Supriya Lifescience IPO Fundamental Analysis (Subscribe)

Key Business Highlights

Incorporated in the year 2008, Supriya Lifescience is an Indian manufacturer and supplier of active pharmaceuticals ingredients (APIs), with a focus on research and development.
The company product profile comprises 38 APIs focused on diverse therapeutic segments such as antihistamine, analgesic, anesthetic, vitamin, anti-asthmatic and antiallergic. The Issuer has consistently been the largest exporter of Chlorpheniramine Maleate and Ketamine Hydrochloride from India, contributing to 45-50% and 60-65%, respectively, of the API exports from India, between Fiscal 2017 and 2021. The Issuer is also an exporter of Salbutamol Sulphate in India contributing to 31% of the API exports from India in FY 2021 in volume terms.
The customers include global pharma companies such as Syntec Do Brasil LTDA, American International Chemical Inc, and AT Planejamento E Desenvolvimento De Negocios Ltda, with whom the company has had a business relationship for over nine years, and Suan Farma Inc, Acme Generics LLP, Akum Drugs Ltd, and Mankind Pharma Ltd.
Export sales accounted for 70.96%, 71.85%, 77.47%, and 73.57%, respectively of revenue from operations for FY19, FY20, FY21, and H1FY22 respectively.
The Issuer has a manufacturing facility located in Parshuram Lote, Maharashtra, which is approximately 250 km from Mumbai, Maharashtra. The manufacturing facility is spread across 23,806 sq. mts, having a reactor capacity of 547 KL/ day and seven cleanrooms. To expand its manufacturing infrastructure, the Issuer has acquired a plot of land measuring 12,551 sq. mt, near the present manufacturing facility.

Financial Review of Supriya Lifesciences

The financial performance of Supriya Lifescience is strong over the last three fiscals. The Issuer has a good track record of profitability margins. The total revenues for H1FY22 were Rs 230.06 crore and it posted a PAT of Rs 65.96 crore during the same period. The Issuer’s revenues increased 22.78% to Rs 396.22 crore in FY21 from Rs 322.71 crore in FY20. PAT rose 63% to Rs 123.83 crore in FY21 from Rs 73.4 crore in FY20. The profitability margins are strong and show an increasing trend in the last three fiscal as can be seen in the table.

Debt to equity is low at 0.22 as of the end of H1FY22. Return on net worth is 19.70%, 46.04%, 49.20% and 42.03% for H1FY22, FY21, FY20, and FY19 respectively.

Table 1 - Financials and Ratios (Amount in Rs Crore)
Title	H1FY22	FY2021	FY2020	FY2019
Total Revenue	230.06	396.22	322.71	285.86
PAT	65.96	123.83	73.4	39.42
EBITDA	98.67	178.15	109.45	72.76
Total Assets	504.1	445.82	336.43	253.05
Cash generated from operations	15.85	79.93	116.06	48.67
EBITDA Margin	42.89%	44.96%	33.92%	25.45%
Net Margin	28.67%	31.25%	22.74%	13.79%

Valuation and Peer Comparison

The Issue is priced at 15.21x with annualized EPS of 18.02x as at the end of H1FY22 calculated at the upper price band of Rs 274 per share. P/BV is 5.99 at NAV of 45.76 as at the end of H1FY22. The sector P/E is 23.03x which indicates that the Issue is attractively priced. Solara Active, Neuland Lab, Aarti Drugs, Wanbury, and Divis Labs are shown as the listed peers as per the RHP. One can refer to the peer comparison table to know about its peers.

Table 2 - Supriya Lifesciences valuation and peers comparison
Particulars	Solara Active	Neuland Lab	Aarti Drugs	Wanbury	Divis Lab	Supriya Lifesciences
Face value per share	10	10	10	10	2	2
Total Income for FY 21 (Cr)	1645.7	953	2159.3	394.9	7032	396.22
EBITDA margin (FY21)	26.64%	17.38%	20.49%	5.20%	41.93%	42.89%
EPS (As on 9 Dec 21)	69	62.85	30.09	-5.04	74.75	16.92
NAV per share	443.3	613	98	-62.5	350.1	45.76
Return on net worth	13.90%	10.25%	30.70%	8.07%	21.35%	46.04%
P/E (As on 14 Dec 21)	20.31	28.09	24.8	NA	57.84	NA
P/B (As on 14 Dec 21)	2.58	2.62	5.74	NA	13.3	NA
Market price (As on 14 Dec 21)	1143.15	1601.1	565.1	82.3	4654.4	NA

The Issue Snapshot

Supriya Lifesciences IPO opens on Dec 16 with an issue size of Rs 700 crore (fresh Issue Rs 200 crore) with a price band of Rs 262-274 per share. The retail quota is 10% and the minimum application amount is Rs 14796. Proceeds of fresh Issue would be used towards funding CAPEX requirements (Rs 92.30 crore) and repayment/prepayment of certain borrowings (Rs 60 crore). The issue closes on Dec 20 and is expected to list on Dec 28, 2021.

Conclusion and Investment Strategy

Supriya Lifesciences has a well-established presence in API manufacturing, it has a global clientele base with a significant export presence and a low dependence on a specific geography. The financial profile of the Issuer is robust with strong and growing revenue and margins. The company has maintained a healthy leverage profile. Future growth is expected as the Issuer would use the proceeds for further expansion. Further, the Issue is attractively priced, hence looking at the positives one may subscribe to this IPO.

Reviewer recommends Subscribe to the issue.

Review By CA Priyanka Choudhary on 10th Dec 2021

Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.