Amkay Products coming with IPO to raise upto Rs 12.61 crore

Amkay Products 

• Amkay Products is coming out with initial public offering (IPO) of 22,92,000 shares of Rs 10 each in a price band Rs 52-55 per equity share.  
• The issue will open for subscription on April 30, 2024 and will close on May 03, 2024.
• The shares will be listed on BSE SME Platform.
• The face value of the share is Rs 10 and is priced 5.20 times of its face value on the lower side and 5.50 times on the higher side.
• Book running lead manager to the issue is Hem Securities.
• Compliance Officer for the issue is Krishna Rathi.

Profile of the company

Amkay Products manufactures, assembles & markets a comprehensive portfolio of medical devices, disposables and other Healthcare Products like Face Mask, Alcohol Swabs, Lancet Needles, Nebulizer, Pulse Oximeter, surgeon cap etc. used by healthcare centers, hospitals/clinics, nursing homes etc. widely spread across India. In addition, it is also engaged in branding and marketing of some of the products like Diapers, Plastic Gloves, Suction Machines etc. The company started its operations in year 2008 with manufacturing and supply of one product in a manufacturing unit taken on rent at Vasai in Mumbai. Gradually, more products were added to its portfolio & for further product expansion, over the period, it shifted to bigger manufacturing units from where it entered into branding & trading segment also along with manufacturing. The company’s product portfolio comprises of many product including Respiratory Disease Related Medical Devices, Surgical Disposables, Home Healthcare Products and Other Healthcare Products.

Its manufacturing facilities are equipped with requisite infrastructure including machineries, testing laboratory other handling equipment to facilitate smooth manufacturing process. Further, the company has accreditation with ISO 9001:2015 for quality management system from QRO Certification LLP. The company was founded in the year 2007 by one of its Promoters, Kashyap Pravin Mody, who has experience in the associated industry. Later, in 2011, Hemanshu Kantilal Batavia joined the company as Director who has an experience in the said industry. Its promoters are involved in the critical aspects of its business, including expansion, process and plant, finance, sales and marketing. Their understanding of the consumer difficulty, intuitive entrepreneurship and involvement in key aspects of its business has helped accelerate and drive its profitable growth.

Proceed is being used for:

• Funding capital expenditure towards installation of additional machinery.
• Meeting working capital requirements.
• General corporate purpose. 

Industry overview

The healthcare and medical device sectors in India have grown significantly in the last decade. A wide range of medical devices, from consumables to implantable medical devices, are produced in India. The majority of medical devices manufactured in India are disposables like catheters, perfusion sets, extension lines, cannulas, feeding tubes, needles, and syringes, as well as implants like cardiac stents, drug-eluting stents, intraocular lenses, and orthopaedic implants. The medical devices sector is highly capital intensive, and also requires continuous training of the healthcare system providers to adapt to new technologies. 

The medical devices sector in India comprises large multinationals, small and midsized companies. The size of the Indian medical devices market is estimated at Rs 90,000 crore (in 2022 and is expected to grow to $50 billion by 2030 with a CAGR of 16.4 %. The Indian medical device market share in the global market is estimated to be 1.65%. India is the 4th largest Asian medical devices market after Japan, China, and South Korea, and among the top 20 medical devices markets globally. Between 2020-30, the diagnostic imaging market is likely to expand at a CAGR of 16.4%. Export of medical devices from India stood at Rs 19, 803 crore in FY22. The exports of medical devices during April-December, 2022 stood at Rs. 20,511 crore, and are expected to rise to $10 billion by 2025. 

Policy makers in India will need to set out an action plan to reduce the country’s dependency on medical devices/technology imports. At present, NITI Aayog is reportedly drawing up a strategic road map for medical devices. Over the next few years, India might grow into a $50 billion market for medical devices. In BioAsia 2021, key stakeholders in the panel discussion on medical technologies predicted that India would become selfsufficient in domestic medical devices manufacturing by 2025-26. The panel observed that the government is taking supportive measures such as promoting indigenous manufacturing of high-tech medical devices, production-linked incentive schemes (PLIs) on medical devices, boosting new medical devices parks, etc. to boost the overall growth of the domestic medical devices market in India.

Pros and strengths

Strong portfolio and diverse range of products across consumer preferences: The company has diverse product portfolio across various segments of medical device and disposables catering to respiratory disease, home healthcare products and surgical disposables to fulfil customer’s requirement. It deals in a wide range of products, which enables the company to cater widespread customer base across India and also expand its reach in international locations like Bhutan, Nepal & Qatar.

Diversified revenue from multiple geographies: The Company has diversified revenue from multiple geographical locations across India and from places outside India. Most of its revenue is derived from Sales within India which is around 99.60%, 98.95%, 98.96% & 99.27% respectively, for the period ending December 31, 2023 and year ended March 31, 2023, March 31, 2022 & March 31, 2021. For the period ending December 31, 2023 and financial year ended March 31, 2023, March 31, 2022 & March 31, 2021 respectively, it has generated around 71.49%, 71.51 %, 70.23% and 78.25% of its total revenue from sales in top 10 geographical regions in India.

Extensive network of dealers covering major parts of India: The growth in its business operations have been made possible by its wide dealer network covering major parts of India. It sells its products through a network spread across India, it works with various dealers depending on their geographical reach, market knowledge, product and customer awareness as well as understanding of Healthcare Industry. Its sales & distribution network is aided by its capable in house sales and marketing team, which liaise with the dealers on a regular basis for customer inputs, market Amkay Products as well as positioning of its products vis-a-vis products of its competitors. Maintaining strong relationships with its dealers are essential to its business strategy and to the growth of its business. It continually strives to maintain strong relationships with its dealers in order to have uninterrupted supplies of its products to them and retain them for a long period of time.

Risks and concerns

Depend on third parties to manufacture some of products: Its business model depends on external manufacturers for some of its products. If these entities decline production, fail to comply with regulations, or miss its standards, its business is at risk. This highlights the importance of meticulous third-party selection, stringent quality control, and consistent communication. Generally, it does not have long-term contracts with its vendors committing them to supply products to the company. If its vendors are unable to manufacture its products in sufficient quantities and on a consistent basis, or if it becomes unwilling to produce that product for the company, it may not be able to supply its customers in a timely manner. 

High working capital requirements: Its business requires significant amount of working capital and major portion of its working capital is utilized towards inventories and trade receivables. Its growing scale and expansion, if any, may result in increase in the quantum of current assets. Its inability to maintain sufficient cash flow, credit facility and other sources of funding, in a timely manner, or at all, to meet the requirement of working capital or pay out debts, could adversely affect its financial condition and result of its operations.

Dependent upon few customers: Since it is dependent on certain key customers for a significant portion of its sales, the loss of one or more of such customers or a reduction in demand from such customers, for any reason, including due to loss of contracts, delay in fulfilling existing orders, failure to negotiate or agree upon acceptable terms in negotiations, disputes or a loss of market share or a downturn in the spending on healthcare by them, if not suitably replaced with another customer, could adversely affect its business, financial condition and results of operations. Its revenues and profitability may also be adversely affected if there’s a significant reduction in the volume of its business with such customers, or if its customers prefer its competitors over it, and it may not remain the preferred products and solutions provider for certain of its customers.

Outlook

The company manufactures, assembles & markets a comprehensive portfolio of medical devices, disposables and other Healthcare Products like Face Mask, Alcohol Swabs, Lancet Needles, Nebulizer, Pulse Oximeter, surgeon cap etc. used by healthcare centers, hospitals/clinics, nursing homes etc. widely spread across India. In addition, it is also engaged in branding and marketing of some of the products like Diapers, Plastic Gloves, Suction Machines etc. On the concern side, its business model depends on external manufacturers for some of its products. If its vendors are unable to manufacture its products in sufficient quantities and on a consistent basis, or if it becomes unwilling to produce that product for the company, it may not be able to supply its customers in a timely manner.

The company is coming out with an IPO of 22,92,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 52-55 per equity share. The aggregate size of the offer is around Rs 11.92 crore to Rs 12.61 crore based on lower and upper price band respectively. On performance front, total income for the financial year 2022-23 stood at Rs 2825.05 lakh whereas in Financial Year 2021-22 the same stood at Rs 3679.45 lakh representing a decrease of 23.22%. The Company reported Restated profit after tax for the financial year 2022-23 of Rs 151.02 lakh in comparison to Rs 146.71 lakh in the financial year 2021-22. The increase of 2.94% was mainly due to decrease in the cost as nationwide Covid effect was neutralized and purchase of stock in trade and other expenses decreased. Meanwhile, it intends to cater to the increasing demand of its existing customers and also to increase its existing customer base by enhancing the reach of its products in different parts of the country and outside country. The company has constantly expanded the dealers network across the country and this continues to be one of the core strategies of the Company to further expand the dealers network. Having a wider product portfolio provides confidence to new dealers to engage with the company.