Sudarshan Pharma IPO

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Sudarshan Pharma IPO

7.9

Company Background

7.5/10

Price Band

7.5/10

Financial Health

8.0/10

Industry Situation

8.0/10

IPO Proceeds Usage

8.5/10

Pros

  • Strong Financials
  • IPO Proceeds To Be Used in Business Expansion
  • Govt Policies in Favor of the Industry

Cons

  • EPS Value Low
  • Premium Marginally High

Sudarshan Pharma IPO is being seen as one of the most sought-after offerings from the Pharmaceuticals sector in India. This 3,440,000 equity shares sized IPO is going to be launched pretty soon for the retail subscription in the primary stock market. The market lot of the IPO is 1600 equity shares (more numbers later). The Sudarshan Pharma IPO is proposed to be listed in NSE SME.

In this article, we will try to cover all important aspects of Sudarshan Pharma Industries Ltd. such as company background, IPO data points, the financial performance of the business over the last 3 years, comparison with few of its peers, strengths, IPO objectives and more. All these areas very crucial to be known before you take an investment decision in this company.

So, let’s start the discussion with the basics of Sudarshan Pharma IPO:

Sudarshan Pharma IPO Basic Details

Here is the detail of the Sudarshan Pharma IPO basics, which is important to understand before going any further:

 

This SME IPO is a fixed price issue with an issue price of ₹75 and total IPO valuation standing at around ₹26 Crore.

In case you are looking to subscribe to this IPO, you will need to buy a lot of 1600 shares, thereby, an investment of minimum 1,20,000 will be required. You may choose to buy more lots each sized at 1600 shares each.

At the same time, this needs to be known that the current promoters are liquidating their share through this IPO and this is how their stake will stand pre and post IPO subscription:

  • Pre-issue shareholding: 89.29%
  • Post-issue shareholding: 73.51%

Sudarshan Pharma IPO Background

Sudarshan Pharma Industries Limited, established in the year 1984, is a Mumbai based Pharma Company engaged in manufacturing and supply of products such as Pharmaceuticals, fibres, perfumes, pesticides, paints, PVC etc.

The generic products offered by the company has a wide application in different fields such as Pharma, food, paint, Pharma formulation to hospitals and outsourcing as well as the supply of medicines, Healthcare and Government Institutes, NGO etc.

The company supplies its products under the brand name in the form of ointments, Capsules, Tablets, and injectable. It has around 50 pharma formulations.

In total, the business has 5 manufacturing units (Gujarat, Uttar Pradesh, Maharashtra, Chhattisgarh and West Bengal) that are certified by agencies such as FDA, WHO, GMP and more. These units employ around 100 team members that look after various aspects of manufacturing and operations.

The company works with its own sales force and distribution network in 5 states for the marketing of products & Pharmaceutical formulation under its brand name in both India and abroad (UK, Australia, Uzbekistan, Syria, Oman, Taiwan etc.)

So, in a nutshell, the core business of the company is:

  • Pharmaceuticals Formulation
  • Speciality Chemicals, Intermediates, and Active Pharmaceuticals Ingredients
  • Branded Generics

Sudarshan Pharma IPO Data Points

As mentioned above, the issue size of the Sudarshan Pharma IPO will be 3,440,000 equity shares of face value 10 each fully paid that will be aggregated up to 25.08 (75*3,440,000) Crore. It includes 65 premium per share. The issue price of the IPO will be 75 each.

In 3,440,000 equity shares,

  • 1,76,000 equity shares of face value 10 each fully paid is reserved for the market makers (MM) for cash at the price of 75 each aggregating 1,32,00,000
  • 32,64,000 equity shares of face value 10 each fully paid is reserved for the public for cash at the price of 75 each aggregating 24,48,00,000
    • Retail investor portion: 16,32,000 equity shares of face value 10 each fully paid for the cash at 75 each aggregating 12,24,00,000
    • Non-Retail investor’s portion: 16,32,000 equity shares of face value 10 each fully paid for the cash at 75 each aggregating 12,24,00,000

Total outstanding equity shares prior to the issue is 95,46,998 equity shares. However, the total outstanding equity share after the issue will be up to 1,29,86,9998 equity shares of 10 each.

The market lot size of the IPO will be 1600 equity shares and it will be listed on the National stock exchange (NSE) under Small &Medium Enterprises (SME).

The stake of the promoter’s & associates post IPO will be 73.51% (26.49% dilution).

Sudarshan Pharma IPO Financial performance

To understand the financial health and growth prospect of the company, it is very important to analyze the financial data of the company. This becomes even important when you are investing in that company.

Here is the quick look at the financial health of Sudarshan Pharma before you decide to invest in Sudarshan Pharma IPO:

 

Earnings per Equity share (In Lakhs)

From the above table, it can be observed that the total asset and the total revenue of Sudarshan pharma have been increasing over the last few years i.e from March 2016 to March 2019 which implies the profit after tax has also been increasing over the mentioned period.

It shows a healthy financial position of the company. Hence an investor can choose to invest in Sudarshan Pharma IPO.


Sudarshan Pharma IPO Peers comparison

Before deciding to invest in any company, it also makes a sense to compare the company’s financial positions with the peer companies existing in the market. This comparison works like a yardstick to measure the present and future potential of the company to be invested in.

In the case of Sudarshan Pharma, the peers to compare with are as follows:

 

This is not just the data, it throws a light on the Financial Stability of peers as well as our company. If the EPS of a company is higher than its peers, it shows two important things for the investors.

The first one is that the company will be able to share out its earnings to the shareholders and the second is the company can reinvest in its business for the further growth of the company.

Here in the case of Sudarshan Pharma, EPS is lower than its peers and it is an area where the business can improve.

Again, if we talk about RONW, it shows the return capability of a company on the capital employed or the amount invested. However, to get the result from this number alone is not possible. The higher the percentage of RONW, the better.

In the case of Sudarshan Pharma, the RONW is the best among the above peers and it is a very good indication of growth for the investors.

Similarly, the PE Ratio stands competitive as well.


Sudarshan Pharma IPO Objectives

The net proceeds from the issue of the Sudarshan Pharma IPO are proposed to be used by the company in the following objects:

  • The first objective is to set up a new and dedicated manufacturing facility for the pharmaceutical business of the company
  • To invest in setting up the distribution and warehousing centre and to ensure that the business runs smoothly. Also, the proceeds will be used for the purchase of Corporate office
  • For the requirement of additional working capital within the company
  • To meet the general corporate expenses of the firm along with the expenses on advertising and sales promotion of the business
  • To meet the expenses incurred of the equity share issue

Distribution of total proceeds among the different objectives of the Equity share issue of the company:

So, what do we understand from this bifurcation of proceeds?

This tells us that the company is primarily looking to expand its business and wants to invest a major chunk of its capital raised into future growth.

Investing in such a model does not look a bad bet at all!


Sudarshan Pharma IPO Strengths

The strength of the company tells us about the future prospect of the firm. As we have seen the financial and competitive performance of the business, let’s have a quick look at some of the areas where the business stands strong.

Here is a look at some of the strengths of Sudarshan Pharma IPO:

  • The Company runs its business according to the demand and convenience of customers. In other words, it uses a customer-centric business model
  • The Sudarshan Pharma offers a wide range of products to the clients so that they can get most of the products under one roof
  • The company has a strong sales and marketing team that spreads the business all over the country along with a strong distribution network
  • The company operates through diversified operations

Sudarshan Pharma IPO Recommendation

From the above discussion, it is clear that the company has various competitive advantages. It includes its wide range of products, research and development facility of the company, and the strong distribution, sales and marketing network.

If we talk about the industry, India is the largest provider of generic medicine. And by running its business in this industry, Sudarshan Pharma is taking advantage of growth opportunity. This needs to be known that the government policies in this industry are business friendly as well.

Sudarshan Pharma has a strong and impressive balance sheet and also has healthy profit & loss account growth. It means the financials of the company is strong enough to run the business in the long-term.

The company adopts the best practice in the industry with the adherence of the highest benchmark of corporate governance. So, all together it gives a positive response to the stakeholders.

So, after considering its strong financial record and its positive points, an investor can subscribe to the Sudarshan Pharma IPO for the long-term investment view. There could be a few potential short-term gains as well, but the business certainly looks lucrative from a long-term investment perspective.

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Sudarshan Pharma IPO Management information

SPIL is promoted by Mr Hemal V. Mehta and Mr Sachin V. Mehta. The combined experience of these two is more than 25 years in the field of Pharmaceuticals, Bulk Drugs, and Specialty Chemicals. They both are the pillars of the company and have done a lot for the company.

Currently, the company has a total of six members on the Board of Directors. Below is the list of their name and designation in the Sudarshan Pharma Industries Ltd.

  • Mr Hemal V. Mehta (Chairman and Managing Director): He has over 15 years of experience in the supply and sourcing of Specialty chemicals, intermediates, API
  • Mr Sachin V. Mehta (Joint Managing Director): He is responsible for look after the new Chemicals Entities and R&D
  • Mr Chetan Kantilal Mehta (Director): He has expertise in Financial Re-engineering. He also has more than 27 years of experience in the Capital Market
  • Dr Ujwala Vilas Salvi (Independent Director): Dr Salvi has more than 15 years of experience in the field of Pharma
  • Mr Sandeep Rameshchandra Mehta (Independent Director-Non-executive): He has more than 12 years of experience in dealing with large Pharma Companies
  • Mr Hetang Shah (Independent Director): He worked as a management consultant in the field of Banking, IT, Pharma and healthcare. He holds 15 years of experience

Sudarshan Pharma IPO Lead Managers

The ’First Capital Overseas Ltd.’ is the Merchant Banker of the Sudarshan Pharma IPO and Karvy Fintech Pvt. Ltd. is acting as the Registrar of the company’s IPO issue.

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