Nureca Limited IPO Financial Analysis (Avoid)

Nureca Ltd Business Overview

Incorporated in the year 2016, Nureca is a B2C company engaged in the business of home healthcare and wellness products offering quality, durability, functionality, usability, and innovative designs. The company markets and sell the products across India through their own website i.e. drtrust.in and third-party e-commerce platforms, distributors, and retailers. Currently, 95% of revenues for Nureca come through digital channels (eCommerce). Dr Trust is known for its innovative products in the market.

Nureca, in October 2019, has entered into a tie-up with Croma, to sell healthcare and wellness products through Croma stores. As part of this tie-up, the company would sell products from its Dr Trust and Dr Physio brands at 30 Croma stores across the country.

Though the company has a manufacturing facility at Chandigarh with 20% utilization, the company majorly outsources the manufacture to certain foreign vendors and certain vendors in India.

The product portfolio can be divided into:

Chronic Device Products like blood pressure monitors, pulse ox meters, and others.
Orthopedic Products – which includes wheelchairs, walkers, and others
Mother and Child Products like bottle sterilizers, bottle warmers, car seats.
Nutrition Supplements and lifestyle products.

Financial Review of Nureca Ltd

Nureca posted total revenue of Rs 122.97 crore in H1FY21 and earned PAT of Rs 36.18 crore for the corresponding period. Revenues show an increasing trend in the last three fiscals. Revenues increased by 60% to Rs 99.49 crore in FY20 against Rs 61.98 crore in FY19. In FY19, revenues rose 200% to Rs 61.98 crore when compared to Rs 20.07 crore in FY18. PAT was Rs 6.40 crore, Rs 6.23 crore, and Rs 3.11 crore for FY20, FY19, and FY18 respectively. But however, PAT has not increased considerably during the three preceding years. This is because of the considerable increase in the employee benefit-cost and other expenses of the company.

When compared to the last three fiscals, Nureca reported a significant increase in profits to Rs 36.18 crore for the six months ended 30^th Sep 2020.

Return on net worth was 42.84%, 78.36%, and 180.81% for FY20, FY19, and FY18 respectively. The key financials can be seen in the table below.

Table 1 - Nureca Ltd Financials and Ratios (Amount in Rs Crore)
Title	H1FY21	FY2020	FY2019	FY2018
Total Revenue	122.97	99.49	61.98	20.07
Revenue from operations	122.15	99.43	61.9	20.05
PAT	36.18	6.40	6.23	3.11
EBITDA	50.06	9.75	9.14	4.39
Total Assets	102.49	33.88	23.52	7.02
Cash and Bank	55.24	0.07	0.11	0.07
Cash flow from operating activities	56.25	-7.92	-0.31	0.09
Operating Margin	40.98%	9.81%	14.77%	21.88%
Net margin	29.42%	6.43%	10.05%	15.50%

Nureca Ltd Valuation and peers comparison

The company has no listed peers as per the RHP though it operates in a very competitive environment with the presence of unorganized players. The company appears to be attractively priced at a P/ BV of 0.03 with a NAV of Rs 14934 at an upper price band of Rs 400.

Future Outlook and Conclusion

Nureca offers product lines supporting the home health market in India, making it a one-stop solution provider. Dr Trust is known for its innovative products in the market. The segment shows potential for growth but it is offset by the fact that the market is fragmented and unorganized. The company competes with local and global companies operating in India. There are over fifty players like Omron, Philips, Johnson and Johnson, Roche, Bayer competing on technological advances, features, and competitive pricing.

Also, the surge in profits in the IPO year raises a major concern of sustainability of revenues in the future. Operating and the net margins also show a declining trend in the last three fiscals. Though the issue is attractively priced but considering the competitive and sustainability challenges that Nureca might face; investors may give a miss to this IPO.

Reviewer recommends Avoid to the issue.

Review By CA Priyanka Choudhary on 8th Feb 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.