Windlas Biotech IPO Financial Analysis (Subscribe for Long Term)

Key Business Highlights

Windlass Biotech (the Issuer) provides a comprehensive range of CDMO services ranging from product discovery, product development, licensing, and commercial manufacturing of generic products, including complex generics.
The majority of revenues (85%) is contributed by the CDMO Services and Products SBV segment which provides products and services across a diverse range of pharmaceutical and nutraceutical generic products for Indian and multinational pharmaceutical companies who market such products under their own brand names to the end-users. The other two segments are trade generic products, OTC brands, and export SBV segment.
The Issuer owns and operates four manufacturing facilities located at Dehradun in Uttarakhand.
Long-term relationships with leading Indian pharmaceutical companies, including Pfizer Limited, Sanofi India Limited, Cadila Healthcare Limited/ Zydus Healthcare Limited, Emcure Pharmaceuticals Limited, Eris Lifesciences Limited, Intas Pharmaceuticals Limited, and Systopic Laboratories Private Limited.

Windlas Biotech Financial Review

The top line of the company is showing an uptrend, the total revenues for FY21 increased to Rs 430.7 crore from Rs 331.34 crore for FY20. The total revenue for FY19 was Rs 311.53 crore. PAT has slightly declined to Rs 15.57 crore from Rs 16.21 crore. Some volatility can be seen in the profitability margins of the Issuer. Net margins have been affected due to the impairment of goodwill in FY21. The company has undertaken divestment (in FY19) and reacquisition (FY20) of its subsidiary, Windlas Healthcare and thus the company has few adjustments in its financials like impairment of goodwill, gain/loss in a joint venture, and associate company.

Debt to equity is 0.26 as of 31st March 2021. Return on net worth is 18.19%, 8.04% and 8.97% for FY21, F20, and FY19 respectively.

The company has no peers as per the RHP.

Table 1 - Financials and Ratios (Amount in INR Crore)
Particulars	FY21	FY20	FY19
Total Revenue	430.7	331.34	311.53
PAT	15.57	16.21	63.82
EBITDA	54.53	33.96	38.643
Total Assets	296.12	338.49	298.18
Cash and Bank	31.11	18.39	13.20
Net cash flow from operations	11.45	25.01	18.65
EBITDA Margin	12.66%	10.25%	12.40%
Net Margin	3.62%	4.89%	20.49%

Valuation

The Issue is priced at 52 times its earnings (EPS of Rs 8.7 per share) at an upper price band of Rs 460 per share. P/BV is 4.21x at NAV of Rs 109.36 as of 31st March 2021.

Conclusion

Windlas Biotech is amongst the top five players in the domestic pharmaceutical formulations CDMOs in terms of revenue. The Issuer has a long-standing relationship with the leading Indian pharmaceutical companies.

CDMOs have seen significant acceptance in the pharmaceutical industry internationally over the last few years as large pharmaceutical players focus on cutting costs and optimizing operations. The company focuses to grow by leveraging the leadership position in the CDMO industry and outsourcing. The Issuer has plans to invest Rs 49 crore as CAPEX to foray into injectable business. The financial track record of the company is yet to be seen and the Issue appears to be aggressively priced. The domestic formulations industry is highly fragmented in terms of both, number of manufacturers and products, with 300 to 400 organized players and approximately 15,000 unorganized players. Thus, one may subscribe for the long term.

Reviewer recommends Subscribe for Long Term to the issue.

Review By CA Priyanka Choudhary on 26th Jul 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]

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