JFL Life Sciences coming with an IPO to raise upto Rs 18.16 crore

JFL Life Sciences

• JFL Life Sciences has come out with an initial public offering (IPO) of 29,78,000 Equity Shares of face value of Rs 10 each for cash at a fixed price of Rs 61 per equity share.
  
• The issue will open for subscription on August 25, 2022 and will close on August 30, 2022.
  
• The shares will be listed on NSE Emerge Platform.
  
• The share is priced 6.10 times higher to its face value of Rs 10.
  
• Book running lead manager to the issue is GYR Capital Advisors.
  
• Compliance Officer for the issue is Pratima Singh.
  

Profile of the company

Headquartered in Ahmedabad, Gujarat, JFL Life Sciences is engaged in the business of manufacturing of pharmaceutical products. The company is engaged in domestic as well as international business. With market presence in PAN India, products of JFL is supplied to 10 developed and developing countries throughout the World. To maintain its competitiveness and to further the cause of health care JFL has laid a strong R&D foundation and a FDA approved state of the art manufacturing facility near Ahmedabad. It is a manufacturing company, so its sales strategy is to sell its products in bulk to pharmaceuticals marketers and traders who in turn provide the channel for sales to customers. It does not sell it under any brand name and it use the same strategy for both domestic & international market. The company’s major products types are Dry powder injections; Tablets & Capsules (B-Lactam) solid oral dosage form; Tablet and capsules (General); and Oral Rehydration Solutions (ORS).

The company exports its products majorly to African countries, Middle Eastern countries and CIS countries, mainly through merchant exporters. The company is registered with the MOH of Kenya, Nigeria, Yemen, Cambodia & Myanmar for manufacturing of a particular product. Few of its products are also registered with Ukraine, Uzbekistan, Kazakhstan (CIS countries) through merchants.

Proceed is being used for:

• Repayment of secured and unsecured loans.
  
• Funding the working capital requirements of the company.
  
• General corporate purposes.
  

Industry overview

The Indian Pharmaceutical Industry has witnessed a robust growth over the past few years moving on from a turnover of approximately $1 billion in 1990 to over $30 billion in 2015 of which the export turnover is approximately $15 billion. The country now ranks 3rd world wide by volume of production and 14th by value, thereby accounting for around 10% of world’s production by volume and 1.5% by value. Globally, it ranks 4th in terms of generic production and 17th in terms of export value of bulk actives and dosage forms. Indian exports are destined to more than 200 countries around the globe including highly regulated markets of US, West Europe, Japan and Australia. It has shown tremendous progress in terms of infrastructure development, technology base creation and a wide range of products. It has established its essence and determination to flourish in the changing environment.

The industry now produces bulk drugs belonging to all major therapeutic groups requiring complicated manufacturing technologies. Formulations in various dosage forms are being produced in GMP compliant facilities. Strong scientific and technical manpower and pioneering work done in process development have made this possible. Recognizing the potential for growth, the Government of India took up the initiative of developing the Indian Pharmaceuticals sector by creating a separate Department in July 2008. The Department is entrusted with the responsibility of policy, planning, development and regulation of Pharmaceutical Industries. The foreign direct investment (FDI) inflow in the Indian drugs and pharmaceuticals sector stood at $18.12 billion between April 2000 and June 2021. The foreign direct investment (FDI) inflows in the Indian drugs and pharmaceuticals sector reached $130 million between April 2021 and June 2021. In FY21, North America was the largest market for India’s pharma exports with a 34% share and exports to the U.S., Canada and Mexico recorded a growth of 12.6%, 30% and 21.4%, respectively.

Pros and strengths

Experienced management and dedicated employee base:  The company has a seasoned management team with extensive knowledge of the pharmaceutical manufacturing sector. This makes effective operational collaboration and business strategy continuity easier. It can foresee and address market changes, manage and grow its operations, and preserve and leverage client connections thanks to their specific industry experience. Furthermore, the company’s workforce includes experienced senior executives, many of whom have been with it for a long time. Its management team and other key management personnel are well qualified and have extensive industry expertise, and that they have been responsible for its operations' growth. Its management team's experience and contacts with diverse stakeholders have enabled it to expand its operational capabilities, improve the quality of its goods, enhance its methods and designs on a regular basis, and fulfil its industry growth goals.

Quality assurance: The company has an in-house testing laboratory in the manufacturing unit itself, to test its products. Its finished product passes quality check to ensure compliance with applicable domestic as well as international quality standards. Its in house testing laboratory regulates and monitors the quality of the products as per the requirements of the customers as well.

Quality and brand strength: The compay’s manufacturing facility is WHO GMP certified for good manufacturing practices issued by Foods and Drug Control Administration. It has undergone NAFDAC GMP Audit and received a certificate issued by National Agency for Food and Drug Administration and Control. It has Pharmexcil membership certificate issued by Pharmaceutical Export Promotion Council of India. It has GMP certificate from Republic of Kenya. Pharmaceutical manufacturing registration certificate from Kingdom of Cambodia.

Risks and concerns

Highly depend on major raw materials: The company is engaged in the business of manufacturing pharmaceutical products. Therefore, it is highly dependent on API, which is the primary component of its manufacturing process. Thus, if the company experience significant increase in demand, or need to replace an existing supplier, it cannot assure that it will be able to meet such demand or find suitable substitutes, in a timely manner and at reasonable costs, or at all. Further, in view of the ongoing pandemic, wherein partial or complete lockdown and various travel restrictions has been imposed in various countries, it may not be able to procure adequate amount of raw materials for its manufacturing unit.

Requires significant amount of working capital: The company’s business requires a significant amount of working capital. As per its settled business terms, it require its customers to pay the full amount of the consideration only after they receive the order, as a result, significant amounts of its working capital are often required to finance the purchase of raw material and execution of manufacturing processes before payment is received from customers. Further, it is also required to meet the increasing demand and for achieving the same, adequate stocks have to be maintained which requires sufficient working capital. In the event, it is unable to source the required amount of working capital for addressing such increased demand of its products, it might not be able to efficiently satisfy the demand of its customers. Even if it is able to source the required amount of funds, it cannot assure that such funds would be sufficient to meet its cost estimates and that any increase in the expenses will not affect the price of its products.

Dependent on third party transportation providers: To ensure smooth functioning of the company’s manufacturing operations, it needs to maintain continuous supply and transportation of the raw materials required from the supplier to its manufacturing unit and transportation of its products from its unit to its customers, which may be subject to various uncertainties and risks. It is significantly dependent on third party transportation providers for the delivery of raw materials to it and delivery of its products to its customers. Uncertainties and risks such as transportation strikes or delay in supply of raw materials and products could have an adverse effect on its supplies and deliveries to and from its customers and suppliers. Additionally, raw materials and products may be lost or damaged in transit for various reasons including occurrence of accidents or natural disasters.

Outlook

JFL Life Sciences is a professionally managed public limited pharmaceutical company. It manufactures a wide range of pharmaceutical formulations. Since 2012, JFL has consistently recorded high growth rates and has established itself as a progressive, professionally managed, major healthcare company. Today, JFL has pronounced presence in International markets, with exports more than 10 developed and developing countries throughout the World. To maintain its competitiveness and to further the cause of health care JFL has laid a strong R&D foundation and a State of the art manufacturing facility near Ahmedabad. JFL builds quality into the products with the help of a highly qualified, competent & committed man power. The pharmaceutical manufacturing licenses were granted by F.D.A, Gujarat. The company has registered its products to manufacture in various countries like sovereign of Kenya, Nigeria, Yemen, Cambodia & Myanmar for manufacturing of a particular product. On the concern side, an adverse change in the regulations governing the development of its products and their usage by its customers, including the development of licensing requirements and technical standards and specifications or the imposition of onerous requirements, may have an adverse impact on its operations. The company seeks to grow its market reach domestically to explore untapped markets and segments; however, it cannot assure that it will be able to grow its business as planned.

The company is coming out with a maiden IPO of 29,78,000 equity shares of Rs 10 each at a fixed price of Rs 61 per equity share to mobilize Rs 18.16 crore. On the performance front, the total income of the company for fiscal year 2021 was Rs 3,286.89 lakh against Rs 3,020.41 lakh total income for Fiscal year 2020. An increase of 8.82% in total income. Profit after tax for the Fiscal 2021 was at Rs 54.21 lakh against profit after tax of Rs 36.04 lakh in fiscal 2020, a 50.42% increase. Meanwhile, the company aims to explore the Eastern Asian markets to export its products and in order to improve its cost effectiveness and achieve balance of convenience, it plans to import the APIs used by it in its manufacturing process. It intends to achieve operational excellence in terms of cost and production efficiency. It also aim to take the maximum advantage of the location of the company by reaching to the un-explored or less explored countries which has direct connectivity to the current location of the company.