Sudarshan Pharma Industries
Sudarshan Pharma Industries is coming out with a 100% book building; initial public offering (IPO) of 68,62,400 shares of Rs 10 each in a price band Rs 71-73 per equity share.
The issue will open for subscription on March 9, 2023 and will close on March 14, 2023.
The shares will be listed on SME Platform of BSE.
The face value of the share is Rs 10 and is priced 7.10 times of its face value on the lower side and 7.30 times on the higher side.
Book running lead manager to the issue is Gretex Corporate Services.
Compliance Officer for the issue is Ishita Ashok Samani.
Profile of the company
The company is engaged in the business of manufacturing and trading of Specialty Chemicals & Intermediates for Pharma, agro chemicals, Coating, paints, adhesive and various other industries. The company is also into Active Pharmaceuticals Ingredients manufacturing. Some products it outsources and manufactures at its toll manufacturing facility, it is into specialty chemicals imports & exports as well as supply of same to the actual users. As per the clients need and requirements, it provides customize specialty chemicals to its clients in India and abroad regularly. Its Specialty chemicals & its Intermediates have wide application in sectors like pharma, agro chemicals, performance chemicals, resins, paint, food, adhesive and various other Industries.
The company is also involved in contract manufacturing, outsource & supply of generic pharma formulation and medicines to healthcare institution, Government, NGO and Hospitals. It carries about Ethical marketing of pharmaceutical formulation & products in the Domestic and International market through its own distribution network and Sales force under its own brands.
The company & its executives have developed the skill and expertise in innovation in specialty chemical, bulk drugs, API and pharmaceutical formulation to provide the products having wide application in pharma, agro chemicals, performance chemicals, resins, paint, food, adhesive and various other Industries. It is also offer services of QC and Formulation Development to provide customised solutions to its customers and assist them in sourcing the innovative products as per their needs. It aims to develop its Brand & goodwill for quality products in API, bulk drug and pharma industry and developed the technique to make all products as Make in India and provide competition to China and other Markets.
Proceed is being used for:
Industry overview
The Indian Pharmaceutical industry is currently ranked third in pharmaceutical production by volume after evolving over time into a thriving industry growing at a CAGR of 9.43% since the past nine years. Generic drugs, over-the-counter medications, bulk drugs, vaccines, contract research & manufacturing, biosimilars, and biologics are some of the major segments of the Indian pharma industry. India has the most number of pharmaceutical manufacturing facilities that are in compliance with the US Food and Drug Administration (USFDA) and has 500 API producers that make for around 8% of the worldwide API market.
Indian pharmaceutical sector supplies over 50% of global demand for various vaccines, 40% of generic demand in the US and 25% of all medicine in the UK. The domestic pharmaceutical industry includes a network of 3,000 drug companies and around 10,500 manufacturing units. India enjoys an important position in the global pharmaceuticals sector. The country also has a large pool of scientists and engineers with a potential to steer the industry ahead to greater heights. Presently, over 80% of the antiretroviral drugs used globally to combat AIDS (Acquired Immune Deficiency Syndrome) are supplied by Indian pharmaceutical firms. India is rightfully known as the ‘pharmacy of the world’ due to the low cost and high quality of its medicines.
The pharmaceutical industry in India is a significant part of the nation's foreign trade and offers lucrative potential for investors. Millions of people around the world receive affordable and inexpensive generic medications from India, which also runs a sizable number of plants that adhere to Good Manufacturing Practices (GMP) standards set by the World Health Organization (WHO) and the United States Food and Drug Administration (USFDA). Among nations that produce pharmaceuticals, India has long held the top spot. Medicine spending in India is projected to grow 9-12% over the next five years, leading India to become one of the top 10 countries in terms of medicine spending. Going forward, better growth in domestic sales would also depend on the ability of companies to align their product portfolio towards chronic therapies for diseases such as such as cardiovascular, anti-diabetes, anti-depressants and anti-cancers, which are on the rise.
Pros and strengths
Wide and diverse range of product offerings: The company has more than 2000 Specialty Chemicals & Intermediates for Pharma, agro chemicals, Coating, paints, adhesive and various other industries. It is also into Active Pharmaceuticals Ingredients manufacturing. It has a wide product portfolio comprising of pharmaceuticals, cosmetics, and nutraceutical. At present, it is supplying products in the form of capsules, oral and dry syrups, tablets, and liquid injections. It proposes to enhance its product basket by introducing OTC products in the segment of lifestyle diseases. It manufactures various types of pharmaceutical products which are used as Neuro-Psychiatric drugs and other drugs that are used for the treatment of Pain management, Orthopedic treatment, Iron Deficiency Anemia (IDA) Constipation, Erectile dysfunction, Respiratory Ailments (Anti Allergic & Bronco Dilatory Drugs). The FDFs manufactured by it includes various therapeutic segments like Anti-Infective, Anti-Ulcer, Antihistamines / Antibiotics, Anti-Hypertensive, Vitamins & Iron Supplements etc. It is also manufacture products based on needs and requirements of the clients and its market. It has necessary resources, experience, and network to launch additional products in future. With an operating history of more than three years in the finished dosages segment, it is primarily known for its range of formulations.
Strategic location of manufacturing units: The company has contract manufacturing facility arrangements with four companies to manufacture its formulations. These manufacturing facilities are in Maharashtra, Uttarakhand, Himachal Pradesh and Gujarat. As regards its Specialty Chemicals and pharma formulation business is concerned, it has regular manufacturers who supply bulk drugs and formulation as per the specific order. It has selected the contract manufacturing facilities and suppliers as there are strategically located.
Diversified business operations and revenue base: Its business is diversified in terms of geographies and therapeutic areas in the pharmaceutical industry and Specialty Chemicals in the chemical industry. In terms of geographical diversity, it has marked its presence in India and international markets. It has exported to the UK, Australia, Uzbekistan, Syria, Oman, Taiwan, & MENA Regions. In terms of products, it has multiple brands across various therapeutic areas in the pharmaceuticals industry and Specialty / Performance-enhancing products in the chemical industry. Its diversified revenue base enables it to mitigate the risk of income concentration by spreading revenue across multiple sources and opens opportunities to new prospects of growth.
Risks and concerns
Major revenue comes from few customers: The company derives a significant portion of its revenues from a limited number of customers which operate in the pharma industry. For the period ended on September 30, 2022, its top 5 customers cumulatively accounted for more than 40% of its total revenue from operations. In the event any one or more customers cease to continue doing business with it, its business may be adversely affected. The loss of such customers may be caused mainly because of competition and technological advancements. There may be factors other than its performance, which may not be predictable, which could cause loss of customers. Further, any significant reduction in demand for its services from its key customers, any requirement to lower the price offered by these customers, or any loss or financial difficulties caused to these customers, change in relationship with the customers could have a material adverse effect on its business, result of operations, financial condition and cash flow.
No long-term supply agreements with its vendors / suppliers: its Business may be adversely affected if there is any disruption in the trading material supply or due to non-availability of trading material. It 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 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.
Stiff competition: The market in which its company is doing business is highly competitive on account of organized players. Players in this industry generally compete with each other on key attributes such as technical competence, experience, pricing and timely delivery. Some of its competitors may have longer industry experience and greater financial, technical and other resources, which may enable them to react faster in changing market scenario and remain competitive. Moreover, the unorganized sector offers their products at highly competitive prices which may not be matched by it and consequently affect its volume of sales and growth prospects. Growing competition may result in a decline in its market share and may affect its margins which may adversely affect its business operations and its financial condition.
Outlook
Sudarshan Pharma is engaged in the business of Manufacturing and trading of Specialty Chemicals & Intermediates for Pharma, agro chemicals, Coating, paints, adhesive and various other industries. The company is also into Active Pharmaceuticals Ingredients manufacturing. On the concern side, 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. Moreover, the company’s business is substantially dependent on its key customers from whom it derives a significant portion of its revenues. The loss of any significant clients may have a material and adverse effect on its business and results of operations.
The company is coming out with an IPO of 68,62,400 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 71-73 per equity share. The aggregate size of the offer is around Rs 48.72 crore to Rs 50.10 crore based on lower and upper price band respectively. Minimum application is to be made for 1600 shares and in multiples thereon, thereafter. On performance front, revenue from operations is Rs 35,709.46 lakh for the financial year 2021-22 as compared to Rs 19,335.03 lakh for the financial year 2020-21 representing an incline of 84.69% on account of incline in sales due to rapid recovery in business after the pandemic. Moreover, its profit after tax increased by 98.55% to Rs 530.37 lakh for the financial year 2021-22 from Rs 267.12 lakh for the financial year 2020-21, reflecting a net increase of Rs 257.75 lakh due to aforementioned reasons.
Going forward, the company intends to strengthen its position in India and further expand its operations internationally in regulated and semi-regulated markets to achieve long-term sustainable growth, increase brand value, achieve operational excellence, strengthen existing services, customer satisfaction, innovation, and marketing etc. In this regard, the company is setting up a dedicated State-of-the-Art Manufacturing (Oral Solid Dosage) duly certified by FDA, WHO, GMP & GLP to manufacture more than 40 APIs including specialty chemicals like N- Heptane, Acetonitrile, Meta Xylene Special Purity Grade, under PLI scheme Vitamin B6. Moreover, the company will also focus on increasing its global sales and increasing operational efficiency.
