Prasol Chemicals Ltd

Prasol Chemicals Limited

Incorporated in January 1992 as Prachi Poly Products Private Limited and headquartered in Navi Mumbai, Prasol Chemicals Limited is a manufacturer of acetone phosphorous based specialty chemicals. The portfolio runs to over 150 products, being 21 acetone based, 53 phosphorous based and 76 other specialty products including surfactants, performance additives, ethers, esters, polymers and acids. Acetone based chemicals were 42.75% of FY26 revenue, phosphorous based 38.30% and other specialty chemicals 18.33%.

The company sold to 1,618 customers in FY26 across five application industries, being performance chemicals, paints inks construction and adhesives, pharmaceuticals, agrochemicals, and home and personal care. Exports were 27.29% of FY26 revenue across 56 countries. It runs two plants in Maharashtra, at Khopoli since 1995 and Mahad since 2020, with aggregate installed capacity of 98,644 MTPA. According to the CARE Report it was the largest importer of acetone in India during calendar years 2022 to 2025, the only manufacturer of isophorone in India, and among the top five users of yellow phosphorous.

DRHP filed: October 14, 2025 (first DRHP filed April 2022 and subsequently withdrawn)

RHP filed: September 2, 2026

IPO open & close: 8 September 2026 to 10 September 2026 (anchor book 7 September 2026)

Price band: INR 643 to INR 676 per share; face value INR 2; lot size 22 shares

Issue structure: Total offer INR 500 cr, being a fresh issue of INR 80 cr and an offer for sale of INR 420 cr.

Listing date (tentative): 16 September 2026 (BSE and NSE)

BRLM: DAM Capital Advisors Limited (sole book running lead manager)

Registrar: KFin Technologies Limited

Auditor: C N K & Associates LLP, Chartered Accountants

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Executive Summary:

Can Subscribe for Listing Gains | Skip | GMP: ~15% (7^th September 2026)

At ₹676 per share the company lists at a market capitalisation of roughly ₹4,000 crore and an enterprise value of about ₹4,090 crore, or 29.3x EV/EBITDA and 47.2x earnings on FY26. We feel that is expensive for a low-margin business with limited pricing power. The company has reputed clientbase including Clean Science, Croda, Lubrizol, Coromandel, Gharda, Supriya, Alembic and MSN among others, and records ten-to-sixteen-year relationships with the lead customer in each end market, each having gone from one product to four or more, but Prasol has no long-term contracts with most of its customers, and the chemistries it runs are well established and widely available: dehydration, esterification, oxidation, substitution, hydrogenation, aldol condensation. It is hard to build a genuinely differentiated product on that toolkit, and the gross margin shows it. Gross margin went from 26.09% in FY24 to 28.46% in FY25 and 30.72% in FY26, moving in step with acetone, which fell 26.89% last year.

A specialty business prices on value and holds gross margin through the input cycle. A business that earns more only when its raw material gets cheaper is passing costs through. For scale, Vinati Organics earns a 29.36% EBITDA margin, which is about the whole of Prasol's gross margin, and that gap is the difference between specialty and intermediate chemistry. The EBITDA margin tells the same story less clearly at 11.3% against 6.9% two years ago, and over eleven years it has sat between 6% and 12%, the only exception being roughly 16% in FY22 during Covid. So 11.3% is the top of the range, not a new base. The safety record is the second reason. Prasol has been under regulatory scrutiny repeatedly for poor hazard management, four workers have died and several more have been injured across the two plants, and there is ample precedent of companies being forced to halt production over safety failures and repeated non-compliance with pollution control boards. The auditor has qualified internal financial controls in each of the last three years, we feel that for a company with inventory worth INR 153 Crore, these systems should be placed well before auditor’s flagging it repeatedly in the audited financials.

The closest parallel we can think of is Rossari Biotech, on the standalone or core business. It listed on a high multiple, could not hold its 17 to 18% margin once raw material prices normalised, and the stock de-rated as EBITDA growth tapered.

Given the history of criminal cases, recurring lapses on human security and weak business as demonstrated by its margin and cashflow profiles we would like to skip the investment opportunity at any price.

• According to the RHP, the global acetone derivative market is expected to grow at 4% CAGR till CY29 whereas the global phosphorus derivative market is expected to grow at 7% CAGR till CY29

• Four workers have died due to negligence and incomplete safety protocols. On 21 September 2020 at Khopoli, two contract workers were dismantling the reboiler of the acetone recovery plant when residual chemical splashed onto them which led to demise of both the workers. That incident sits in a different risk-factor table from the Mahad deaths, carries no MPCB order, no fine and no criminal case, and is disclosed in three lines. Then on 14 November 2022 at Mahad one worker died and another was injured, and on 5 October 2023 at Mahad a contract worker died in the DETC plant with four more exposed. Gaurang Parikh, the Managing Director and factory occupier, is an accused in four criminal complaints at Alibaug and has taken bail in each. A fifth was filed in October 2025. All five are pending.

• In October 2023 the company had to shut the plant for the third time. MPCB closed Khopoli for roughly 55 days from February 2018 after samples from a sewage pipe on the premises came back over the limit. It ordered Mahad to cease manufacturing for 24 days in August 2021 after villagers in Aamshet complained their borewell water was contaminated. Then Mahad went down for 190 days from October 2023. That is about 269 days of regulator-ordered downtime in eight years across both plants. The company also holds seven other MPCB or MIDC notices. Khopoli's consent to operate expired on 30 June 2026 and the renewal filed in April was still pending when the RHP went out.

• Only INR 80 crore of the INR 500 crore reaches the company, and INR 60 crore of that repays debt. There is no capital expenditure object at all. That sits oddly beside a strategy section talking about debottlenecking both plants, spare land at Dheku and two more plots at Mahad, a site at Saykha bought from GIDC and an MoU with the Odisha government. All of it will have to come from internal accruals or fresh borrowing.

• Cash conversion is weak. Over FY25 and FY26 the company turned 31.6% of EBITDA into operating cash. CFO fell from ₹115.61 crore in FY24 to ₹49.47 crore in FY26 while EBITDA more than doubled to ₹139.32 crore. Working capital is where it went: core working capital rose from ₹83.98 crore to ₹229.56 crore on revenue growth of 40.6%.

• The auditor has qualified internal financial controls in each of the last three years, on the same point every time. Inventory quantities are not maintained item-wise against values, including the stage the stock is sitting at, and overheads are allocated by hand. The company blames system limitations and says an ERP upgrade will come at a suitable time. For a business running multi-stage chemistry with INR 153 crore of inventory, the same finding three years running is something worth thinking upon.

• Reported borrowings of INR 110 crore understate how the balance sheet is funded. At 15 July 2026 total outstanding was INR 343.67 crore, of which non-fund based facilities (Bank Guarantees and Letter of Credits) were INR 227.24 crore against a sanctioned INR 120 crore, the excess drawn against interchangeable fund based limits. Two thirds of raw material is imported and financed on letters of credit, which land in trade payables rather than in debt. Payables were INR 208 crore at year end.

• Customer risk is low as the relationships are old. No customer went above 5% of revenue in any of the three years, the top ten were 23.68% of FY26 revenue, and repeat customers were 93.28%. The RHP names Clean Science, Croda, Lubrizol, Coromandel, Gharda, Supriya, Alembic and MSN among others, and records ten-to-sixteen-year relationships with the lead customer in each end market, each having gone from one product to four or more. Approval cycles run one to four years, which is a real barrier once you are through it. There are 1,618 accounts with no anchor and no long-term contracts in place.

• Prasol had clearance for an IPO in 2022 and walked away. The company had filed a DRHP in April 2022 for INR 800 crore, of which INR 250 crore was fresh capital, with JM Financial alongside DAM Capital. SEBI cleared it at the end of August 2022. The issue never launched and the approval lapsed. When the company came back in October 2025, the fresh issue had been cut from INR 250 crore to INR 80 crore. Four years ago this was a company raising growth capital as compared to current issue, 84% of the which is OFS.

The Safety and Regulatory Record

Total regulator-ordered downtime across the three closure or cease orders is approximately 269 days.

• Given the recurrence and the negligence alleged, the risk of operational disruptions is not just a tail risk but a real recurring risk which significantly impacts the performance of the business.

• Khopoli is close to full utilization at 80.29% in FY26. For continuous chemical processing that leaves very little genuine headroom once turnarounds and maintenance are taken out. The ex-Mahad business grew 15.8% last year almost entirely by taking utilisation from 68.60% to 80.29%. That lever is now largely spent. From here, growth has to come either from Mahad filling up or from new capacity, and the issue funds neither. If Mahad runs at Khopoli's 80%, on its own realisation of about INR 1.54 lakh a tonne and at a 13% margin, it would do around INR 245 crore of revenue and INR 32 crore of EBITDA against today's INR 3.94 crore loss. Even after considering the optimum capacity for Khopoli and Mahad, the total EBITDA would be ~INR 175 Crore, giving the company a valuation of 23.3x (still expensive)

Mahad Against the Rest of the Business

• The RHP splits out Mahad's revenue, EBITDA and pre-tax result, which lets the loss-making greenfield be separated from the established Khopoli operation. Mahad started in 2020, was shut by MPCB for six months over 2023 and 2024, and still loses money at both the EBITDA and the pre-tax line. It holds about a fifth of installed capacity and made 12.2% of FY26 tonnage. 

Business

• The company makes over 150 products across two main chemistries (acetone and phosphorous based products). The 21 acetone-based products were 42.75% of FY26 revenue and include diacetone alcohol, isophorone, hexylene glycol and meta xylenol; Prasol is the only manufacturer of isophorone in India. The 53 phosphorous based products were 38.30% and include phosphorous pentasulphide and pentoxide, dithiophosphates used in lubricant additives and mining flotation reagents, polyphosphoric acid and DETC. The remaining 76 products, at 18.33%, are surfactants, performance additives, ethers, esters, polymers and acids. Phosphorous grew 35% in FY26 against 9% for acetone.

• Products go into five end markets: performance chemicals, paints and inks and construction and adhesives, pharmaceuticals, agrochemicals, and home and personal care.

• Khopoli opened in 1995, covers 120,604 sq m and ran at 80.29% of its 78,784 MTPA capacity in FY26. Mahad opened in 2020, covers 119,423 sq m and ran at 44.09% of 19,860 MTPA. A third site at Dheku is used for repacking and storage and can be converted to manufacturing.

• Two thirds of raw material is imported and none of it is bought under contract. Imports were INR 548.55 crore in FY26 from China, Thailand, Korea, Europe, Kazakhstan and Vietnam, against INR 283.07 crore sourced domestically. The company does not sign long-term supply agreements and buys off quotations from several suppliers. The top ten suppliers account for 68.87% of material consumed. Yellow phosphorous requires an import permit from the Directorate of Narcotics for non-insecticidal use, and the company holds SCOMET export licenses for Russia and Belarus, which together were 4.08% of FY26 revenue.

Promoters and Leadership

• The board reads well on paper. The executive directors are technocrats rather than professional managers, and their education and work histories line up with the business they are running.

• Nishith Rajnikant Shah, 67, is Chairman and a founder, with degrees from California State University Northridge and Cal Poly and around 36 years in chemicals. He handles strategy.

• Gaurang Natwarlal Parikh, 53, is Managing Director, a chemical engineer from Pune with a master's from Toledo, previously at Owens Brockway, Rostone and Budd in the United States, with 25 years in the industry. He has Five pending criminal matters, all at the Chief Judicial Magistrate, Raigad at Alibaug, all in his capacity as factory occupier under the Factories Act

• Dhaval Nalin Parikh, 45, Joint Managing Director, came through ICT Mumbai and UMass Lowell and was at GE Plastics; he runs international sales and manufacturing.

• Pankil Nishith Dharia, 42, handles strategy and business development and was previously at Medtronic. He is a 2nd generation entrepreneur and was convicted in rash driving in a collision on 12 Nov 2020.

• The independent directors looks strong on paper. Lakshmi Kantam Mannepalli is a green chemistry professor at ICT, formerly director of CSIR-IICT, and sits on Vinati Organics, Godavari Biorefineries and NACL. G Ramakrishnan has been on the Galaxy Surfactants board since 2009. Narayanan Pulukhool Nair spent his career at ADAMA, Gharda, Makhteshim-Agan and Ranbaxy. Ajay Motilal Jain is an IIT Bombay chemical engineer, and Srinivasan Subramanian is a chartered accountant and company secretary. There are total 5 independent directors. Ajay Jain resigned in April 2024 and came back in December.

• Rahul Ashit Shroff, the CFO and Finance Director, is married to the Chairman's daughter. 

Valuation

Financials