Started in 2008, Mumbai based Sudarshan Pharma Industries Limited (SPIL) has a contract manufacturing facility to source and supply generic formulations. It is also engaged in import & export activities, and supply of specialty chemicals, API (Active Pharmaceutical Ingredients), and Intermediates. Based on clients' specifications and requirements, they outsource the manufacturing facility from the suppliers in India and abroad. The generic products supplied by the company have a wide application in paint, food, pharma, and adhesive industry. The company is involved in a contract manufacturing facility, supply and outsource of medicines and pharma formulation to hospitals, NGO, government and healthcare institutes. SPIL has 50 pharma formulations which are supplied under the brand name in the form of tablets, ointment, capsules, and injectable. The company has its own sales force and distribution network in 5 states for ethical marketing of pharmaceutical formulation & products under the brand name in Indian and international markets. It also offers formulation development and QC services and provides customised solutions. The competitive strengths of the company are: 1. Customer-centric and order driven business model2. Wide range of product offerings3. Contract manufacturing facility arrangements 4. Strong distribution, marketing and sales network5. Diversified business operations On the financial performance front, Sudarshan has posted turnover/net profits of Rs. 55.52 cr. / Rs. 0.16 cr. (FY17), Rs. 89.76 cr. / Rs. 0.74 cr. (FY18) and Rs. 140.02 Cr / Rs. 2.38 Cr (FY19). So company has shown good growth over the years. Trade receivables for FY19, is around 25.91 Cr which is 18.5% of total revenue of FY19. For last three fiscals, Sudarshan has posted an average EPS of Rs. 2.63 and an average RoNW of 9.96%. The issue is priced at a P/BV of 2.19 on the basis of its NAV of Rs. 34.30 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 41, thus issue appears over priced and currently pharma companies are out of flavour and well known brands are trading below P/E of 40. Comparison with listed peers is given in above table, but they are not strictly comparable. On BRLM's front, for First Overseas Private Limited this is the 13th IPO in last three fiscals and from last 10 IPOs, 5 opened below issue price and remaining opened above issue price with 0.05% to 25% premium on the day of listing. As of now, from last 10 IPOs, 9 are trading below issue price and remaining above issue price. ( As on 06.06.2019 ) Company has shown good results, RoNW is 9.96% and issue looks over priced with respect to current earnings. Performance of BRLM is very poor. So we give AVOID rating to this SME IPO.
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