

♦ Face value: ₹2 per share

♦ Lot size: 46 shares

♦ Post-issue market cap: ~₹1,697.7 crore at the upper band

♦ Valuation: P/E of 31.8x FY25 and EV/EBITDA of 21.6x

♦ Grey Market Premium (GMP): ~6%, indicating flat-to-mild listing gains

Proceeds from the fresh issue will primarily go toward prepayment or repayment of borrowings and general corporate purposes.

Business Profile 🌿

Founded over 20 years ago, Gem Aromatics manufactures essential oils, aroma chemicals, and value-added derivatives used in oral care, personal care, wellness, nutraceuticals, and pharmaceuticals.

Key highlights:

♦ Product portfolio: 70 products across four buckets — mint, clove, phenol, and other ingredients

♦ Facilities: Three plants in Budaun, Silvassa, and Dahej

♦ Market position: Among India’s largest processors of clove oil, eugenol, and eucalyptus oil, with a dominant share in mint-based ingredients

♦ Exports: 50.7% of FY25 revenue, with the U.S. as its largest market

Financial Performance 📊

♦ Revenue (FY25): ₹504 crore (vs ₹452.5 crore in FY24)

♦ EBITDA (FY25): ₹88.5 crore; EBITDA margin: 17.6%

♦ Profit after tax (FY25): ₹53.4 crore; PAT margin: 10.6%

Growth has been steady, supported by capacity additions and sticky relationships with marquee customers including global flavor and fragrance houses.

Analyst Views and Risks 🔍

Anand Rathi: “Subscribe – Long Term” rating — calling the IPO fully priced but supported by:

♦ Entrenched franchise in essential oils and derivatives

♦ Broad product basket and diversified applications

♦ Strong order book and Dahej scale-up potential

Key risks:

♦ Customer concentration: Top 10 buyers contributed ~56% of FY25 revenue, including a major supply agreement with dōTERRA

♦ Category concentration: Heavy exposure to mint derivatives

♦ Legal overhang: Ongoing land litigation at the Budaun facility

♦ Supplier dependence: Reliance on a handful of raw material providers

Motilal Oswal Investment Advisors is the book-running lead manager; KFin Technologies is the registrar.