Zenith Drugs Limited is a pharmaceutical manufacturing and trading company based out from Indore. They have a manufacturing unit. The Company is into Generic Medicines and Generic Medicines are cost effective. The Company always emphasis on core strength and policies that focus on technology and great deliverance. With a passion to set high standards of services, the company has always taken all measures to scale up as and when required only to deliver the better. They work diligently and have a wide range of products to cater to every need and to reach the client sensitivity and centricity. They are proud to be WHO-GMP compliant, adhering to the stringent guidelines set by the World Health Organization. The commitment to quality is further demonstrated by the ISO 9001:2015 certification, obtained from a respected EuroUK certification body. Zenith offers a wide range of formulations in various forms such as: 1. ORS Powder; 2. Liquid Orals; 3. Ointments; 4. Liquid Externals; and 5. Capsules. Each formulation is carefully developed to deliver efficacy, safety, and affordability, making quality healthcare accessible to all. Currently, the Company is having FDA approval of more than 600 Products from Food & Drugs Administration. Out of 600 Products, 325 products are being Manufactured Regularly. Since its inception, the company embarked on a journey of growth and continuous improvement. Initially, they started as a modest manufacturing house for oral and external formulations. However, recognizing the importance of quality and compliance, they swiftly shifted to a Schedule M GMP compliant unit in 2004 where they started the production of two lines which are liquid orals and ointments. This transition enabled to enhance the manufacturing capabilities and ensure stringent adherence to regulatory standards. In 2007, they expanded the product line by incorporating ORS Powder manufacturing into the operations. This addition enabled to contribute to the critical healthcare need for oral rehydration solutions, further widening the portfolio and addressing the needs of patients. The Company have been Receiving Sales orders from the Customers & Institutions on regular basis. Since, they are a WHO GMP Certified Unit, they have to Procure the Material from Approved Sources only, that qualifies the quality requirement. The Requirements are automatically generated from ERP System & after Verification form the Store Department, they Float the Requirement among all the Approved Vendors for Price Quotation. Once they get the prices from all vendors, they make the Comparison & after Negotiation process, they place the Purchase Orders with prevailing delivery terms. These Suppliers may be Manufacturers, Importers, Authorised Distributors, or Local vendors. Further, the Company is constantly reaping the benefits given by the Government to the MSME Segment. The Company has received subsidy under Madhya Pradesh MSME Yojna i.e. MSME Promotion Scheme, 2019 as Industrial Development Grant upto 40% of the capital invested in machinery i.e. grant of Rs 170.04 Lakhs. As per financial performance, Zenith Drugs Limited has posted total income / net profits of Rs 73.52 Cr / Rs 3.03 Cr (FY21), Rs 92.67 Cr / Rs 3.13 Cr (FY22), Rs 115.70 Cr / Rs 5.15 Cr (FY23) and Rs 69.48 Cr / Rs 5.39 Cr (upto Q2 FY24). So as per previous financials data, company has shown good growth. But, trade receivables are around 42% of FY23 revenue and . Company has posted an average EPS of Rs 3.44 and average RoNW of 29.23% for last three fiscals. Issue is priced at a P/BV of 4.19 as per NAV of 18.87 as on post issue. If we attribute latest earnings of FY22, FY23 and annualised FY24 on fully diluted equity post issue, then asking price is at a P/E of around 43.30, 26.29 and 12.56 respectively, which looks aggressively priced. As per RHP, comparison between listed peers is shown in above table. On BRLM's front, Gretex Corporate Services Limited is associated with this SME IPO and handled 19 SME IPOs in last 3 year. From last 10 SME IPOs, three opened below issue price and remaining opened above issue price or at par on the day of listing. As of now from last 10 SME IPOs, two are trading below issue price and remaining are trading above issue price. ( As on 13.02.24 ) As per financials, Zenith Drugs Limited has shown zig-zag results, RoNW is 29.88% and P/E is respectively 43.30, 26.29 and 12.56 as per FY22, FY23 and annualised FY24 earnings. So, issue looks fully priced and trade receivables are very high. Company is engaged in manufacturing and trading of pharmaceutical, which is highly competitive and fragmented segment. Performance of BRLM is good. So, we give NEUTRAL rating for this IPO. Readers must consult a qualified financial advisor prior to making any actual investment decisions.
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