Started in 1999, Gujarat based Par Drugs and Chemicals Limited is engaged in the business of manufacturing and developing active pharma ingredients (API) for the Indian and international markets. APIs are used as the main ingredient in making tablets, capsules, and other finished dosages. The company also produces various antacid molecules. It has two manufacturing facilities located at Ankleshwar and Bhavnagar in Gujarat. Currently, the company has a total of 6 Fine Chemical and 12 API products which are available in the market of 17 countries, including India. Some of the customers of the company are Dabur India Ltd, Meyer Organics Pvt. Ltd, Cadila Healthcare Ltd., Cipla Ltd, and Pfizer Ltd. For fiscal 2018, the international and domestic operations recorded 86.88% and 13.12%, respectively from the total company sales. The company has a testing laboratory to maintain quality standards for finished products and raw materials. Par Drugs and Chemicals Ltd also performs drying operations of the products provided by customers in the liquid form and converts them into powders. The competitive strengths of the company are: 1. Diversified product range2. International presence3. Prompt sales & distribution network4. A good track record 5. Strong chemistry capabilities On the financial performance front, Par Drugs has posted turnover/net profits of Rs. 33.30 cr. / Rs. 0.4 cr. (FY16), Rs. 48.80 cr. / Rs. 1.84 cr. (FY17), Rs. 42.41 cr. / Rs. 1.49 cr. (FY18) and Rs. 46.41 Cr / Rs. 43.12 Cr (FY19). So financials remained zig-zag and there is sudden jump in bottom-line for FY19 is surprising. Trade receivables for FY19, is around 8.52 Cr which is 18.35% of total revenue of FY19. For FY19, promoters and their family members had taken around 1.40 Cr as Salary and total net profit of FY19 was 2.41, so that looks as very big amount when compared to net profit. For last three fiscals, Par Drugs has posted an average EPS of Rs. 5.69 and an average RoNW of 9.78%. The issue is priced at a P/BV of 0.83 on the basis of its NAV of Rs. 61.19 post issue. If we take FY19 earnings and attribute it on fully diluted post issue equity, then asking price is at a P/E of around 13, thus issue appears fully priced as industry average is also around 15.38. Comparison with listed peers is given in above table. On BRLM's front, for Pantomath Capital Advisors Private Limited this is the 56th IPO in last three fiscals and from last 10 IPOs, all opened above issue price with 0.05% to 11% premium on the day of listing. As of now, from last 10 IPOs, 2 are trading below issue price and remaining above issue price. ( As on 30.04.19 ) Company has shown zig-zag in results, RoNW is 9.78% and issue looks fully priced with respect to current earnings. Performance of BRLM is good. So we give NEUTRAL rating to this SME IPO.
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