Highlights
| Issue Size –: 1,38,84,615 shares | Issue Open/Close – 19 Aug / 21 Aug, 2025 |
| Price Band (Rs.) 309 – 325 | Issue Size (Rs.) – 4,513 mn |
| Face Value (Rs) 2 | Lot Size (shares) 46 |
Gem Aromatics Limited (GAL), incorporated on 1997, is a manufacturer of specialty ingredients, including, essential oils, aroma chemicals and Value-Added Derivatives in India with a track record of over two decades. They offer a diversified portfolio of products, ranging from the Mother Ingredients to its various Value-Added Derivatives
GAL offer a wide ranging and diversified bouquet of essential oil-based products in four product categories: (i) mint and mint derivatives; (ii) clove and clove derivatives; (iii) phenol; and (iv) other synthetic and natural ingredients.
The company is one of the largest procurers of Piperita oil, and one of the largest processors of DMO, Clove oil, Eugenol and Eucalyptus Oil in terms of volume manufactured. As on FY25, their share of DMO and Eugenol in India was 12 pct and 65 pct, respectively, in terms of volume manufactured.
Out of the total proceeds of Rs. 4,513 mn, ~Rs. 1,400 mn would go towards Prepayment and/or repayment of outstanding borrowing availed by the company and subsidiary. ~350 mn would be go towards general corporate purpose and Rs. ~2,763 would go towards existing promoter selling shareholders and investors selling shareholders of the company.
Key Highlights
- The Indian Flavours and fragrances market was estimated at USD 2.7 bn in 2025E and is expected to reach at USD 4.1 bn by 2030, registering CAGR growth of 8.71 pct. Highest growth of CAGR 8.8 pct is expected in Essential oils as they are perceived natural, environment friendly without any adverse effect on health.
- In FY25, the company supplied products to 225 customers domestically and 44 customers cumulatively across 18 foreign countries globally, covering geographies including the Americas, Asia, Africa and Australia. In the domestic market, they sell products directly to customers on a B2B basis and export sales through company to customer, sale through subsidiary and sales through third party agency.
- GAL operate three manufacturing facilities located in Uttar Pradesh, Dadra and Nagar Haveli and Gujarat with combine capacity of 5,346 MTPA. In FY25, 69.12 pct of capacities were utilized and company produced 3,696 MTPA of products.
- GAL have developed forward integration capabilities for menthol by production of cooling agents. Further, they have developed capabilities for production of anisole which has forward integration capabilities into monomethyl ether of hydroquinone (MEHQ), guaiacol, 4 methoxy acetophenone (4MAP). They also started manufacturing of key catalyst inhouse to increase backward integration capabilities at manufacturing process.
- GAL’s key growth strategies include (i) Expansion of manufacturing capacities for existing and new products. (ii) Widen product offerings by expanding chemistry capabilities in order to expand addressable market size and capture higher client wallet share (iii) Continuing focus on sustainability and reducing operating costs and improving operational and business efficiency (iv) Expanding geographical reach through growing exports.
- The sales/EBITDA/ profit of the company have grown 8.92 pct CAGR/15.6 pct CAGR/9.32 pct CAGR over FY23-25. In FY25 sales of the company stood at Rs. 5,040 mn, rose 11.38 pct YoY. EBITDA of the company increased 12.89 pct YoY to Rs. 885 mn while margins expanded 23 bps YoY to 17.6 pct. Profit came at Rs. 534 mn, grew 6.55 pct YoY.
Key Risk
- The United States contributes 31.04 pct of GAL’s sales and The United States imposed a 25 pct tariff on a wide range of products imported from India. if such tariffs are not rolled-back, this may adversely affect their business.
- Some of the raw materials used in production processes are natural resources, hence GAL are subject to the seasonality and risk of depletion of such natural resources.
- The sales of the company rose 8.92 pct CAGR over FY23-25 while trade receivables rose 33.06 pct CAGR over same period, which is stretching working capital days to 205 days from 172 days.
Financial Performance
| Particulars | FY23 | FY24 | FY25 |
| Sales (Rs. mn) | 4,248 | 4,525 | 5,040 |
| EBITDA (Rs. mn) | 662 | 784 | 885 |
| EBITDA Margin (%) | 15.6% | 15.9% | 17.6% |
| Profit/Loss (Rs. mn) | 447 | 501 | 534 |
| Profit/Loss Margin (%) | 10.5% | 11.0% | 10.6% |
| ROCE (%) | 22.9% | 21.1% | 16.0% |
| ROE (%) | 24.9% | 21.7% | 18.8% |
Peers Comparison based on FY25 Financials
| Particulars | Gem Aromatics | S H Kelkar | Oriental Aromatics | Privi Speciality Chemical |
| Sales (Rs. mn) | 5,040 | 21,234 | 9,283 | 21,012 |
| EBITDA (Rs. mn) | 885 | 2,350 | 934 | 4,535 |
| EBITDA Margin (%) | 17.6% | 11.1% | 10.1% | 21.6% |
| Profit/Loss (Rs. mn) | 534 | 730 | 343 | 1848 |
| Profit/Loss Margin (%) | 10.6% | 3.4% | 3.7% | 8.7% |
| ROCE (%) | 16.0% | 6.8% | 6.7% | 14.6% |
| ROE (%) | 18.8% | 5.7% | 5.2% | 16.7% |
Valuation
Gem Aromatics Limited (GEL), a prominent essential oils and Value-Added Derivatives manufacturers in India and 70 products across four product categories with long standing relationships with several domestic and global corporate customers such as, Colgate-Palmolive (India) Limited, Dabur India Limited, Patanjali Ayurved Limited etc. At the upper end of the price band of Rs. 325, the issue is priced at a PE of 31.8x its FY25 earnings on post issue equity capital. The issue appears to be fully priced. One can avoid this issue.
Disclaimer: The views shared in blogs are based on personal opinions and do not endorse the company’s views. Investment is a subject matter of solicitation and one should consult a Financial Advisor before making any investment using the app. Making an investment using the app is the investor’s sole decision, and the company or its communication cannot be held responsible for it.
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