Dipna Pharmachem coming with an IPO to raise upto Rs 15.20 crore

Dipna Pharmachem

• Dipna Pharmachem is coming out with an initial public offering (IPO) of 4002000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 38 per equity share.
  
• The issue will open on August 25, 2022 and will close on August 30, 2022.
  
• The shares will be listed on SME Platform of BSE.
  
• The share is priced 3.80 times higher to its face value of Rs 10.
  
• Book running lead manager to the issue is Interactive Financial Services.
  
• Compliance Officer for the issue is Khushboo Jethaliya.
  

Profile of the company

The company is engaged in the trading and distribution of wide range of pharmaceutical raw material which is also known as APIs (Active Pharmaceutical Ingredients), Excipient and chemical formulation products. Presently its product portfolio comprises of 61 AIPs and AIPs intermediates such as Cephalosporins, Cardiovasculars, Anti - Bactaria, Quinolones, Veterinary, Anti - Virus, Anti - Inflammatory, Neuropsychiatry, Steroid Hormone, other etc. Being a trading and distribution company, it has pan India market for its products. The company had also started the selling of chemicals on commission basis. In the financial year 2022, the company had earned commission income of Rs 127.50 lakh. The company is doing trading in Ahmedabad and surrounding area of Ahmedabad.

Proceed is being used for:

• Working capital requirement.
  
• General corporate purpose.
  
• Meeting public issue expenses.
  

Industry overview

The Indian Pharmaceuticals industry plays a prominent role in the global pharmaceuticals industry. India ranks 3rd worldwide for production by volume and 14th by value. The nation is the largest provider of generic medicines globally, occupying a 20% share in global supply by volume, and is the leading vaccine manufacturer globally. India also has the highest number of US-FDA compliant Pharma plants outside of USA and is home to more than 3,000 pharma companies with a strong network of over 10,500 manufacturing facilities as well as a highly skilled resource pool. The pharmaceutical industry in India offers 60,000 generic brands across 60 therapeutic categories. Major segments include generic drugs, OTC Medicines, API/Bulk Drugs, Vaccines, Contract Research & Manufacturing, Biosimilars and Biologics.

Indian pharmaceutical industry is known for its generic medicines and low-cost vaccines globally. Transformed over the years as a vibrant sector, presently Indian Pharma ranks third in pharmaceutical production by volume. In the last nine years, Indian Pharma sector has grown steadily by CAGR of 9.43%. Pharma sector has been consistently earning trade surplus. During 2020-21, total pharma export was Rs 180555 crore ($24.35 billion) against the total pharma import of Rs 49436 crore ($6.66 billion), thereby generating trade surplus of $17.68 billion. Till end September 2021, total pharma export has been Rs 87864 crore ($11.88 billion) as against total import of Rs 33636 crore ($4.66 billion), thereby generating a trade surplus of Rs 54228 crore ($7.22 billion). Major segments of Indian Pharmaceutical Industry include generic drugs, OTC medicines, bulk drugs, vaccines, contract research & manufacturing,biosimilars and biologics.

Pros and strengths

Diversified product portfolio: The company has diverse product portfolio across various segments to fulfil customer‘s requirements. Its offerings include wide range of pharmaceutical raw material which is also known as APIs (Active Pharmaceutical Ingredients) and chemical formulation products. It supplies products on the basis of needs and requirements in the market. Its product range in formulations allows its existing customers to source majority of their product requirements from it and also enables it to expand its business from existing customers as well as address a larger base of potential new customers.

Quality service: The company has set very high standards for itself when it comes to timeliness and quality of service it provide to its customers. The stringent systems ensure that all the products reach its customers on stipulated time and there are minimum errors to ensure reduced product rejection. Its quality service for the last 2 decades has earned it a goodwill from its customers, which has resulted in customer retention and order repetition. It has also helped it to add to its existing customer base. It has developed internal procedure of checking the client orders at each stage from customer order to delivery. The company focuses on maintaining the level of consistently in its service, thereby building customer loyalty for its Brand.

High level of customer satisfaction: The company’s customers are highly satisfied with its services from purchase order to quality to delivery to customer complain redressal mechanism. It has been able to achieve this customer satisfaction with the help on timely deliveries, ease of placing orders, and its stellar customer services.; this has helped in creating a customer base from various categories such as retailers, semi-wholesalers, etc.

Risks and concerns

No long term supply agreements with its vendors/suppliers: The company does not have written agreements with its vendors/suppliers and it operate on a purchase order system. There are no long term supply agreements for the trading material. In absence of any such formal contract with its vendors/suppliers, it is exposed to the risks of irregular supplies or no supplies at all or delayed supplies or price variation which would materially affect its results of operations. In the event of any disruption in the supply or the non-availability of material in the required quantity and of required quality from alternate source, the supply schedule to its clients may be adversely be affected impacting the sales and profitability of the Company.

Increased competition for skilled employees: Due to pandemic situation there is sizable growth in Indian pharmaceutical industry and increased competition for skilled employees in India over the last two years, wages of skilled employees are increasing at a fast rate. Accordingly, it may need to increase its levels of employee compensation rapidly to remain competitive in attracting the quality of employees that its business requires. Salary increases may reduce its profit margins and have a material and adverse effect on its results of operations.

Avails various credit facilities from Bank and Financial Institutions: The company has availed various working capital facilities from the Indusind Bank. As a part of the conditions, during currency of the Bank‘s credit facilities, the borrower shall not without prior approval of the Bank in writing effect changes in their capital structure, shall not pledge shares held by promoters, formulate any scheme of amalgamation/ reconstruction, undertake new project/scheme, Declare dividend, grant loan to promoters/Directors. These covenants may have an adverse effect on the functioning of the Company.

Outlook

Incorporated in 2011, Dipna Pharmachem is engaged in the trading and distribution of a wide range of pharmaceutical raw materials which is also known as APIs (Active Pharmaceutical Ingredients), Excipient and chemical formulation products. The company also started selling chemicals on a commission basis in the Financial year 2022. The company conducts business in Ahmedabad and the surrounding area of Ahmedabad. The company's product portfolio comprises 61 AIPs and AIPs intermediates such as Cephalosporins, Cardiovascular, Anti - Bacteria, Quinolones, Veterinary, Anti - Virus, Anti - Inflammatory, Neuropsychiatry, Steroid Hormone, other etc. The company’s customers are highly satisfied with its services from purchase order to quality to delivery to customer complain redressal mechanism. It has been able to achieve this customer satisfaction with the help on timely deliveries, ease of placing orders, and its stellar customer services.; this has helped in creating a customer base from various categories such as retailers, semi-wholesalers, etc. On the concern side, as a part of its trading activity, sometimes the company may require to import materials from foreign countries for which it has to make payment in foreign currency. It has to face the foreign exchange fluctuation risk. Besides, the company does not have long term contracts with most of its customers and there can be no assurance that it will continue to receive repeat orders from all or any of them, including its longstanding customers.

The company is coming out with a maiden IPO of 4002000 equity shares of Rs 10 each at a fixed price of Rs 38 per share to mobilize around Rs 15.20 crore. On performance front, in the FY22, the company's total revenue was Rs 7275.54 lakh, which is increased by 134.70 % in compare to FY21 total Income of Rs 3099.99 lakh. Profit after Tax (PAT) is Rs 116.69 lakh for the FY22 in compare to Rs 2.42 lakh in FY21. Meanwhile, the company plans to increase its customers base by supplying orders in hand on time, maintaining and renewing its relationship with existing clients. It is focused on dealing in the products which meets with the requisite quality standards as per the applicable regulatory norms. Providing the desired and good quality products help it in enhancing its image and maintaining long term relationships with customers.