Prasol Chemicals IPO targets premium valuation amid margin growth and cash flow pressures
Indian specialty chemical manufacturer Prasol Chemicals is heading to the public markets with strong profit growth, though rising working capital demands and a high valuation multiple present distinct risks for prospective investors.
Prasol Chemicals is preparing for an initial public offering, bringing its extensive portfolio of acetone and phosphorus-based derivatives to public market investors. The India-based manufacturer, incorporated in 1992, is seeking a valuation that reflects its recent surge in profitability and steady revenue expansion.
Between FY24 and FY26, the company’s revenue from operations grew at an annual rate of 18.6 percent to reach ₹1,232.6 crore. Net profit experienced a more dramatic 114.1 percent annual surge, climbing to ₹83.1 crore over the same period.
This profit growth was accompanied by significant operational efficiency gains. Earnings before interest, tax, depreciation and amortization jumped 51.7 percent to ₹139.3 crore, pushing the EBITDA margin to 11.3 percent in FY26 from 6.9 percent in FY24. Acetone-based specialty chemicals drove 42.8 percent of FY26 revenue, followed by phosphorus-based chemicals at 38.3 percent, with the remaining 18.3 percent coming from 76 other specialty chemical products.
However, this operational scaling has strained the company’s cash conversion cycle. Operating cash flow fell sharply to ₹49.5 crore in FY26 from ₹115.6 crore in FY24.
The decline stems largely from working-capital swings, including rising receivables and inventory buildup as sales expanded across diverse end-use industries like pharmaceuticals, agrochemicals, and construction. Consequently, working capital days stretched to 49 days in FY26, up from 35 days in FY24.
Valuation and Cash Flow Dynamics
Investors will need to weigh these cash flow dynamics against the proposed valuation. Based on post-IPO equity and FY26 net profit, the company is pricing itself at a price-earnings multiple of 48.
While this multiple sits within the broad 27 to 197 range commanded by sector peers such as Aarti Industries, Vinati Organics, and Laxmi Organic Industries, it requires sustained execution. Market participants will closely monitor whether the company can maintain its margin trajectory while reining in working capital demands to support long-term growth.
