Gem Aromatics IPO opens today; GMP at 6%. Should you bid?

Gem Aromatics IPO will open for subscription today and will close on August 21. The speciality ingredients maker is looking to raise about Rs 451.3 crore at the top end of the band, comprising a fresh issue of roughly 53 lakh shares for Rs 175 crore and an offer for sale of about 85 lakh shares for Rs 276.3 crore.

The face value is Rs 2 per share and the lot size is 46 shares, translating into a minimum retail cheque of about Rs 14,950 at the upper band.

At the top end, the post-issue market capitalisation works out to about Rs 1,697.7 crore, implying a price-to-earnings multiple of 31.8 times FY25 and an EV/EBITDA of 21.6 times.

Grey-market chatter points to a modest 6% premium ahead of listing. While GMP is only an informal indicator and tends to be volatile, it suggests expectations of flat-to-mild listing gains as of now.

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

It counts marquee flavour and fragrance houses and FMCG names among customers, supplies 70 products across four buckets—mint and mint derivatives, clove and clove derivatives, phenol and other synthetic and natural ingredients—and operates three plants in Budaun, Silvassa and Dahej.

The company says it is among India’s larger processors of clove oil, eugenol and eucalyptus oil by volume, with a dominant presence in mint-based ingredients.

Exports made up about 50.7% of FY25 operating revenue, with the United States its single-largest overseas market. The company intends to deploy the fresh proceeds primarily toward prepayment or repayment of borrowings and for general corporate purposes.

Financially, Gem posted steady growth through FY23–FY25. Revenue from operations rose to about Rs 504 crore in FY25 from Rs 452.5 crore in FY24, while EBITDA improved to Rs 88.5 crore and profit after tax to Rs 53.4 crore.

EBITDA margin expanded to 17.6% and PAT margin stood at 10.6% in FY25.

Should you subscribe

Anand Rathi has tagged the issue “Subscribe – Long Term,” calling it fully priced but backed by an entrenched franchise in essential oils and derivatives, a broad product basket, sticky relationships with reputed customers, and ongoing capacity additions that could support growth.

The valuation at 31.8 times FY25 earnings sits at a premium to many mid-cap chemical names on near-term metrics, so the case leans on execution, market share gains in mint/clove value chains and the scale-up at Dahej.

Key risks include customer concentration—the top ten buyers contributed about 56 percent of FY25 revenue, including a sizeable supply agreement with dōTERRA—category concentration in mint derivatives, an ongoing land litigation related to the Budaun facility, and dependence on a handful of suppliers.

Motilal Oswal Investment Advisors is the book-runner and KFin Technologies is the registrar.

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