PCBL Shares Hit New 52-Week High After Rs 3,800 Crore Aquapharm Deal, 100% Up YTD; Buy?

PCBL Set to Expand Global Presence With ₹3,800 Crore Acquisition; Here's What JM Financial Report Says

PCBL Ltd, a major player in carbon black and specialty chemicals, announced on Wednesday its plans to acquire a full 100% stake in Aquapharm Chemicals Pvt Ltd (ACPL) for a total consideration of Rs 3,800 crore.

The financing for this significant acquisition will be a combination of internal accruals and external fundraising, as disclosed in an exchange filing. The company has executed a share purchase agreement with ACPL and key stakeholders, paving the way for the Proposed Transaction. The deal is, however, subject to obtaining all necessary approvals and fulfilling customary conditions outlined in the agreement.

This is a leap in PCBL's expansion strategy as it marks the company's entry into the global specialty segments of water treatment chemicals and oil & gas chemicals. ACPL, a Pune-based specialty chemicals company, ranks among the top three globally in its sector, with a specialization in manufacturing water treatment chemicals. The company operates manufacturing facilities not only in India but also in the US and Saudi Arabia, overseeing overseas plants through subsidiaries.

The fiscal year 2022-23 witnessed ACPL's robust performance, reporting a substantial topline of Rs 2,045 crore and an EBITDA of Rs 417 crore.

PCBL's stock responded positively to the news, trading with gains of more than 2% at Rs 273 per share as of 1:20 pm on Thursday. In the previous session, the stock had closed with a 5% increase at Rs 266.90 per share.

"This acquisition is the first milestone in achieving the vision of creating a multi-platform global specialty chemical business portfolio," explained PCBL in a release. The company's foray into water treatment and oil & gas chemicals positions it strategically to capitalize on the growing demand in these specialized sectors.

In a recent report released by JM Financial, the brokerage firm hailed PCBL's acquisition of Aquapharm Chemicals as a momentous milestone in its pursuit of becoming a comprehensive specialty chemical player. The cash consideration of Rs 3,800 crore for this acquisition is seen as a strategic move to position PCBL as a world-leading player in differentiated chemicals.

"This acquisition is a significant step for PCBL, offering several new and innovative chemistries at a compelling valuation," stated JM Financial in its report. The 8.5x FY25 EBITDA multiple suggests a robust performance, estimating the FY25 EBITDA to be around Rs 450 crore. Even under the assumption of full debt funding at a 10% interest cost, the acquired entity is projected to have a Profit Before Tax (PBT) of approximately Rs 70 crore.

While awaiting further details on the debt/equity structure for the acquisition and the capex and growth plans for Aquapharm, JM Financial has maintained its 'BUY' rating on PCBL. The firm has set a December 2025 target price of Rs 290 per share, anticipating a positive trajectory for PCBL's stock in the wake of this transformative acquisition.

As the completion of the transaction is contingent on obtaining all necessary approvals, industry analysts are closely watching this development, anticipating the positive impact it could have on PCBL's market standing and global footprint.