IPO closes on 21 Aug'25
Gem Aromatics Ltd
Minimum Investment
₹ 14,950 / 46 shares
Grey market premium
₹ 25 (8% premium)
Our Verdict:
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- Gem Aromatics Ltd (GAL) has reported steady revenue and earnings growth over the last three years. Though debt levels are on the higher side, the IPO proceeds will be utilized to reduce borrowings, thereby improving the balance sheet.
- Going forward, growth is expected to be driven by GAL’s entry into high-margin aroma products such as Anisole, Saffranal and Anethole. The company will become the second-largest Anisole manufacturer in India with a 7,000 MT capacity, developed through an environmentally friendly vapor-phase method.
- In terms of valuation, the IPO appears reasonably priced at a P/E of 29x based on FY25 earnings.
- Overall, GAL operates in a niche yet growing industry with a sizable addressable market. Although substantial listing gains are unlikely, however, given the company's strong market positioning (including a 65% domestic share in Eugenol), robust growth prospects and ongoing capacity expansion, investors may subscribe to the IPO from a long-term perspective.
About the company
Founded in
3 Oct'97
Managing director
Yash Parekh
- GAL is a leading manufacturer of essential oils and aroma chemicals used across oral care, cosmetics, pharmaceuticals and pain management industries. Its portfolio spans 70 products in 4 key categories — mint derivatives, clove derivatives, phenol, and other synthetic and natural ingredients. Mint and its derivatives contribute nearly two-thirds of the company’s revenue.
- GAL operates three manufacturing facilities located in Budaun (UP), Silvassa and Dahej, with a combined installed capacity of 5,346 tonnes. Its marquee clientele includes dōTERRA, Colgate, Dabur, Patanjali, SH Kelkar and Rossari Biotech, among others.
STRENGTHS
- Strong Position in Mint Oil Value Chain: India accounts for over two-thirds of the global mint oil market, which is GAL’s key product line. The firm holds a 5–12% market share in key products such as menthol and DMO (Dementholised Mint Oil), competing with established players like Herbochem and Norex.
- Leadership in Eugenol: With ~80% of India’s aroma chemicals and essential oils exported globally, the segment is highly export-driven. GAL is among the prominent manufacturers, with specialisation in mint, clove, eucalyptus and other derivatives. Notably, the company commands a dominant 65% domestic market share in Eugenol (a clove oil derivative widely used in teas, meats, confectionery, perfumes, and cosmetics).
- Steady Growth: From FY23 to FY25, GAL delivered steady performance with a revenue CAGR of 9%, EBITDA CAGR of 16% and net profit CAGR of 9%.
- Solid Return Metrics: Operational efficiency remains a key strength, with Return on Equity (RoE) at 18.8% and Return on Capital Employed (RoCE) at 16% in FY25 — among the best in its peer group.
RISK FACTORS
- Client Concentration: In FY25, 56.1% of GAL’s operating revenue came from its top 10 customers, with the largest client contributing 10%. A slowdown or loss of orders from these clients could significantly impact revenue visibility and financial performance.
- Vendor Dependence: Around 53% of raw materials are sourced from the top 10 suppliers, without long-term contracts. Any disruption in supply or failure by these vendors to meet commitments could adversely affect production, margins and profitability.
- Cash Flow Pressure: GAL reported negative operating cash flows in FY25. Sustained negative cash generation could strain liquidity, increase reliance on external funding and pose risks to business continuity.
- Export and Tariff Exposure: Exports contribute 51% of sales, with the US alone accounting for 31%. This makes global growth and US tariff policies critical factors. However, management has highlighted limited risk as some products fall under exemption lists and global clients can re-route supplies through their multiple plant locations.
Financials
All Values are in Cr.
Issue details
Issue type
Mainstream
Issue size
₹ 451.25 crore
Fresh Issue
₹ 175 crore
OFS
₹ 276.25 crore
Price range
₹ 309 - 325
Lot size
46 shares
Issue Objective
The net proceeds from the fresh issue will be utilized for:
- Prepayment or repayment of certain outstanding borrowings availed by the company and its subsidiary; and
- General corporate purposes.
Dates
Bidding open
19 Aug'25
Bidding close
21 Aug'25
Allotment date
22 Aug'25
Refund date
25 Aug'25
Listing
26 Aug'25
IPO Reservations
Qualified institutional buyers
<50%
Non-institutional investors
>15%
Retail individual investors
>35%
Read the Offer Document
© 2025 by Liquide Solutions Private Limited, SEBI Registered Research Analyst (Registration number - INH000009816)
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