Started in 2012, Ahmedabad Gujarat based Earum Pharmaceuticals Limited is engaged in trading, marketing, distribution of pharmaceutical formulation products. The company has 125 drugs formulation products such as anti-biotic drugs, anti-malarial drugs, anti-allergic &anti cold drugs, analgesic/ anti-pyretic & anti inflammatory drugs, dermatology products, cerebral activator drugs, neurological drugs, gastro intestinal drugs, steroids, gynecology drugs, calcium, multivitamins, anti-oxidants and injections. The company is also involved in the trading business of active pharmaceutical ingredients (API's) including Amoxicillin Trihydrate IP, Levofloxacin Hemihydrate IP and Albendazole IP. Earum Pharmaceuticals is primarily engaged in two types of business activities; marketing of its own formulations products and trading of other brands' generic formulations. Currently, it has around 24 products which are manufactured by 3rd parties and marketed by the company under its brand name. It has a warehouse at Ahmedabad, Gujarat equipped with all amenities to process business operations smoothly. The company has a domestic and international presence across South East Asia, Latin America and Africa. Future goals of Earum Pharmaceuticals Ltd are:1. Make global presence more prominent2. Enhance customer satisfaction by improving market skills3. Deal in quality standard products On the financial performance front, EPL has posted turnover/net profits of Rs. 18.63 cr. / Rs. 0.10 cr. (FY16), Rs. 23.69 cr. / Rs 0.16 cr. (FY17) and Rs. 35.85 cr. / Rs 0.86 cr. (FY18). For upto Q3 of FY19, company has posted PAT of Rs 0.87 Cr on total revenue of Rs 34.50 Cr. So company has shown growth over the years. But sudden jump in PAT in FY18 and FY19 generates doubt. Trade receivables for FY18 is around Rs 10.89 Cr that is around 30% of FY18 total revenue, which is very high and its nearly 3 times more than FY17 trade receivable. Company has fixed salary of promoters around Rs 36 Lacs and its around 40% of FY18 PAT. The issue is priced at a P/BV of 1.89 on the basis of its NAV of Rs. 19.02 post issue. If we annualise latest earnings and attribute it on fully diluted post issue equity than asking price is at P/E of 19.25 and as per FY18 earning P/E is 25.90. So this issue looks fully price. As per RHP, listed peers are shown in above table, but it can't be strictly comparable. On BRLM's front, for Hem Securities Limited this is the 36th SME IPO. From last 10 IPOs, 2 opened below issue price, 1 at part and remaining above issue price with listing gains around 2% - 20%. Currently from last 10 IPOs, 5 are trading below issue price and remaining above issue price. ( As on 14.06.19 ) As financials company has shown growth but also trade receivables gone up, RoNW is 20.34% and issue looks fully priced with respect to latest earnings with P/E of 19.25. Currently Pharma companies are out of flavour and performance of BRLM is average, So we give AVOID rating to this SME IPO.
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