Ami Organics is a research and
development driven specialty chemicals manufacturer with varied end usage,
focused on the development and manufacturing of advanced pharmaceutical
intermediates for regulated and generic active pharmaceutical ingredients (APIs)
and new chemical entities (NCE) and key starting material for agrochemical and
fine chemicals, especially from its recent acquisition of the business of
Gujarat Organics (GOL).
Promoters of the company are
NareshkumarRamjibhai Patel, Chetankumar Chhaganlal Vaghasia, Shital Nareshbhai
Patel and Parul Chetankumar Vaghasia
The company is one of the major
manufacturers of pharma intermediates for certain key APIs, including
Dolutegravir, Trazodone, Entacapone, Nintedaniband Rivaroxaban, as per the F&S (Frost &
Sullivan ) report. The pharma intermediates which it manufactures, find
application in certain high-growth therapeutic areas including anti-retroviral,
anti-inflammatory, anti-psychotic, anti-cancer, anti-Parkinson, anti-depressant,
and anti-coagulant, commanding significant market share both in India and
globally.
The company has developed and
commercialised over 450 pharma intermediates for APIs across 17 key therapeutic
areas since inception and NCE, with a strong focus on R&D across select
high-growth high margin therapeutic areas such as anti-retroviral,
anti-inflammatory, anti-psychotic, anti-cancer, anti-Parkinson, anti-depressant,
and anticoagulant, for use across the global pharmaceutical market.
The company has recently completed the
acquisition of two additional manufacturing facilities operated by GOL which
has added preservatives (parabens and parabens formulations which have end
usage in cosmetics, animal food and personal care industries) and other
specialty chemicals (with end usage in inter alia the cosmetics, dyes polymers
and agrochemicals industries) in its existing product portfolio, which command
significant market share globally in the supply of certain paraben derivatives.
The acquisition is in line with its inorganic growth strategy of foraying
further into the specialty chemicals sector. The company intends to pursue
strategic acquisitions and partnerships to complement its organic growth and
internal expertise. The company may use some of the land area available to it
in the future (which currently stands at 15,830.00 sq mtr) in Jhagadia facility
to explore brownfield expansion opportunities. The sales turnover for fiscal
2021 of the 2 plants acquired as part of the recent acquisition was Rs 106.04
crore.
The pharma intermediates used for
manufacturing of APIs and NCEs portfolio has expanded from over 425 products as
of March 31, 2019, to over 450 products as of March 31, 2021. Revenue from
operations from pharma Intermediates business was Rs 301.14 crore for fiscals
2021 accounting for 88.41% of its total revenue from operations.
The company has eight process patent
applications (in respect of intermediates used in the manufacture of Apixaban,
Rivaroxaban, Nintedanib, Vortioxetine, Selexipag, Pimavanserin, Efinaconazole
and Eliglustat) and three additional pending process patent applications for
which applications were made recently, in March 2021.
The company supply pharma intermediates
used for manufacturing of APIs and NCEs to various multi-national
pharmaceutical companies which cater to the large and fast-growing markets of
Europe, China, Japan, Israel, UK, Latin America, and the USA. In the fiscals
2021, 2020, and 2019, revenue from exports contributed 51.57%, 45.89% and
49.61%, respectively of its total revenue from operations. Revenues from
exports have grown at a compound annual growth rate (CAGR) of 21.84% between
fiscals 2019 and 2021.
The company supply products to more
than 150 customers (including international customers) directly in India and in
25 countries overseas, using a distributorship network in certain cases. Some
of its domestic customers include Laurus Labs, Cadila Healthcare and Cipla and
some of key export customers include Organikes.r.l.a Socio Unico, Fermion Oy, Fabbrica Italiana Sintetici S.p.A, Chori Co. Ltd., Medichem S.A. and Midas Pharma
GmbH. It has established long standing relationships with some of key
customers. Thirteen of its customers have been customers since the past 10
years and fifty of its customers have been customers since the past five years
The specialty chemicals find use in the
agrochemicals and fine chemicals industry. The specialty chemicals manufactured
by the facilities which it acquired as part of the acquisition, find use in
cosmetics, preservatives, and agrochemicals. Revenue from operations from
specialty chemicals business was Rs 16.59 crore, for fiscals 2021 accounting
for 4.87% of total revenue from operations.
The company has three manufacturing
units located at GIDC, Sachin, Gujarat, spread over an aggregate land area of
8,250 sq. mtrs with an installed capacity of 2,460 mtpa (metric tonne per
annum), GIDC, Ankleshwar Industrial Estate, Gujarat, spread over an aggregate
land area of 10,644 sq. mtrs. with an installed capacity of 1200 mtpa, and GIDC
Industrial Estate, Jhagadia, Gujarat, spread over an aggregate land area of
56,998.35 sq. mtrs. with an installed capacity of 2,400 mtpa. Total annual
installed capacity is 6060 mtpa. The Ankleshwar facility and Jhagadia facility
have been recently acquired from GOL. The Sachin Facility is inspected and
approved (EIR issued) by US FDA for manufacture and supply of advanced
pharmaceutical intermediates for manufacturing of APIs and NCEs since 2016. The
management systems of Sachin facility has been certified by the Bureau Veritas
Certification Holding SAS - UK Branch to be compliant with ISO 9001:2015, ISO
14001:2015, ISO 45001:2018 and SA 8000:2014 for designing, manufacturing and
dispatching of pharmaceutical intermediates for bulk drugs. Similarly, Jhagadia
and Ankleshwar facilities are compliant with ISO 9001:2015 and ISO 14001:2015
standards.
The manufacturing operations require a
significant amount of power and water. Power requirements are fulfilled through
electricity connection from the state electricity board for a maximum
contracted demand of 1000 KvAH at Sachin facility, 1,000 KvAH at Ankleshwar
facility and 1,000 KvAH at Jhagadia facility, and the state water board
provides potable water for operating manufacturing facilities. It has entered
into an arrangement with Gujarat Gas Company for supply of natural gas and also
have an in-house captive power generation plant.
The company has a dedicated in-house
R&D facility located in GIDC, Sachin spread over an aggregate built-up area
of 2,200 sq. mtrs and is also supported by its analytical development
laboratory in relation to developmental activities, freezing specifications and
developing the method of analysis for finished products, in process
intermediates, key starting materials (KSMs) and raw materials. The R&D facility
has been approved and certified by the Department of Scientific and Industrial
Research, Ministry of Science and Technology of India (DSIR).
The company has incurred an expenditure
of Rs 6.50 crore, Rs 8.59 crore and Rs 2.36 crore towards R&D activities
during the fiscals 2021, 2020 and 2019 representing 1.91%, 3.59%, and 0.99% of
its revenue from operations in such periods, respectively.
The company has also made an investment
in its Joint Venture, Ami Onco-Theranostics, LLC, a Delaware, USA entity (AOL),
which, by way of a transfer of patent usage rights by its JV Partner Photolitec
LLC, is entitled to the worldwide usage (except China) of certain patents used
in the development of new photosensitizing compounds used to identify and treat
cancer through patent and patent applications and additional know-how regarding
the same.
The key raw materials that the company
use for manufacturing operations include Chloroacetaldehyde Dimethylacetal,
SemicarbazideHcl, Meta Chloro Aniline,1-Bromo 3-Chloro Propane and
Bis-(2-Chloethyl) AmineHcl. The company identify and approve multiple vendors to
source its key raw materials and place purchase orders with them from time to
time. It currently source 73.22% of its total raw materials from domestic
vendors, 19.39 % from China and the remaining from other overseas sources for
fiscal 2021.
The Offer and the Objects
The offer comprises fresh issue of
3278689 equity shares at upper price band of Rs 610 and 3316750 equity shares
at lower price band of Rs 603 aggregating up to Rs 200 crore by the company and
an offer for sale by Parul ChetankumarVaghasia- promoter selling shareholder
(700000 equity shares) and other selling
shareholders (5359600 equity shares) together of up to 6059600 equity shares
aggregating to Rs 370 crore at the upper price band of Rs 610 and Rs 365 crore
at lower price band of Rs 603. The company will not receive any proceeds from
the offer and all the offer proceeds will be received by the selling
shareholders, in proportion to the offered shares sold by the respective
selling shareholders as part of the offer.
Promoter Parul Chetankumar Vaghasia
post-issue shareholding shall decrease to 8.89% from 11.87% pre issue
shareholding at the upper price band of Rs 610.
The company has undertaken a Pre-IPO
placement of 1,658,374 equity shares at a price of Rs 603 per share,
aggregating to Rs 100 crore. The company allotted 497512 equity shares to
Plutus Wealth Management LLP aggregating Rs 30 crore, 729685 equity shares to
Malabar India Fund aggregating Rs 44 crore, 331675 equity shares to IIFL
Special Opportunities Fund - Series 7 aggregating Rs 20 crore and 99502 equity
shares to Malabar Value fund aggregating Rs 6 crore.
The company proposes to utilize the net
proceeds of the fresh issue and the proceeds from the Pre-IPO placement towards
repayment/prepayment of certain financial facilities availed by the company
amounting Rs 140 crore, funding working capital requirements amounting Rs 90
crore and balance towards general corporate purposes. Total outstanding loan
amount as on June 30, 2021, is Rs 145.35 crore
Strengths
The company has developed and
commercialised over 450 pharma intermediates for APIs including Dolutegravir,
Trazodone, Entacapone, Nintedanib and Rivaroxaban and NCEs across 17 high growth
therapeutic areas since inception, such as anti-retroviral, anti-inflammatory,
anti-psychotic, anti-cancer, anti-Parkinson, anti-depressant, and
anti-coagulant
The Indian chemicals market is valued
at US$ 166 billion (around 4% share in the global chemical industry) in 2019.
It is expected to reach around US$ 326 billion by 2025, with an anticipated
growth of around 12% CAGR. The specialty chemical industry forms around 47% of
the domestic chemical market, which is expected to grow at a CAGR of around 11-12%
over the same period.
India's specialty chemical companies
are gaining favor with global MNCs because of the geopolitical shift after the
outbreak of Covid-19 as the world looks to reduce its dependence on China.
Currently, China accounts for around 15-17 percent of the world's exportable
specialty chemicals, whereas India accounts for merely 1-2 percent, indicating
that the country has a large scope of improvement and widespread opportunity.
It is anticipated that specialty chemicals will be the next great export pillar
for India.
The Indian pharmaceuticals market was
valued at US$ 59 billion in 2020, contributing to around 4% of the global
market. The Indian pharma market is expected to grow at around CAGR of around
10% between 2020 and 2025 fueled by substantial increase in Indian API domestic
consumption
The pharmaceutical intermediates
business has high entry barriers inter alia due to a long gestation period to
be enlisted as a supplier with the customers, particularly with the customers
in US and European countries, which requires suppliers to adhere to strict
compliance requirements, leading to a high regulatory gestation period and the
involvement of complex chemistries in the manufacturing process, which is
difficult to commercialize on a large scale.
Any change in the vendor of the product may require significant time and
cost for the customer resulting in a propensity amongst customers to continue
with the same set of suppliers.
The company has secured REACH
(Registration, Evaluation, Authorization and Restriction of Chemicals)
registration for some of its products for the purposes of selling and marketing
these products in the European Union with an added advantage of being a
preferred supplier to its customers in the said territory. This is a
significant entry barrier that works in favor of the company and places it in a
major advantageous position vis-a-vis its competitors in the critical European
market wherein the company intends to cater to the regulated players (i.e., the
originators and not generic makers).
Some of the raw materials that the
company use such as Thionyl Chloride, Phosphorus Oxychloride and Sodium
Methoxide requires a high degree of technical skill and expertise, and
operations involving such hazardous chemicals ought to be undertaken only by
personnel who are well trained to handle such chemicals. The level of technical
skill and expertise that is essential for handling such chemicals can only be
achieved over a time, creating a further barrier for new entrants
The company has 8 process patent
applications (in respect of intermediates used in the manufacture of Apixaban,
Rivaroxaban, Nintedanib, Vortioxetine, Selexipag, Pimavanserin, Efinaconazole
and Eliglustat) and 3 additional pending process patent applications for which
applications were made recently, in March 2021.
The company supplies their products to
more than 150 customers (including international customers) directly in India
and in 25 countries overseas, using a distributorship network in certain cases.
In Fiscal 2018, it had established a new state-of-the-art fully GMP-compliant
manufacturing unit at the Sachin facility, and this new and excess capacity
will help them capitalize on the growth opportunities. In addition, the
acquisition of the Ankleshwar facility and the Jhagadia facility, both
multipurpose backward integrated facilities in fiscal 2021, has enabled them to
expand their product portfolio to include the manufacture of specialty
chemicals. Going forward, they may consider acquisition/ investment
opportunities to selectively expand in other verticals.
Weaknesses
Top ten customers for fiscal 2021 have
contributed to 60.99% of total revenue from operations
The company is subject to strict
quality requirements, regular inspections and audits, and the success and wide
acceptability of its products is largely dependent upon quality controls and
standards. Any manufacturing or quality control problems may subject it to
regulatory action, damage reputation and have an adverse effect on business,
results of operations, financial condition, and cash flows.
The company operates in a hazardous
industry and is subject to certain business and operational risks consequent to
its operations, such as, the manufacture, usage, and storage of various
hazardous substances.
The company imports a significant
portion of its raw materials from China (amounting to 19.39%, 21.85% and
22.11%, of its total raw material purchases during fiscals 2021, 2020 and 2019,
respectively). Existing geopolitical tensions between India and China may
adversely affect its abilities to effectively source raw materials for business
and operations.
The company facilities are subject to
client inspections and quality audits and any failure on its part to meet their
expectations or to comply with the quality standards set out in contractual
arrangements, could result in rejection of its product lot(s) and/or the
termination of contracts which may adversely affect business, results of
operations, financial condition, and cash flows.
The company requires many approvals,
licences, registrations and permits to operate its business and the failure to
obtain or renew these licences in a timely manner, or at all, may have an
adverse effect on business, results of operations and financial condition.
Valuation
For FY 2021, consolidated sales were up
by 42% to Rs 340.61 crore primarily due to increased sales of its products
resulting from a robust growth of domestic and export demand. OPM rose 640 bps
to 23.5% which led to 95% increase in operating profit to Rs 80.15 crore. Other
income decreased 51% to 1.38 crore while interest cost rose 1% to Rs 5.62 crore
and depreciation increased 19% to Rs 4.19 crore. PBT increased 106% to Rs 71.73
crore. Tax expenses rose 143% to Rs 17.73 crore. Net profit increased 97% to Rs
54 crore.
At the higher price band of Rs 610, the
offer is made at around 41.2 times its EPS of Rs 14.8 for the period ended
March 31, 2021, on a post-issue equity share capital of Rs 36.44 crore of face
value of Rs 10 each. Listed industry peers of the company are Aarti Industries,
Hikal, Valiant Organics, Vinati Organics, Neuland Laboratories and Atul.
In comparison Aarti Industries trades
at 31 times its FY2021 EPS of Rs 30 at the current market price of Rs 932,
Hikal trades at 59.8 times its FY2021 EPS of Rs 10.8 at the current market
price of Rs 646, Valiant Organics trades at 29.1 times its FY2021 EPS of Rs
44.7 at the current market price of Rs 1299, Vinati Organics trades at 68.4
times its FY2021 EPS of Rs 26.2 at the current market price of Rs 1793, Neuland
Laboratories trades at 26.7 times its FY2021 EPS of Rs 62.9 at the current
market price of Rs 1680 and Atul trades at 41.4 times its FY2021 EPS of Rs
221.2 at the current market price of Rs 9162.
Ami Organics: Issue Highlights
|
Fresh issue (in Rs crore)
|
200
|
Offer for sale (in number of shares)
|
6059600
|
Offer for sale (in Rs crore)
|
|
- in Upper price band
|
370
|
- in Lower price band
|
365
|
|
|
Price Band (Rs)
|
603-610
|
For Fresh Issue Offer size (in no of shares )
|
|
- in Upper price band
|
3278689
|
- in Lower price band
|
3316750
|
Pre issued capital (Rs crore)
|
33.16
|
Post issue capital (Rs crore)
|
|
- in Upper price band
|
36.44
|
- in Lower price band
|
36.48
|
Pre issue promoter shareholding (%)
|
45.17
|
Post issue Promoter shareholding
|
|
-On higher price band (%)
|
39.18
|
-On lower price band (%)
|
39.14
|
Bid Size (in No. of shares)
|
24
|
Issue open date
|
1/9/2021
|
Issue closed date
|
3/9/2021
|
Listing
|
BSE,
NSE
|
Rating
|
48/100
|
Ami Organics: Consolidated Financials
|
Particulars
|
1903 (12)
|
2003 (12)
|
2103 (12)
|
Total Income
|
238.512
|
239.64
|
340.61
|
OPM (%)
|
17.6
|
17.1
|
23.5
|
Operating Profits
|
42.08
|
41.02
|
80.15
|
Other Income
|
0.38
|
2.84
|
1.38
|
PBIDT
|
42.46
|
43.86
|
81.53
|
Interest
|
4.75
|
5.59
|
5.62
|
PBDT
|
37.71
|
38.27
|
75.91
|
Depreciation
|
2.60
|
3.52
|
4.19
|
PBT
|
35.11
|
34.76
|
71.73
|
Share of Profit/loss of JV
|
0.00
|
0.00
|
0.00
|
PBT Before EO
|
35.11
|
34.76
|
71.73
|
EO
|
0.00
|
0.00
|
0.00
|
PBT after EO
|
35.11
|
34.76
|
71.73
|
Provision for Tax
|
11.82
|
7.28
|
17.73
|
Profit after Tax
|
23.30
|
27.47
|
54.00
|
PPA
|
0.00
|
0.00
|
0.00
|
Net profit after PPA
|
23.30
|
27.47
|
54.00
|
MI
|
0.00
|
0.00
|
0.00
|
Net profit after MI
|
23.30
|
27.47
|
54.00
|
EPS (Rs)*
|
6.4
|
7.5
|
14.8
|
*EPS annualized on post issue equity capital of Rs 36.44 crore of face
value of Rs 10 .each
|
Figures in Rs crore
|
Source: Capitaline Corporate Database
|
|