Must you be investing in Supriya Lifescience Restricted IPO? – myMoneySage Weblog

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Supriya Lifescience Limited incorporated on March 26, 2008, is one of the key Indian manufacturers and suppliers of active pharmaceuticals ingredients (“APIs”), with a focus on research and development. The company has niche product offerings of 38 APIs focused on diverse therapeutic segments such as antihistamine, analgesic, anesthetic, vitamin, anti-asthmatic and anti-allergic and they have also consistently been the largest exporter of Chlorpheniramine Maleate and Ketamine Hydrochloride from India.

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The company’s products were exported to 86 countries to 1,296 customers including 346 distributors as of fiscal 2021. The company has API business in Europe, Latin America, Asia, and North America. It is supported by a modern manufacturing facility located in Parshuram Lote, Maharashtra, spread across 23,806 sq. mt. They have 4 manufacturing blocks that are segregated therapeutic segment-wise. The 4th block commenced operation on May 30, 2021.

Promoters & Shareholding:

Satish Waman Wagh is the company promoter.

Pre Issue Holding 99.98%
Post Issue Holding 68.24%

Public Issue Details:

Offer for sale: Fresh issue of approx. 7,299,270 equity shares at Rs. 2, aggregating up to Rs. 200 Cr and OFS of approx. 18,248,175 equity shares, aggregating up to Rs. 500 Cr.

Total IPO Size: Rs. 700 Cr.

Price band: Rs. 265 – Rs. 274.

Objective: For funding working capital requirement, repayment or prepayment of borrowings, and for general corporate purpose.

Bid qty: minimum of 30 shares (1 lot) for Rs. 15,000 and maximum of 13 lots.

Offer period: 16th Dec 2021 – 20th Dec 2021.

Date of listing: 28th Dec 2021.

Also read : Market Outlook – Dec’21

Pros:

  • One of the key Indian manufacturers and suppliers of active pharmaceuticals ingredients.
  • The company’s backward integration of API ensures a steady supply of intermediates.
  • Modern manufacturing and research and development capabilities.
  • Professional and experienced management team.
  • Geographically diversified revenues with a global presence across 78 countries.

Cons:

  • International operations expose it to complex management, legal, tax, and economic risks, which could adversely affect its business.
  • The company depends on third-party suppliers and transporters to a large extent.
  • The company is subject to regulatory scrutiny and any non-compliance will affect the company’s business.
  • The pharmaceutical industry is intensely competitive.

Subscribe or avoid?

Sectorial outlook – Global pharmaceutical market has grown by around 4.8% CAGR from $ 955 billion in CY14 to $ 1,270 billion in CY20. It is expected to sustain this growth over the next five years to reach $ 1,585- $1,625 billion in CY25. The global “API” market was estimated to be around $181.3 billion in 2020 and is expected to grow at a CAGR of 6.2% to reach about $259.3 billion by 2026. India currently holds about 6% of the market share with an estimated market size of about $11 billion in 2020; however, India is expected to have the highest growth rate of about 9.6% in the next five years owing to the government initiatives such as PLI, ABA, etc and other investments which are expected have a positive impact on the company and its business.

The financials (revenue and net profit) are shown in the graph below:

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Valuation – For the last 3 years average EPS is Rs. 10.78 and the P/E is around 31x on the upper price band of Rs. 274. The EPS for FY21 is Rs. 16.92 and the P/E is around 16.19x. If we look at the first 6 months ended at Sep-21 and annualize it to FY22 then the EPS is Rs. 9.01 and the P/E is around 30.4x. The listed peers as per the RHP are Solara Active Pharma Sciences Ltd (20.9x P/E), Neuland Laboratories Ltd (29.4x P/E), Aarti Drugs Ltd (26.1 P/E), Wanbury Ltd, Divis Laboratories Ltd (56.4x P/E). The company P/E is between 31x and 16.19x and after considering all the factors, the listing seems to be reasonable.

Recommendation – The Company is one of the key Indian manufacturers and suppliers of API’s and the revenue as well as profit margin has been on an uptrend and the listing also seems to be reasonable. The GMP of 91% indicates a strong demand for this issue. After considering all the factors we recommend investors to “SUBSCRIBE” to this IPO for the medium to long term perspective.

Disclaimer:

This article should not be construed as investment advise, please consult your Investment Adviser before making any sound investment decision. If you do not have one visit mymoneysage.in

Also read : All you need to know about RBI’s Retail Direct Scheme

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