Supriya Lifesciences Ltd IPO - Information Note
5paisa Research Team
Last Updated: 14th December 2021 - 05:59 pm
Supriya Lifesciences is a 13 year old company focusing on the fast-growing active pharma ingredients (API) business. APIs are the inputs that go into medicines and Supriya Lifesciences caters to a wide spectrum of formulations as well as niche products.
Its products are predominantly exported to 86 countries and as of FY21, exports account for 77.47% of total sales with domestic sales accounting for the balance 22.53%.
Supriya Lifesciences has a portfolio of 38 APIs across therapeutic applications like anti-histamine, anti-allergic, anti-anaesthetic, analgesic, anaesthetic and vitamins.
Supriya is the largest exporter of Chlorpheniramine Maleate and Ketamine Hydrochloride while the company is also among the key exporters of Salbutamol Sulphate from India. The company has 8 DMFs filed with US-FDA and 8 active CEPs with EDQM of Europe.
Key terms of the IPO issue of Supriya Lifesciences
|
Key IPO Details |
Particulars |
Key IPO Dates |
Particulars |
|
Nature of issue |
Book Building |
Issue Opens on |
16-Dec-2021 |
|
Face value of share |
Rs.2 per share |
Issue Closes on |
20-Dec-2021 |
|
IPO Price Band |
Rs.265 - Rs.274 |
Basis of Allotment date |
23-Dec-2021 |
|
Market Lot |
54 shares |
Refund Initiation date |
24-Dec-2021 |
|
Retail Investment limit |
13 Lots (702 shares) |
Credit to Demat |
27-Dec-2021 |
|
Retail limit - Value |
Rs.192,348 |
IPO Listing date |
28-Dec-2021 |
|
Fresh Issue Size |
Rs.700 crore |
Pre issue promoter stake |
99.98% |
|
Offer for Sale Size |
Rs.200 crore |
Post issue promoters |
68.24% |
|
Total IPO Size |
Rs.500 crore |
Indicative valuation |
Rs.2,205 crore |
|
Listing on |
BSE, NSE |
HNI Quota |
15% |
|
QIB Quota |
75% |
Retail Quota |
10% |
Data Source: IPO Filings
Here are some of the key aspects of the Supriya Lifesciences business model
A) It has a strong portfolio of 38 APIs across a range of therapeutic applications with a primary focus on the research and development activity.
B) Company generates over 77% of its annual revenues from exports, which de-risks the company substantially from the domestic demand and supply cycles.
C) Leadership in exports of Chlorpheniramine Maleate, Ketamine Hydrochloride and Salbutamol Sulphate with export share of 50%, 65% and 31% respectively.
D) Supriya Lifesciences has a low 4.8% exposure to the US market with major export sales coming from Latin America, Asia (ex-Indochina), Europe and Cambodia.
E) Among therapeutic areas, analgesics, anaesthetics, anti-histamine, anti-asthma and vitamins contribute 81% of the total sales.
How is the Supriya Lifesciences IPO structured?
The Supriya Lifesciences IPO is a combination of a fresh issue and an offer for sale.
1) The fresh issue component will comprise the issue of 72,99,270 shares to the public and at the upper end of the price band at Rs.274, this translates into a fresh issue size of Rs.200 crore. These funds will be used for capex and prepayment of loans.
2) The OFS component will comprise issue of 1,82,48,175 shares and at the upper price band of Rs.274, the OFS is worth Rs.500 crore. The total issue comprising of the fresh issue and OFS is worth Rs.700 crore.
3) Out of the OFS of 182.48 lakh shares, promoter Satish Waman Wagh will be tendering the entire 182.48 lakh shares. The OFS is meant to give partial exit to the promoter group and also help the company list on the bourses.
4) Post the offer for sale and the fresh issue, the promoter stake will come down from 99.98% to 68.24%. Public shareholding overall will go up to 31.76% post IPO.
Key Financial parameters of Supriya Lifesciences
|
Financial Parameters |
Fiscal 2020-21 |
Fiscal 2019-20 |
Fiscal 2018-19 |
|
Sales Revenues |
Rs.385.37 cr |
Rs.311.64 cr |
Rs.277.84 cr |
|
EBITDA |
Rs.178.15 cr |
Rs.109.45 cr |
Rs.72.76 cr |
|
Net Profit / (Loss) |
Rs.123.83 cr |
Rs.73.40 cr |
Rs.39.42 cr |
|
EBITDA Margins |
46.23% |
35.12% |
26.19% |
|
Net Profit Margins (NPM) |
31.25% |
22.75% |
13.79% |
|
Net Worth |
Rs.268.94 cr |
Rs.149.16 cr |
Rs.93.79 cr |
Data Source: Company RHP
Two things have worked to favour the financials; its positioning in the niche API for therapeutics and the limited dependence on the price competitive US markets. Revenues in FY21 are up 38.7% over FY19 while profits are up more than 3-fold in the same period. The EBITDA margins and the net margins have shown sharp expansion over FY19.
Supriya Lifesciences is expected to have a listing market cap of Rs.2,205 crore assigning a P/E ratio 17.8 times FY21 earnings. That is reasonable valuation for a company that has a stable revenue model, strong entry barriers and ROE in excess of 45%.
Investment Perspective for Supriya Lifesciences IPO
Here is what investors must consider before investing in the Supriya Lifesciences IPO.
a) The company has very strong financials as is evident from the growth in sales, profits and operating profit margins over FY19.
b) What should work for the company is the fact that nearly 80% of the fresh funds will be applied to capex and loan prepayment, which are value accretive.
c) Since Supriya gets less than 5% of its revenues from the US markets, the impact of price competition on its profit margins are limited for now.
d) The company has just expanded its capacity utilization from 63% to 71% in FY21. As the utilization perks up further, it will give a boost to fixed cost absorption.
e) At a P/E of 17.8X, the ROE of over 45% will be an advantage. However, most API companies in India, except Divi’s Laboratories, quote at these median valuations.
The stock has a good story, but API companies do have a valuation overhang.
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