What you must know Blue Jet Healthcare IPO?

Blue Jet Healthcare Ltd is a global science led pharmaceutical company which has, over the years, emerged as a Strategic Partner for Collaboration, Development & Manufacturing of advance Pharmaceutical Intermediates and API. The company has been in existence for 53 years with substantial stack of man-years of experience and insights built up. The company has also included CDMO among its offerings and it has been able to establish long-standing, relationships with customers. Blue Jet Healthcare Ltd will not get any fresh funds from the issue since it is entirely an offer for sale. The IPO will be lead managed by Kotak Mahindra Capital, ICICI Securities and JP Morgan India. Link Intime India will be the registrar to the IPO of Blue Jet Healthcare Ltd.

In terms of business segments, Blue Jet Healthcare Ltd operates across Intermediate Contrast Media Intermediates, Saccharine & its salts, Niche Pharmaceutical Ingredients & APIs, and CDMO-CMO. Here is a quick look at the various business verticals of Blue Jet Healthcare Ltd. The company is India’s largest manufacturer of Intermediate Contrast Media Intermediates with over 24 years of manufacturing experience in the field. It is a 100% exports driven business. This vertical helps them combine their long-standing chemicals and pharma pedigree. On the Saccharine & its salts vertical, it is the largest manufacturer of saccharine sodium in India with 3,000 MT of annual capacity. The business is fully backward integrated. It supplies saccharine salts to healthcare, pharma, animal feeds, food, and beverages industry. Regarding the niche pharma intermediates and API vertical, Blue Jet Healthcare Ltd makes Butane Sultone as a pharma excipient for Remdesivir, CBS for fine chemicals, para amino benzoic acid for Benzocaine, docusate sodium for laxatives etc. Finally, its CDMO, CMO vertical offers contract manufacturing for NCEs, advanced intermediates, APIs and building blocks.

Blue Jet Healthcare IPO Highlights

Here are some of the key highlights to the public issue of Blue Jet Healthcare IPO.

• Blue Jet Healthcare Ltd has a face value of ₹2 per share while the price band for the book building IPO has been set in the band of ₹329 to ₹346. The final price will be discovered within this band through the process of book building.
   
• The IPO of Blue Jet Healthcare Ltd will be entirely an offer for sale, with no fresh issue component. It must be remembered that while the fresh issue is equity and EPS dilutive, the offer for sale (OFS) is generally capital neutral as it is just a transfer of shares from one set of owners to another. It does not impact the EPS in any way.
   
• The offer for sale (OFS) portion of the IPO comprises the sale of 2,42,85,160 shares (242.85 lakh shares approximately), which at the upper price band of ₹346 per share will translate into an offer for sale (OFS) size of ₹840.27 crore.
   
• The entire offer for sale (OFS is being made by the promoter group. Among the promoters, Akshay Bansarilal Arora will sell 183.66 lakh shares in the OFS while Shiven Akshay Arora will sell 59.19 lakh shares in the OFS. They account for the entire OFS.
   
• Therefore, the overall IPO will comprise only of the OFS. Thus, the total IPO will entail the sale of 2,42,85,160 shares (242.85 lakh shares approximately), which at the upper price band of ₹346 per share will translate into a total IPO issue size of ₹840.27 crore.

There are just 2 shareholders offering shares under the OFS portion, and both belong to the promoter group. There will be no fresh funds coming into the company via the IPO since there is no fresh issue of shares.

Promoter holdings and investor allocation quota

The company was promoted by Akshay Bansarilal Arora, Shiven Akshay Arora, and Archana Akshay Arora. Currently the promoters hold 100.00% of the company, which will get diluted post the IPO to 86%. As per the terms of the offer, 50% of the net offer is reserved for the qualified institutional buyers (QIBs), while 35% of the total issue size is reserved for the retail investors. The residual 15% is kept aside for the HNI / NII investors . The stock of Blue Jet Healthcare Ltd will be listed on the NSE and on the BSE. The table below captures the gist of the allocation to various categories.

It must be noted here that the anchor allocation to anchor investors would be done a day ahead of the opening of the IPO. Such anchor carved out of the QIB allocation as shown above and the QIB public issue portion will be reduced to that extent.

Blue Jet Healthcare IPO lot sizes for investing

Lot size is the minimum number of shares that the investor has to put in as part of the IPO application. The lot size only applies for the IPO and once it is listed then it can be even traded in multiples of 1 shares since it is a mainboard issue. Investors in the IPO can only invest in minimum lot size and in multiples thereof. In the case of Blue Jet Healthcare Ltd, the minimum lot size is 43 shares with upper band indicative value of ₹14,878. The table below captures the minimum and maximum lots sizes applicable for different categories of investors in the IPO of Blue Jet Healthcare Ltd.

It may be noted here that for the B-HNI category and for the QIB (qualified institutional buyer) category, there are no upper limits applicable.

Key dates for Blue Jet Healthcare IPO and how to apply?

The issue opens for subscription on 25th October 2023 and closes for subscription on 27th October 2023 (both days inclusive). The basis of allotment will be finalized on 01st November 2023 and the refunds will also be initiated on 01st November 2023. In addition, the demat credits are expected to happen on 03rd November 2023 and the stock will list on 06th November 2023 on the NSE and the BSE. Blue Jet Healthcare Ltd offers a very unique combination. It has an established and tested business model; it is into an industry that is considered the future of business management and it has a pedigree of more than 53 years in the business. Let us now turn to the more practical issue of how to apply for the IPO of Blue Jet Healthcare Ltd.

Investors can apply either through their existing trading account or the ASBA application can be directly logged through the internet banking account. This can only be done through the authorized list of self-certified syndicate banks (SCSB). In an ASBA application, the requisite amount is only blocked at the time of application and the necessary amount is debited only on allotment. Investors can apply in the retail quote (up to ₹2 lakh per application) or in the HNI / NII quota (above ₹2 lakh). Minimum lot sizes to invest are already covered previously in this report.

Financial highlights of Blue Jet Healthcare Ltd

The table below captures the key financials of Blue Jet Healthcare Ltd for the last 3 completed financial years.

Data Source: Company RHP filed with SEBI (All ₹ figures are in crores)

There are few key takeaways from the financials of Blue Jet Healthcare Ltd which can be enumerated as under

1. The revenue growth and the profit growth have been relatively erratic. However, that is the nature of the API business with most of the API companies facing pressure from lower demand in the global markets. That should stabilize in the coming quarters and growth is expected to be smoother.
    
2. The profit margins and the return on equity are very impressive. Pharma companies have typically enjoyed very strong net profit margins and even in the case of Blue Jet Healthcare Ltd, the net margins have been consistently in the range of between 21% and 25%, which is a very healthy number to sustain valuations in the long run. The ROE is lower than previous years, but at over 23%, it is still impressive and good enough to explain valuations.
    
3. The company has maintained an impressive rate of sweating assets as is evident from the asset turnover ratio between 0.85 and 1.00. This segment has long gestations and the ratio should improve going ahead as sales stabilize. That is critical as it is a key component in the ROE sustenance.

While pricing of the IPO does matter here, what is more critical is the eventual PAT margins that will sustain. Let us quickly look at valuations. On the latest year EPS of ₹9.23 per share, the P/E discount at the IPO issue price of ₹346 comes to a range of 35-37 times. That is the general norm for pharma and API companies in India so valuation should not be an issue. A lot will predicate on how the company manages the volumes and profits in a business niche that is known to be notoriously volatile in the past. For investors with a perspective of 2-3 years and a higher risk appetite, the IPO of Blue Jet Healthcare Ltd can be a good option.