Tarsons Products IPO  Fundamental Analysis

Key Business Highlights

  • Incorporated in the year 1983, in West Bengal; Tarson (the Issuer) is an Indian labware company.
  • The Issuer manufactures a range of quality labware products that helps advance scientific discovery and improve healthcare.
  • As of June 30, 2021, Tarson has a diversified product portfolio with over 1,700 SKUs across 300 products.
  • Currently operates through five manufacturing facilities located in West Bengal. These facilities are vertically integrated and equipped with automated support systems which helps maintain quality, increase productivity, and reduce costs.
  • The Issuer caters to a diverse range of end customers across various sectors which include research organizations, academic institutions, pharmaceutical companies, CROs, diagnostic companies, and hospitals.
  • The company supplies products to 40 countries across both developed and emerging markets through a blend of branded and ODM sales. The overseas sales in FY21 accounted for Rs 75.59 crore representing 33.02% of revenue from operations.
  • The product portfolio is classified into three key categories:
    • Consumables - includes products such as centrifuge ware, cryogenic ware, liquid handling, PCR consumables, and petri dish, transfer pipettes, and others.
    • Reusables - includes products such as bottles, carboys, beakers, measuring cylinders, and tube racks.
    • Others - include benchtop instrumentation such as vortex shakers, centrifuges pipettors, and others.

Some of the end customers include Indian Institute of Chemical Technology, National Centre for Biological Sciences across academic institutes and research organizations; Dr Reddy's Laboratories, Enzene Biosciences across pharmaceutical sectors; Syngene International, Veeda Clinical Research across CROs; and Molbio Diagnostics, Agappe Diagnostic, Metropolis Healthcare, Dr. Lal Path Labs, Mylab Life Solutions across other sectors such as diagnostics.

Financial Review of Tarsons Products

An increasing trend can be seen in the financial performance of the company in terms of margins and revenues. The total revenues for Q1FY21 were Rs 71.13 crore and Tarson posted PAT of Rs 24.84 crore. The consolidated revenues increased to Rs 234.29 crore in FY21 from Rs 180.05 crore (standalone) in FY20. The Issuer recorded PAT of Rs 68.87 crore in FY21 and Rs 40.53 crore in FY20. Profitability margins have been strong throughout the three fiscals as can be seen from the table below. It should be noted that the revenues have also increased due to the covid benefit effect with increased demand of labware during the pandemic.

Return on net worth is 28.91, 20.51% and 28.80% in FY21, FY20 and FY19 respectively. Debt to equity was 0.26 as on Q1FY22.

Table 1 - Financials and Ratios (Amount in Rs Crore)
Title Q1FY22 FY2021 FY2020 FY2019
Total Revenue 71.13 234.29 180.05 184.72
Other income 1.98 5.38 4.15 5.97
PAT 24.84 68.87 40.53 38.96
EBITDA 38.74 108.81 73.4 77.64
Total Assets 364.77 295.95 248.71 211.96
Cash from operations 27.31 92.22 79.54 68.37
EBITDA Margin 54.46% 46.44% 40.77% 42.03%
Net Margin 34.92% 29.40% 22.51% 21.09%

Valuation and peer comparison

The Issue is priced at 33.91 at annualized EPS of 19.52 calculated at the upper price band of Rs 662 per share. P/BV is 12.54x at NAV of Rs 52.80 as of the end of Q1FY22. There are no peers of the Issuer as per the RHP.

Issue Details

Tarson products IPO opens on 15 Nov with a fresh issue of Rs 150 crore and offer for sale of 1.32 crore shares. The price band is Rs 635-662 per share; the fresh issue proceeds would be utilized towards repayment of certain borrowings (Rs 78.54 crore) and funding CAPEX for the proposed expansion (Rs 62 crore). The Issue closes on 17 Nov and would list on 26 Nov 2021.

Conclusion and Investment Strategy

The life sciences industry is growing at a decent pace on account of advancements in the field of scientific research. Laboratories serve as multipurpose research facilities that host several types of testing mechanisms, novel developments, and research analogies. The need for various types of equipment across laboratories and the increasing trend of research-based studies is driving the global demand for laboratory equipment. The global laboratory equipment market is expected to register a growth of 4.90% CAGR from 2020 to 2025 to reach USD 20.5 billion by 2025 from USD 16.2 billion in 2020.

Tarson has a good financial profile with strong revenue growth and profitability margins. The challenges that the Issuer may face are over the sustainability of margins post-pandemic and greater proportion of offer for sale which puts concerns over its growth prospects. Hence an investor may subscribe for the short to medium term.

Reviewer recommends Subscribing to the issue.

Review By CA Priyanka Choudhary on 8th Nov 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.

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