Patron Exim coming with an IPO to raise Rs 16.69 crore

Patron Exim

• Patron Exim is coming out with an initial public offering (IPO) of 61,80,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 27.00 per equity share.
• The issue will open on February 21, 2023 and will close on February 24, 2023.
• The shares will be listed on SME Platform of BSE.
• The share is priced 2.70 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 Sonia Kakani.

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), industrial chemical, excipient and solvents. Presently its product portfolio comprises of around 150 AIPs, Excipient, Pharma Chemical & Intermediates. The company is also in the trading of variety of chemicals, such as, Petrochemicals, Dyes & Pigment Chemicals, Paints & Speciality Chemical, Agro Chemicals, Oil & Refinery Chemicals, Foam & Adhesive, Plywood & Laminates Chemical. The range of Chemicals also includes food industry & water treatment chemicals, resins & plastics chemicals, polymers and additives etc. The company’s business expansion is located in Ahmedabad and the surrounding area of Gujarat.

The company got certification of ISO 9001:2015 in Quality Management System, ISO 22000:2018 in The Food Safety Management System, ISO 45001:2018 in Occupational Health & Safety Management System, it is also certified by “International Quality Certification Services UK Ltd” as a “HACCP” in “Hazard Analysis & Critical Control Point System”, as a “HALAL” in Compliance with the requirements of Islamic Law and “WHO-GMP” to adopt a Good Manufacturing Practice.

APIs is known as bulk drugs or bulk actives are the principle ingredients used in making finished dosages in the form of capsules, tablets, liquid or other forms of dosage, with the addition of other APIs or inactive ingredients. Timely and committed delivery is an ongoing process of building and sustaining relationships. The company’s strength lies in understanding the requirements of the customer and its execution capabilities. This has enabled the company to get repeated orders from its existing customers and attract new customers. An active ingredient is the ingredient in a pharmaceutical drug or pesticide that is biologically active. The similar terms active pharmaceutical ingredient and bulk active are also used in medicine, and the term active substance may be used for natural products.

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 Bn) against the total pharma import of Rs 49436 crore ($6.66 Bn), thereby generating trade surplus of $17.68 Bn. Till end September 2021, total pharma export has been Rs 87864 crore ($11.88 Bn) as against total import of Rs 33636 crore ($4.66 Bn), thereby generating a trade surplus of Rs 54228 crore ($7.22 Bn).

Further, the Indian pharma industry has also played an important role in meeting the challenges for mitigation of the infection in COVID pandemic. The industry worked in close collaboration with the government and academic institutes etc., to quickly develop and refine manufacturing processes which helped to ensure a consistent supply of medicines needed for the management of COVID-19 (e.g. Remdesivir, Ivermectin, Hydroxychloroquine, Dexamethasone, Tocilizumab, Favipiravir etc.). Indian drug supplies throughout the COVID-19 pandemic period have provided relief to over 120 countries for Hydroxychloroquine (HCQ), 20 countries for paracetamol and about 96 countries for vaccines across the world.

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 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 provides 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 have earned it a goodwill from its customers, which has resulted in customer retention and order repetition. It has also helped the company 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. The company 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 

Topline depends upon few clients: The company derives and may continue to derive a significant portion of its revenue from a relatively limited number of clients. Significant dependence on certain clients may increase the potential volatility of its results of operations, if the company is unable to expand the volumes of its business with its existing clients, maintain its relationship with its key clients or diversify its client base. Further, any significant reduction in demand for its products from its key clients, any requirement to lower the price offered by these clients, or any loss or financial difficulties caused to these clients, or bad debts of the dues from these clients, or change in relationship with the clients could have a material adverse effect on its business, result of operations, financial conditions and cash flow.

No long term supply agreements for the supply with vendors: The company does not have written agreements with its vendors/suppliers and it operates on a purchase order system. There are no long-term supply agreements for the trading (raw) 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 raw material supply or the non-availability of raw material in the required quantity and of required quality from alternate source, the supply schedule to its clients may be adversely affected impacting the sales and profitability of the company.

Dependent on third party transportation providers: As trading is the company’s main activities, its success depends on the smooth supply and transportation of the trading materials and transportation of its trading materials from its suppliers to it/ or its buyers/clients, both of which are subject to various uncertainties and risks. In addition, trading materials may be lost or damaged in transit for various reasons including occurrence of accidents or natural disasters. There may also be delay in delivery of trading materials which may also affect its business and its results of operation negatively. A failure to maintain a continuous supply of trading materials to it as well as to its clients in an efficient and reliable manner could have a material and adverse effect on its business, financial condition and results of operations.

Outlook

Patron Exim is an Ahmedabad-based company engaged in the trading and distribution of a wide range of pharmaceutical raw material which is also known as APIs (Active Pharmaceutical Ingredients), industrial chemical, excipient, and solvents. Its product portfolio comprises around 150 AIPs, Excipient, Pharma Chemical & Intermediates. The company is also in the trading of a variety of chemicals, such as Petrochemicals, Dyes & Pigment Chemicals, Paints & Speciality Chemical, Agro Chemicals, Oil & Refinery Chemicals, Foam & Adhesive, Plywood & Laminates Chemical. On the concern side, significant portion of its revenue is generated from few of its key clients. The loss of any such key clients, significant reduction in the demand for its services from such clients or deterioration in their financial condition may adversely affect its business, financial condition, result of operations and cash flows. Moreover, there are no long term supply agreements for the supply with its vendors/suppliers. Its business may be adversely affected if there is any disruption in the trading (raw) material supply or due to non-availability of trading (raw) material.

The company is coming out with a maiden IPO of 61,80,000 equity shares of Rs 10 each at a fixed price of Rs 27 per share to mobilize Rs 16.69 crore. On performance front, the total income from operations of the company for FY22 was Rs 387.95 lakh as compared to Rs 2053.58 lakh during the FY21 showing decrease of 81.11%. The company in order to avoid fund blocking in working capital post Covid had started selling the goods on commission basis instead of trading goods. The turnover of the company had been reduced substantially on account of the change in the policy. Moreover, PAT increased from Rs 7.31 lakh for the FY21 to Rs 83.11 lakh in FY22. The profit after tax was increased as compared to FY21 on account of increase in other income, which is commission income of the company.

Going forward, the company’s dedicated and focused approach and efficient and timely delivery of products has helped it to build strong relationships over number of years. It bags and places repetitive order with its customers as well as with its suppliers respectively. For the company, establishing strong, mutually beneficial long-term relationships and strategic supplier relationship management are critical steps in improving performance across the supply chain, generating greater cost efficiency and enabling the business to grow and develop.