Gem Aromatics IPO: From Essential Oils to Global Fragrances: Should You Invest?

About the Issue:
Gem Aromatics is preparing to launch its Initial Public Offering (IPO) for equity shares. See the issue details below.

Objects of the Issue:
Gem Aromatics’ IPO aims to strengthen its balance sheet by reducing debt and improving financial flexibility. Around Rs 140 crore will be used for prepayment/repayment of borrowings of the company and its subsidiary, Krystal Ingredients. The remaining funds will go towards general corporate purposes, supporting operational needs, growth plans, and future business requirements.

Promoter Holding:
The promoters of Gem Aromatics include Vipul Parekh, Kaksha Vipul Parekh, Yash Vipul Parekh, and Parekh Family Trust. Their collective stake will decline from 75 per cent pre-issue to 55.06 per cent post-issue, reflecting equity dilution after the IPO.

Company Profile:
Gem Aromatics Limited is a leading Indian manufacturer of specialty ingredients, with over two decades of experience in essential oils, aroma chemicals, and value-added derivatives. Incorporated in 1997, the company offers a diversified product portfolio of 70 products across four key categories—mint and mint derivatives, clove and clove derivatives, phenol, and other synthetic and natural ingredients. Its products find applications across industries such as oral care, cosmetics, nutraceuticals, pharmaceuticals, wellness, and personal care. Gem Aromatics is also expanding into citral-based products, highlighting its focus on innovation and new product development.

Its manufacturing base consists of three strategically located facilities at Budaun (Uttar Pradesh), Silvassa (Dadra & Nagar Haveli and Daman & Diu), and Dahej (Gujarat), with a combined installed capacity of 5,346 MTPA. These are complemented by an advanced R&D centre in Maharashtra, staffed with 13 scientists and equipped with pilot-scale facilities.

The company enjoys strong relationships with leading domestic and international customers, including Colgate-Palmolive, Dabur, Patanjali, SH Kelkar, and Symrise, serving 225 customers in India and 44 customers across 18 countries. Its strong export orientation has earned multiple ‘Export Excellence Awards’.

Financials 

Gem Aromatics Limited has reported steady growth across key financial parameters over FY23–FY25. Total income increased from Rs 425.09 crore in FY23 to Rs 505.64 crore in FY25, a rise of nearly 19 per cent, indicating consistent demand. Profit After Tax improved from Rs 44.67 crore to Rs 53.38 crore during the same period, reflecting a healthy 19.5 per cent growth, supported by operational efficiencies. EBITDA grew by 33.6 per cent over two years, underlining improved operating performance and margin stability.

The company’s balance sheet has strengthened, with net worth rising by 58 per cent to Rs 283.98 crore, driven by robust reserves and surplus accumulation. Assets nearly doubled, growing by 80.7 per cent to Rs 534.52 crore, highlighting capacity expansion. However, borrowings increased sharply from Rs 89.36 crore in FY23 to Rs 222.37 crore in FY25, up 149 per cent, pointing to higher leverage.

Overall, Gem Aromatics showcases solid revenue growth and profitability with strengthened equity, though rising debt remains an area of concern.

Valuation & Returns 

At the IPO price of Rs 325, Gem Aromatics is valued at a P/E of ~31.8x on FY25 diluted EPS of Rs 10.22. This places it at a discount compared to peers such as Clean Science (42.7x), Privi Speciality Chemicals (43.3x), and Oriental Aromatics (47.6x), suggesting relatively attractive entry multiples. Only SH Kelkar trades lower at 22.7x, but its earnings profile is weaker.

Importantly, Gem Aromatics boasts a strong Return on Net Worth (RoNW) of 18.8 per cent, higher than most peers and comparable to Clean Science (18.67 per cent). This indicates efficient utilization of equity and supports its premium positioning despite lower EPS scale.

Outlook:
Gem Aromatics Limited’s growth outlook appears promising, supported by its established market presence, diversified product portfolio, and strong innovation capabilities. The company manufactures over 70 specialty ingredients, with a dominant position in mint, clove, and other essential oil derivatives. Its focus on expanding into new categories such as citral, backed by in-house R&D, positions it well to capture emerging demand trends. Strategically located manufacturing facilities at Budaun, Silvassa, and Dahej provide cost and logistics advantages, while investments in sustainable and efficient technologies are expected to improve margins.

On the market front, the company aims to enhance export penetration and expand warehousing capabilities in key global regions, leveraging its long-standing customer relationships for revenue visibility. Favourable industry trends, including strong growth in specialty chemicals, rising FMCG demand, and increasing global adoption of natural and wellness-driven products, further strengthen prospects. Overall, Gem Aromatics is well-placed for sustainable growth, though customer concentration and working capital remain monitorables.

Given the issue details and elevated valuations, we recommend subscribing to this IPO with a long-term investment horizon.