IPO Analysis

Date Heading Details
12-Jun-2019   14:53 Hrs IST Meera Industries coming with an FPO to raise up to Rs 11.75 crore <p align="justify"><strong>Meera Industries</strong> <ul><li><div align="justify">Meera Industries is coming out with an&nbsp;Further Public Offer (FPO) of 5,22,000 equity shares of face value of Rs 10 each&nbsp; at a fixed price of Rs 225 per equity share.</div></li><li><div align="justify">The issue will open on June 13, 2019 and will close on June 18, 2019.</div></li><li><div align="justify">The share is priced 22.50 times higher to its face value of Rs 10.</div></li><li><div align="justify">Book running lead manager to the issue is Aryaman Financial Services.</div></li><li><div align="justify">Compliance Officer for the issue is Bhavisha K. Khakhkhar.</div></li></ul><p align="justify"><strong>Profile of the company</strong><p align="justify">Meera Industries was originally incorporated as ‘Meera Industries Private Limited' on July 05, 2006 with the Registrar of Companies, Gujarat, Dadra and Nagar Havelli as a private limited company under the provisions of the Companies Act, 1956. The status of the Company was changed to public limited and the name of our Company was changed to ‘Meera Industries Limited' vide Special Resolution dated February 25, 2017. The fresh certificate of incorporation consequent to conversion to Public Limited Company was issued on March 09, 2017 by the Registrar of Companies, Ahmedabad.<p align="justify">Meera Industries is engaged in the business of manufacturing of Yarn Twisting, Winding and Heat-Setting Machine for textile industries and manufacturing / processing yarns. In addition, the high-performance machines are also designed, developed and sold by the company to other textile manufacturing and processing units. They also provide a testing facility and assistance after sales to maintain a healthy relationship with customers.<p align="justify"><strong>Proceed is being used for :</strong><ul><li><div align="justify">Expansion of manufacturing facilities at Sachin, Surat; and</div></li><li><div align="justify">Funding expenditure for General Corporate Purposes.</div></li></ul><p align="justify"><strong>Industry Overview:</strong><p align="justify">India's textiles sector is one of the oldest industries in Indian economy. India's overall textile exports during FY 2017-18 stood at US$ 39.2 billion. The Indian textile industry has the capacity to produce a wide variety of products suitable to different market segments, both within India and across the world. Moreover, the textile machinery manufacturing section is one of the largest segments of the machinery manufacturing industry in India. This industry is nearly sixty years old and has about 1000 machinery and component manufacturing units. Nearly 300 units produce complete machinery and the remaining produces various textile machinery components.<p align="justify">The Indian textiles industry is extremely varied, with the hand-spun and hand-woven textiles sectors at one end of the spectrum, while the capital intensive sophisticated mills sector at the other end of the spectrum. The decentralized power looms/ hosiery and knitting sector form the largest component of the textiles sector. The close linkage of the textile industry to agriculture (for raw materials such as cotton) and the ancient culture and traditions of the country in terms of textiles make the Indian textiles sector unique in comparison to the industries of other countries.<p align="justify"><strong>Pros and strengths</strong><p align="justify"><strong>Quality assurance:</strong> The company has undertaken various initiatives and adopted various systems and processes in order to augment its commitment to focus on quality which is crucial for its operations. Its manufacturing unit is well equipped with modern quality checking and testing equipment's for quality assurance. Its customers also require the company to maintain extremely rigorous and strict checks on compliance with all necessary quality and safety standards.<p align="justify"><strong>Customer centric:</strong> The company focuses on attaining highest level of customer satisfaction which is achieved by providing prompt after sales service. These services include providing installation of machine at the customer's premises warranty and prompt after sales service, if any required for proper functioning of machine which is evidenced by attending to all complaints of customers and resolving them.<p align="justify"><strong>Qualified and experienced workforce and senior management:</strong> The company has a dedicated team of skilled individuals with technical background and domain experience in each of its verticals with a focus on evolving technologies. These teams follow a structured applied innovation and solutions development process and work with delivery functions to identify the key concerns of its customers and generate solutions, ideas and concepts to address the concerns. The team comprises of personnel having technical, operational and business development experience. It has employed suitable technical and support staff to manage key areas of activities allied to operations.<p align="justify"><strong>Risks and concerns</strong><p align="justify"><strong>Intense competition:</strong> The company faces competition in its business from organized and unorganized players, which may adversely affect its business operation and financial condition. Its Competitiveness is also measured by the technology it adopts as the industry is rapidly growing in India. Its inability to compete with this intense competition; will have material adverse impact on the Company's financial position.<p align="justify"><strong>Significant amount of working capital:</strong> Its business requires significant amount of working capital.&nbsp; A significant portion of its working capital is utilized towards trade receivables. Inability to meet working capital requirements may have an adverse effect on its results of operations.<p align="justify"><strong>Changes in technology:</strong> The industry it caters is characterized by rapid technological changes, evolving industry standards, changing client preferences that could result in product obsolescence and short product life cycles. The textile machinery industry is characterized by rapid technological changes, evolving industry standards, changing customer preferences that could result in short product life cycles. The success of the company's business depends on its ability to innovate and continuously provide services that address the varied and expanding requirements of its customers. Its future success will depend on the ability to enhance its existing offerings or develop new customized, to meet customer needs, in each case, in a timely manner.<p align="justify"><strong>Outlook</strong><p align="justify">Meera Industries is engaged in the business of manufacturing of Yarn Twisting, Winding and Heat-Setting Machine for textile industries and manufacturing/processing yarns. In addition, the high-performance machines are also designed, developed and sold by the company to other textile manufacturing and processing units. They also provide a testing facility and assistance after sales to maintain a healthy relationship with customers. The company has established an in-house R&amp;D Center which has received recognition by the Department of Scientific and Industrial Research (DSIR), Government of India and the facility is located within the manufacturing unit. It adheres to the quality standards as prescribed by its customers and hence it is getting repetitive orders from customers. On the concern side, the company's substantial portion of revenues has been dependent upon few clients. The loss of any one or more of its major clients would have a material effect on its business operations and profitability.<p align="justify">The company is coming out with FPO of 5,22,000 equity shares of Rs 10 each&nbsp; at a fixed price of Rs 225 per equity share to mobilize Rs 11.75 crore. On the performance front, the company's revenue from operation as a percentage of total income were 97.64%, 97.93% and 97.51% respectively, for the fiscals 2019, 2018 and 2017. The revenue from operations consists of revenue from manufacturing and selling of textile machinery. After accounting for taxes at applicable rates, its profit after tax had increased by 77.09%, from Rs 255.12 lakhs in Fiscal 2018 to Rs 451.80 lakhs in Fiscal 2019. The company intends to further increase its manufacturing capability through an expansion project wherein it is in the process of acquiring an adjacent land and propose to build a factory building on the same and set-up an additional unit for manufacturing of textile machinery and yarn twisting. The company has entered into an Agreement to Sell for acquiring the required land and the said expansion is proposed to be funded from the net proceeds of this Issue.</p>
11-Jun-2019   15:06 Hrs IST Sudarshan Pharma Industries coming with an IPO to raise up to Rs 25.80 crore <p align="justify"><strong>Sudarshan Pharma Industries</strong>&nbsp; <br></p><ul><li><div align="justify">Sudarshan Pharma Industries is coming out with an initial public offering (IPO) of 34,40,000 Equity Shares of face value of Rs 75 each for cash at a fixed price of Rs 10 per equity share.<br></div></li><li><div align="justify">The issue will open on June 12, 2019 and will close on June 17, 2019.<br></div></li><li><div align="justify">The shares will be listed on NSE Emerge platform.<br></div></li><li><div align="justify">The share is priced 7.50 times higher to its face value of Rs 10.<br></div></li><li><div align="justify">Book running lead manager to the issue is&nbsp;First Overseas Capital<br></div></li><li><div align="justify">Compliance Officer for the issue is Anubhav Jain.<br></div></li></ul><p align="justify"><strong>Profile of the company</strong><br></p><p align="justify">Sudarshan Pharma Industries was originally incorporated under the Companies Act, 1956 vide certificate of incorporation dated July 23, 2008 issued by the Registrar of Companies, Mumbai. Later in 2016, the name of the company was changed from -Sudarshan Specialty Chemsolve Private Limited to -Sudarshan Pharma Industries Private Limited under the Companies Act, 2013 pursuant to a special resolution passed by its shareholders at the EGM held on November 25, 2016 and vide certificate of incorporation dated December 17, 2016 issued by the Registrar of Companies,Mumbai. Thereafter, the Company was converted in to a public company pursuant to a special resolution passed by its shareholders at the EGM held on December 12, 2016 and consequently name was changed to-Sudarshan Pharma Industries Limited (SPIL) vide fresh certificate of incorporation dated January 15, 2017 issued by Registrar of Companies, Mumbai.</p><p align="justify">The company is engaged in Contract Manufacturing, outsource &amp; Supply of Generic Pharma formulation and medicines to healthcare institution, Government, NGO and Hospitals. It outsource its manufacturing facility, deal in Import and Exports, indenting and Supply in Specialty chemicals, API &amp; its intermediate. As per the clients need and requirement, it provides order and gets them manufactured from various suppliers in India and abroad regularly. Specialty chemicals and Intermediates having wide application in pharma, paint, food and adhesive Industry. It carries out Ethical marketing of Pharmaceutical formulation &amp; products in the Domestic and International market through its own distribution network and Sales force under its own brand.<br></p><p align="justify"></p><p align="justify"><strong>Proceed is being used for:</strong><br></p><ul><li><div align="justify">Setting up a dedicated manufacturing facility,<br></div></li><li><div align="justify">Distribution and warehousing centre's &amp; purchase of corporate office,<br></div></li><li><div align="justify">Additional working capital,<br></div></li><li><div align="justify">General Corporate expenses, and <br></div></li><li><div align="justify">Meeting the epenses of the issue.</div></li></ul><p align="justify"><strong>Industry overview:</strong></p><p align="justify">Specialty Chemicals are a group of relatively high value low volume chemicals, known for its end use performance enhancing applications. They are recognized for -what they do rather than-what they are as in the case of Basic Chemicals. They provide-solutions-to customer applications, are knowledge based and known to deliver much more returns as compared to Basic chemicals. The critical success in this industry depends upon understanding customer‘s needs and product/application development to meet the same at a favorable price performance ratio, Specialty chemicals are mainly used to add value to the finished product, they are primarily sold on a B2B basis. Specialty chemicals can be further divided into various sub-segments on the basis of end-use and application.</p><p align="justify">The Indian specialty chemicals market is smaller than global peers' in most of the sub segments. However, in some sub-segments (such as agrochemicals, colourants, paints &amp; coatings) India accounts of 5%-10% of the respective global market sizes. India is also one of the largest exporting countries for agrochemicals and colourants, and has significantly boosted its market share over the years.</p><p align="justify">Compared to countries like USA or China, the current penetration of specialty chemicals is low (e.g. construction chemicals) with an increased focus, improved products and customer awareness, the use of specialty chemicals will increase (e.g. Construction Chemicals, Pesticides use in India).<br></p><p align="justify"></p><p align="justify"><strong>Pros and strengths</strong><br></p><p align="justify"><strong>Wide and diverse range of product offerings:</strong>&nbsp; The company has a wide product portfolio comprising of pharmaceuticals, cosmetics and nutraceutical. At present, it is supplying products in the form of capsules, oral and dry syrups, tablets and liquid injections. It propose to enhance its product basket by introducing OTC products in the segment of lifestyle diseases. It manufacture various types of Pharmaceutical products which are used as Neuro-Psychiatric drugs and other drugs that are used for the treatment of Pain management, Orthopedic treatment, Iron Deficiency Anemia (IDA) Constipation, Erectile dysfunction, Respiratory Ailments (Anti Allergic &amp; Bronco Dilatory Drugs). The FDFs manufactured by the company include various therapeutic segments like Anti-Infective, Anti-Ulcer, Antihistamines/Antibiotics, Anti-Hypertensive,Vitamins &amp; Iron Supplements etc.</p><p align="justify"><strong>Strategic Location of Manufacturing Units:</strong> The company has contract manufacturing facility arrangements with four companies to manufacture its formulations. These manufacturing facilities are located in Maharashtra, Uttrakhand, Himachal Pradesh and Gujarat. As regards its Specialty Chemicals and pharma formulation business is concerned, it has regular manufacturers who supply bulk drugs and formulation as per the specific order. The company has selected the contract manufacturing facilities and suppliers as there are strategically located.</p><p align="justify"><strong>Strong sales, marketing and distribution capabilities:</strong> It has been supplying its products Pan India and hence not dependent on any particular region. The company has widespread domestic presence not only mitigates the risk of dependence on a few regions but also helps it to leverage its brand value. It has dedicated sales and marketing team under the -VIMAC Healthcare Division and an extensive domestic distribution network for Pharma business. This division focuses on generating significant demand for its products in India. This division also works on maintaining the existing clients and acquiring new clients for its products.<br></p><p align="justify"></p><p align="justify"><strong>Risks and concerns</strong></p><p align="justify"><strong>Significant portion of revenues comes from few customers:</strong> For financial year ending March 31, 2019, company's major customers have accounted approximately 21.12% of total revenue from operations, respectively. The company has maintained good and longstanding relationships with major domestic and international customers, however, it do not have any long-term contract with either of them.</p><p align="justify"><strong>Not entered into any long-term contracts with suppliers:</strong> The company do not have any long-term contracts with suppliers or customers and any change in the selling or buying pattern of the suppliers or customers could adversely affect the business of the company. </p><p align="justify"><strong>High volume - low margin business:</strong> The company is involved in high volume - low margin business. Any disruption in its turnover or failure to regularly grow the same may have a material adverse effect on its business, results of operations and financial condition. inability to regularly grow its turnover and effectively execute its key business processes could lead to lower profitability and hence adversely affect its operating results and financial conditions. Due to the nature and varied categories of the products the company sell, it may not be able to charge higher margins for its products. Hence, its business model is heavily reliant on its ability to effectively increase sale of value business products and / or grow its turnover and manage its key processes including but not limited to order procurement, timely order execution, effectively delivery monitoring and continuous cost control of non-core activities.<br></p><p align="justify"></p><p align="justify"><strong>Outlook</strong><br></p><p align="justify">Sudarshan Pharma Industries (SPIL) outsources specialty chemicals, intermediates and Active Pharmaceutical Ingredients (API s). It also deals with contract manufacturing. The company operates with a scalable business model as its business model is customer-centric and order driven, and requires optimum utilization of its existing resources, assuring quality supply and achieving consequent economies of scale. The business scale generation is basically due to the development of new markets and products in both domestic and international markets by exploring customer needs, marketing expertise and consistent product quality. On the concern side, the distribution &amp; trading industry is highly competitive, coupled with the large number of players and also the existence of unorganized players. Also, several national and international manufacturers and brand owners have set-up their own distribution arms in India. With the high level of competition, its results of operations are sensitive to, and may be materially and adversely affected by, competitive pricing, services offered, brand recognition and other factors.</p><p align="justify">The company is coming out with a maiden IPO of 34,40,000 equity shares of Rs. 10 each at a fixed price of Rs. 75 per share to mobilize Rs. 25.80 crore. On performance front, SPIL has posted an increase in total revenue during the year 2018-19 at Rs. 13913.02 Lakhs as against Rs 8814.50 lakhs in year 2017-18. It represents increase of 58% of the total revenue. This revenue earned from sales of API, Bulk Drugs, Specialty Chemical and Pharmaceutical formulation products having vast application in pharma and paint industry.While, PAT for Financial Year 2018-19 has increased to Rs 234.79 Lakhs from profit of Rs. 73.98 Lakhs in Financial Year 2017-18. This was mainly due to increased in products mix and additional formulations, sales team, focus on cost cutting and control on quality and material cost &amp; efficiency of staff. The company's business is diversified in terms of geographies and therapeutic areas in the pharmaceutical industry and Specialty Chemicals in the chemical industry. In terms of geographical diversity, it has marked its presence in India and international markets. The company has exported to the UK, Australia, Uzbekistan, Syria, Oman, Taiwan, &amp; MENA Regions. In terms of products, it has multiple brands across various therapeutic areas in the Pharmaceuticals industry and Specialty/Performance-enhancing products in the chemical industry. Its diversified revenue base enables it to mitigate the risk of income concentration by spreading revenue across multiple sources and opens opportunities to new prospects of growth.<strong><br></strong></p>
29-May-2019   17:13 Hrs IST Suich Industries coming with an IPO to raise Rs 30.86 crore
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