Supriya Lifescience
is one of the key Indian manufacturers and suppliers of active pharmaceuticals
ingredients (APIs), with a focus on research and development.
As of
October 31, 2021, Company has niche product offerings of 38 APIs focused on
diverse therapeutic segments such as antihistamine, analgesic, anesthetics,
vitamin, anti-asthmatic and antiallergic.
Pharmaceutical
business of the company is organized into two segments- domestic and export
sales. From April 1, 2020, until October 31, 2021, products of the company were
exported to 86 countries to 1,296 customers including 346 distributors.
Company has
grown its API business in several countries across (1) Europe, which
contributed 17.40 % and 18.53 % of revenue from operation for the year ended
March 31, 2021 and for the six month period ended September 30, 2021,
respectively; (2) Latin America, contributed 19.15 % and 12.01 % , respectively;(3)
Asia (excluding India), contributed 29.27 % and 36.76 %, respectively;(4) North
America, contributed 4.76 % and 2.36 %, respectively;and (5) India, contributed
22.53% and 26.43%, respectively.
In FY 2021,
regulated markets contributed 38.17% of total sales and semi-regulated and
non-regulated markets contributed 61.83%.For the six month period ended
September 30, 2021 Regulated markets contributed 49.22% of total sales and semi-regulated
and non-regulated markets contributed 50.78%.
For FYs
2019, 2020, 2021 and for the six-month period ended September 30, 2021, export
sales accounted for 70.96%, 71.85%, 77.47% and 73.57%, respectively, of revenue
from operations. Similarly, for FYs 2019, 2020,2021 and for the six month
period ended September 30, 2021, domestic sales accounted for 29.04%,
28.15%,22.53% and 26.43%, respectively, of total revenue.
Business
operations of the company are supported by a modern manufacturing facility
located in Parshuram Lote, Maharashtra, which is approximately 250 km from
Mumbai. Its manufacturing facility has received approvals from USFDA, EDQM
TGA-Australia, KFDA-Korea, PMDAJapan, NMPA (previously known as SFDA)- China,
Health Canada, in relation to the products being exported to the relevant
jurisdictions
The
manufacturing facility is spread across 23,806 sq.mt, having reactor capacity
of 332 KL/ dayand seven cleanrooms. In addition, company has acquired a plot of
land, admeasuring 12,551 sq.mt, near the present manufacturing facility,
wherein the Company intends to expand its manufacturing infrastructure.
Company’s customers
include global pharma companies such as Syntec Do Brasil LTDA, American
International Chemical Inc and AT Planejamento E Desenbolvimento De
NegociosLtda, with whom it has business relationship for over nine years, and
SuanFarma Inc, Acme Generics LLP, Akum Drugs Ltd and Mankind Pharma Ltd with
whom it has business relationship for over four years.
Company intends
to continue to drive R&D initiatives towards the development of innovative
APIs. It also intends to improve its R&D capabilities, with a focus on
capturing more high-value first-to-market opportunities in key international
markets, as well as leveraging broad product basket to enhance market position
globally.
As of
October 31, 2021, company has filed 14 active DMFs (Drug Master File) with the
USFDA (Food and Drug Administration) and eight active CEPs (Certificate of
Suitability) with EDQM (European Directorate for the Quality of Medicines and
HealthCare) for its API products in therapeutic areas such as antihistamine,
analgesic, anesthetic, vitamin, anti-asthmatic and anti-allergic.
Offer and its objects
The IPO comprise of fresh issue of
equity shares worth up to Rs 200 crore and an offer for sale of Rs 500 crore by
existing shareholders.
Price band for the IPO is Rs 265 to
Rs 274 per equity share of face value Rs 2 each.
Objectives for the fresh issue are funding
capital expenditure requirements of Rs 92.3 crore, Rs 60 Crore for
Repayment/pre-payment, in full or part of borrowings and remaining amount will
be used for general corporate purposes.
Satish Waman Waghis the Promoter of
the Company, which currently holds an aggregate of 72,642,390 Equity Shares,
aggregating to 99.26% of the pre-offer issued and paid-up Equity Share capital.The
post IPO shareholding for the same is expected to be around 68.24%.
The issue, through the book-building process, will open on 16
Dec 2021 and will close on 20 Dec 2021.
Strengths
Company has a track record of delivering strong financial
performance, Its consolidated revenue from operations for FYs 2021, 2020 and 2019
was Rs 396.22 crore, Rs 322.71 crore and Rs 285.86 crore, respectively. Revenue
grew at a CAGR rate of 17.73% from FY2019 to FY2021.
Company has
leadership position across key and niche products. Company has consistently been the largest exporter of
Chlorpheniramine Maleate and Ketamine Hydrochloride from India, contributing to
45-50% and 60-65% respectively, of the API exports from India, between FYs 2017
and 2021.Company is also the largest exporter of Salbutamol Sulphate in India
contributing to 31% of the API exports from India in FY 2021 in volume terms.
Company is focused on products
which are high on value and low on competition, so it is well positioned to
derive relatively higher returns from investments.
Company is in the process of
further diversifying its product portfolio with strong product pipeline. A
diversified product portfolio diminishes the risk associated with the
dependence on any therapeutic area.
Company has a backward integrated
business model for active pharmaceuticals ingredients (APIs), this model ensures
steady supply of intermediates at an equitable cost, avoiding any market
fluctuations. As on October 31, 2021, 12 of its existing products are backward
integrated, which contributed 67.14% and 60.17.% of the total revenue for
Fiscal year 2021 and for the six-month period ended September 30, 2021
respectively.
Company has
acquired a plot of land, admeasuring 12,551 sq.mt, near the present
manufacturing facility, wherein the Company intends to expand its manufacturing
infrastructure. The proposed expansion of manufacturing facilities is expected
to enhance key starting material manufacturing capabilities.
Company has geographically
diversified revenue sources with a global presence across 86 countries. From
April 1, 2020 until October 31 2021, company’s products were exported to 86
countries including (1) regulated markets such as USA, China, Japan, Germany,
Spain, Indonesia, South Korea and Switzerland; and (2) semi-regulated and
non-regulated markets such as Brazil, Mexico, Chile, Taiwan, Malaysia;
Bangladesh, South Africa, Kenya, Jordan and Egypt, through its own marketing
and distribution network as well as by entering into distribution arrangements
with pharmaceutical distributors in these markets.
Company has advanced manufacturing
and research and development capabilities. It has four manufacturing blocks
which are segregated therapeutic segment wise. The fourth block commenced
operation on May 30, 2021. The manufacturing facility includes well delineated
areas for R&D, quality control (chemical microbiology), quality assurance,
dedicated areas for engineering maintenance, warehouse, materials and finished
goods stores.
Company’s Promoter and Chairman,
Satish Wagh, has extensive experience in the pharmaceutical sector. SatishWagh
is the recipient of the (1) National Award for Research & Development
Effort in Small Industries 1999 by Ministry of Small Scale Industries; (2)
National Award for Outstanding Entrepreneurship Efforts 2007 by Ministry of Micro,
Small and Medium Enterprises; (3) National Award for Quality Products in Small
Scale Sector for Manufacturing of Basic Drugs 2003 by Ministry of Small Scale
Industries; (4) National Award for Research & Development 2010 by Ministry
of Micro, Small and Medium Enterprises; and (5) Certificate of Excellence Times
Inspiring Leaders 2021.
In FY 2020, company undertook the
strategic acquisition of Swastik Industries, which was primarily engaged in the
business of manufacturing of APIs. The acquisition of the manufacturing
facility of Swastik Industries enabled optimal utilization of manufacturing
resources and collation of manufacturing capabilities under one entity.
Weaknesses
Company operates in a highly
regulated industry and its operations are subject to extensive regulation. Failure
to comply with regulations prescribed by governments and regulatory agencies or
any delay in getting approvals could lead to adverse impact on financial
performance.
Company generates a significant
portion of revenue from the sale of a limited number of products. For the
Fiscals 2019, 2020 and 2021 and for the six-month period ended September 30,
2021, the sale of top 10 APIs and related products accounted for 81.30%, 86.06%,
80.99% and 85.94% of total revenue, respectively.
Company derives significant portion
of its revenue from a few customers and the loss of one or more such customers,
could lead to deterioration of financial condition or prospects. Top 10
customers contributed to 30.24%, 32.09%, 40.10% and 47.13% of revenue from
operations for Fiscals 2019, 2020, 2021 and for the six-month period ended
September 30, 2021, respectively.
Company purchase Raw materials
primarily from suppliers in India, China, Europe, and USA. For the period from
April 1, 2021, to October 31, 2021, 32% raw material was purchased from China,
5% from USA and 2% from Europe. So, any price fluctuations due to inflation,
seasonality and global supply could adversely affect profitability.
The pharmaceutical industry is a
highly competitive market with several major pharmaceutical companies present,
and therefore it is challenging to improve market share and profitability.
As of October 31, 2021, Company had
total outstanding borrowings of Rs 80.94 crore,its financing agreements include
conditions and restrictive covenants. These restrictions may limit its
flexibility in responding to business opportunities, competitive developments
and adverse economic or industry conditions.
As a significant portion of
company’s revenue comes from exports. Anyexchange rate fluctuations could
affect the amount of income and expenditure recognized by the company.
Company has entered various
transactions with related parties and may continue to do so in the future,
which may potentially involve conflicts of interest with the equity
shareholders.
Registered Office and Corporate
Office premises are not owned by Company but are taken on leasehold basis
pursuant to contractual arrangements with its Promoter. Further, some of its
lease agreements and leave and license agreements may not have been duly
stamped as per applicable law. An instrument not duly stamped, or
insufficiently stamped, may attract a penalty as prescribed under applicable
law, which could adversely affect business and financial condition.
Valuation
For FY 2021, consolidated
sales were up by 23.66% to Rs 385.37 crore compared to FY 2020. OPM increased
by 1184 bps to 43.41% which led to 70.05% increase in operating profit to Rs
167.30 crore. Other income decreased 1.92% to Rs 10.86 crore, while interest
cost fell 40.43% to Rs 4.08 crore and depreciation increased 4.74% to Rs 6.68
crore.PBT increased 73.96% to Rs 167.39crore.Tax expenses for FY2021 was of Rs 43.57
crore compared to tax expense of Rs 22.82 crore in FY2020. Net profit rose
68.70% to Rs 123.83 crore.
The annualized EPS(excluding extraordinary items and relevant
tax) for the six-month period ended September 30, 2021, on post-issue equity
works out to Rs 16.40. At the upper price band of Rs 274, P/E works out to 16.70.
As of 14 December 2021, its listed peers such as Solara
Active Pharma Sciences trades at P/E of 25.5 on six-months annualized EPS, Neuland
Laboratories trades at P/E of 35.26, Aarti Drugs trades at P/E of 28.77 andDivis
Laboratories trades at P/E of 53. For FY21, Supriya’s OPM and ROE stood at
43.41% and 46%, respectively, compared to 23.87% and 13.95% for Solara Active
Pharma Sciences, 15.67% and 10.26% for Neuland Laboratories, 20.29% and 30.69%
for Aarti Drugs and 41.04% and 21.34% for Divis Laboratories, respectively.
SupriyaLifescience:
Issue highlights
|
For Fresh Issue Offer size (in no of shares )
|
|
- On lower price band
|
75,47,169
|
- On upper price band
|
72,99,270
|
Offer size (in Rs crore)
|
200
|
For Offer for Sale Offer size (in no of
shares)
|
|
- On lower price band
|
1,88,67,924
|
- On upper price band
|
1,82,48,175
|
Offer size (in Rs crore )
|
500
|
Price band (Rs)
|
265-274
|
Minimum Bid Lot (in no. of shares )
|
54
|
Post issue capital (Rs crore)
|
|
- On lower price band
|
16.14
|
- On upper price band
|
16.09
|
Post-issue promoter & Group shareholding
(%)
|
68.24
|
Issue open date
|
16-12-2021
|
Issue closed date
|
20-12-2021
|
Listing
|
BSE, NSE
|
Rating
|
48/100
|
SupriyaLifescience: Consolidated
Financials
|
|
|
1903
(12)
|
2003
(12)
|
2103
(12)
|
2109
(6)
|
Sales
|
277.84
|
311.64
|
385.37
|
224.80
|
OPM (%)
|
23.30%
|
31.57%
|
43.41%
|
41.55%
|
OP
|
64.74
|
98.38
|
167.30
|
93.41
|
Other inc.
|
8.02
|
11.07
|
10.86
|
5.26
|
PBIDT
|
72.76
|
109.45
|
178.15
|
98.67
|
Interest
|
10.22
|
6.85
|
4.08
|
2.03
|
PBDT
|
62.54
|
102.60
|
174.07
|
96.64
|
Dep.
|
5.44
|
6.38
|
6.68
|
4.94
|
PBT
|
57.10
|
96.23
|
167.39
|
91.70
|
Share of Profit/(Loss) from
Associates/JV
|
-
|
-
|
-
|
-
|
PBT before EO
|
57.10
|
96.23
|
167.39
|
91.70
|
Exceptional items
|
-
|
-
|
-
|
-
|
PBT after EO
|
57.10
|
96.23
|
167.39
|
91.70
|
Taxation
|
17.68
|
22.82
|
43.57
|
25.74
|
PAT
|
39.43
|
73.40
|
123.83
|
65.96
|
Minority Interest
|
-
|
-
|
-
|
-
|
Net Profit
|
39.43
|
73.40
|
123.83
|
65.96
|
EPS (Rs)*
|
4.90
|
9.12
|
15.39
|
16.40
|
* EPS is annualized on post issue
equity capital of Rs 16.09 crore of face value of Rs 2 each
|
|
EO: Extraordinary items. EPS is
calculated after excluding EO and relevant tax
|
|
|
Figures in Rs crore
|
|
|
|
|
Source: Capitaline Corporate
Database
|
|
|
|
|
|