Gem Aromatics IPO

Gem Aromatics claims to be a prominent manufacturer of essential oils and value-added derivatives in India.

Gem Aromatics offers a diversified portfolio with 70 products across four categories: mint and mint derivatives, clove and clove derivatives, phenol, and other synthetic and natural ingredients. The company claims to have developed advanced processes for producing products like citral and has consistently expanded its product offerings through its R&D capabilities.

The company has made strides in backward and forward integration, particularly in menthol and eugenol derivatives. Gem Aromatics claims to have developed sustainable processes, such as a specialised catalyst for eugenol production, setting a global benchmark in innovation. This approach enhances product quality control, reduces environmental impact, and enables further customisation for clients.

Gem Aromatics has developed strong, long-term relationships with both Indian and global customers, including major fast-moving consumer goods (FMCG) companies like Colgate-Palmolive (India) Limited, Dabur India Limited, and Patanjali Ayurved Limited. The company claims to have a reputation for delivering high-quality products consistently, which has helped foster customer loyalty and drive repeat business.

Gem Aromatics operates three manufacturing facilities in Uttar Pradesh, Dadra and Nagar Haveli, and Gujarat. These locations are strategically chosen to benefit from access to essential raw materials, such as natural mint oil from the mint cultivation belt in Uttar Pradesh. The company also claims to have integrated sustainable practices, including advanced effluent management systems, and its Dahej facility is positioned close to key transport hubs, reducing logistical costs.

The company holds ISO 14001:2015 certification for its environmental management systems, ISO 45001:2018 certification for its occupational health and safety management systems, and ISO 9001:2015 certification for its quality management systems. Additionally, Gem Aromatics holds the FSSC 22000 (version 6) certification, which includes ISO 22000:2018 and ISO/TS 22002-1:2009 for food safety management. The company also claims to have obtained Good Manufacturing Practice (GMP) certification for its Budaun facility and Food Safety and Standards Authority of India (FSSAI) registrations for its manufacturing facilities. Furthermore, certain of its products are kosher and halal certified.

Gem Aromatics has received a stable credit rating from Acuite Ratings and Research. As of July 12, 2024, the company’s bank loan rating was reaffirmed with a long-term rating of ACUITE A (Stable) and a short-term rating of ACUITE A1.

The company has reported a consistent increase in revenue from operations and profit after tax (PAT). Revenue from operations increased from Rs 424.79 crore in FY23 to Rs 452.45 crore in FY24 and Rs 503.95 crore in FY25. PAT increased from Rs 44.67 crore in FY23 to Rs 50.10 crore in FY24 and Rs 53.38 crore in FY25.

The top 10 customers accounted for Rs 282.61 crore (56.06 percent) of the company’s revenue in FY25, Rs 236.07 crore (52.19 percent) in FY24, and Rs 279.58 crore (65.81 percent) in FY23. Furthermore, the top customer (dōTERRA Global Limited) alone accounted for Rs 40.17 crore (7.97 percent) of the company’s revenue in FY25, Rs 85.46 crore (18.89 percent) in FY24, and Rs 86.10 crore (20.27 percent) in FY23. Any failure to retain these key customers, expand the customer base, or loss of business from any of them could adversely affect the company’s business and financial standing.

A substantial portion of the company’s revenue is derived from the mint and mint derivatives product category. It accounted for Rs 348.33 crore (69.12 percent) of the company’s revenue in FY25, Rs 329.79 crore (72.89 percent) in FY24, and Rs 297.26 crore (69.98 percent) in FY23. Any decline in the demand for products under this category could hurt the company’s revenue and profitability.

The cost of materials consumed accounted for Rs 364.14 crore (84.50 percent) of the company’s total expenses in FY25, Rs 344.42 crore (89.08 percent) in FY24, and Rs 316.51 crore (85.77 percent) in FY23. Any sudden spike in the costs of raw materials could have an adverse impact on the company’s revenue from operations and profitability.

The top five suppliers accounted for Rs 166.86 crore (38.72 percent) of the company’s total expenses in FY25, Rs 210.75 crore (54.51 percent) in FY24, and Rs 140.03 crore (37.96 percent) in FY23. Any disruption in the supply chain, whether due to supplier insolvency, labour strikes, or adverse financial conditions, could harm the company’s operations and financial performance.

A significant portion of the company’s revenue is derived from the US. It accounted for Rs 156.43 crore (31.04 percent) of the company’s revenue in FY25, Rs 148.71 crore (32.86 percent) in FY24, and Rs 176.83 crore (41.63 percent) in FY23. Any adverse political, economic, or regulatory developments in this region, including trade tariffs, could hit the company's revenue and profitability.

Gem Aromatics is heavily dependent on suppliers from Uttar Pradesh for the supply of raw materials for products under the mint and mint derivatives category. They accounted for Rs 126.63 crore (29.39 percent) of the company’s total expenses in FY25, Rs 118.36 crore (30.61 percent) in FY24, and Rs 131.42 crore (35.61 percent) in FY23. Any loss or disruption in supply from this region, whether due to economic, political, or government policy changes, could adversely affect the company's operations and financial performance.

The cost of raw materials imported accounted for Rs 137.02 crore (37.63 percent) of the company’s total cost of materials consumed in FY25, Rs 146.74 crore (42.61 percent) in FY24, and Rs 107.99 crore (34.12 percent) in FY23. Any restrictions on the import of raw materials or an increase in shipment costs could adversely impact the company’s business, cash flows, and results of operations.

Gem Aromatics reported negative cash flow from operating activities amounting to Rs 24.92 crore in FY25. This was primarily due to increases in trade receivables and other assets, offset by working capital changes. Additionally, negative cash flow from investing activities amounted to Rs 92.54 crore in FY25, Rs 51.05 crore in FY24, and Rs 14.36 crore in FY23. This was due to investments in property, plant, and equipment, and intangible assets. Extended negative cash flows could strain the company’s financial position and hinder its ability to fund business operations and growth initiatives.

Gem Aromatics relies on natural raw materials such as mentha arvensis, mentha piperita, crude clove leaf oil, and lemongrass oil for its production processes. These raw materials are seasonal and subject to the risk of depletion, leading to fluctuating utilisation rates throughout the year. As mint is a seasonal crop, the company faces significantly lower utilisation rates between April and July, which may impact sales and operational performance in certain quarters. Additionally, any future shortages or non-availability of these natural resources, coupled with price volatility, could adversely affect the company’s production capabilities and financial condition.

The company, its directors, promoters, subsidiaries, key managerial personnel, and senior management personnel are involved in certain ongoing legal proceedings, including criminal and tax-related cases. Any adverse judgments in any of these cases could be detrimental to the company’s business and finances.

As of FY25, the company had trade receivables of Rs 140.99 crore, up sharply from Rs 45.33 crore in FY24. Any failure to collect these receivables on time or at all can negatively impact the business and its financial condition.

As of FY25, the company had contingent liabilities amounting to Rs 58.19 crore. If any of these contingent liabilities materialise, it could adversely affect the company’s financial condition.

As of June 30, 2025, the company had outstanding financial indebtedness amounting to Rs 259.84 crore. Any failure to service or repay these loans can harm the company’s operations and financial position.