Hemant Surgical Industries
- Hemant Surgical Industries is coming out with a 100% book building; initial public offering (IPO) of 27,60,000 shares of Rs 10 each in a price band Rs 85-90 per equity share.
- The issue will open for subscription on May 24, 2023 and will close on May 26, 2023.
- The shares will be listed on SME Platform of BSE.
- The face value of the share is Rs 10 and is priced 8.50 times of its face value on the lower side and 9.00 times on the higher side.
- Book running lead manager to the issue is Hem Securities.
- Compliance Officer for the issue is Meenal Ajmera.
Profile of the company
The company manufactures, import, assemble and market a comprehensive portfolio of medical equipments and disposables. Its product offerings cover a wide spectrum of equipments and disposables required for (i) Renal Care, (ii) cardiovascular disease (iii) respiratory disease, (iv) Critical Care and Radiology and (v) Surgical disposables. Its wide range of products includes some of the indigenously manufactured products along with some other products that are imported from countries like: Japan, China France and Australia and are further processed in its assembly units. In addition it is also providing services for maintenance and running of dialysis centres.
The company started its operations with importing and marketing of medical disposables like: meditapes, all over India from JMS Company Japan. Later in the year 1999 the company started its manufacturing operations with one Manufacturing unit and over the years expanded its manufacturing and assembly operations to two more additional units. Its facilities are ISO 9001:2015 and ISO 13485:2016 certified having fully equipped quality control department with experienced and qualified staff to facilitate smooth manufacturing and assembly line process. The company was founded in the year 1989 by one of its Promoters, Hanskumar Shamji Shah, who has over 35 years of experience in the industry.
Proceed is being used for:
- Funding Capital Expenditure towards installation of additional plant and machinery.
- Funding to meet working capital requirements.
- General Corporate Purpose.
- Issue expenses.
Industry overview
The Indian market for medical equipment is predicted to increase to $50 billion by 2025. India has an overall 75-80% import dependency on medical devices. Export of medical devices from India stood at $2.53 billion in FY21. The US, Germany, China, Brazil, Iran, etc. are a few key countries that import Indian medical devices. Gujarat, Maharashtra, Karnataka, Haryana, Andhra Pradesh, Telangana and Tamil Nadu are the manufacturing hubs for medical devices in India. In BioAsia 2021, key stakeholders in the panel discussion on medical technologies stated that India would become self-sufficient 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 park, etc. to boost overall growth of the domestic medical devices market in India.
As of 2020, the medical devices market is estimated to be at $12 billion in India. India is the 4th largest Asian medical devices market after Japan, China, and South Korea, and among the top 20 medical devices markets globally. However, it has the potential to surpass its peers in terms of size and scale; this is based on the government's support the sector has received over the past several years. India’s medical devices market is projected to reach $50 billion by 2025. Between 2020-25, diagnostic imaging is likely to expand at a CAGR of 13.5%. The medical devices sector in India comprises large multinationals, and small and midsized companies. This sector, which is growing faster amid the pandemic, offers great opportunities for domestic players, particularly engineering MSMEs, to further penetrate the global markets. The Government of India (GOI) has commenced various initiatives to strengthen the medical devices sector, with emphasis on research and development (R&D) and 100% FDI for medical devices to boost the market. India added significant production capacity for various critical care items such as PPE kits, surgical gloves, sanitisers and N95 masks, and emerged as a significant destination for manufacturing of healthcare products and services.
Pros and strengths
Offers diversified range of products: The company has a diversified product portfolio ofmedical equipments and disposables catering to renal care solution, cardiovascular disease, respiratory disease, Critical Care and Radiologyand surgical disposables. It deala in a wide range of products, which enables it to cater to a widespread customer base across India and also expand its reach in international locations like Philippines, Bangladesh, Kenya, Bhutan, Burundi, Camaroon, Congo, Nepal, Nigeria, Ivory Coast, France, Seychelles, etc. The collaboration, agreements or authorizations awarded to the company for equipments or disposables has endowed it with greater exposure and opportunity to benefit from large consumer market in India. It provides advanced medical equipments with latest technology. Further, it has necessary resources, experience, and network that can be customized and leveraged to cater to wider range of medical devices as per requirements of the customers.
Existing well established reputation and customer relationships: The company focuses on maintaining long term cordial business relationship with most of its customers. Its key customers majorly include (i) hospitals and diagnostic centres; (ii) Distributors and dealers and (iii) independent doctors. It sells some of its products under its registered brand name “JMS”, “Aero Plus” and “Safecath”. With its expanding business scope, its brand alongwith other brands, over these years has built a reputation by marketing and distributing wide range of medical equipments and disposables with strong customer base. It constantly tries to address customer needs with a variety of products. Its existing client relationships help it to get repeat business from its customers. This has helped it maintains a long term working relationship with its customers and improve its customer retention strategy.
Quality Assurance: The company has obtained ISO 9001:2015 and ISO 13485:2016 certification for Quality management System from AQC Middle East FZE and BSCIC Certifications, respectively. It has been in the business of supplying medical equipments and disposables since 35 years and It has successfully ventured and supplied quality products to its customers. Products are manufactured under controlled conditions & suitable working environment is provided. Adequate Hygienic conditions are maintained in the product Assembly and Packing Rooms. Its focus on quality is maintained at all stages right from the sourcing of raw materials, which is undertaken from manufacturers to the product manufacturing and assembly stage, which is subject to a rigorous review and monitoring process undertaken at its manufacturing facilities.
Risks and concerns
Face risks relating to sourcing of raw materials and components: The company deals in variety of medical equipment used by the medical practitioners, hospital and diagnostic service providers etc. It currently does not have long term contracts or exclusive supply arrangements with all its suppliers. Although it has not encountered any significant disruptions in the sourcing of any raw material or component, it cannot assure that such disruptions will not occur and/or it shall continue to be able to source the raw materials or components in a cost effective manner. Any failure to procure such raw material or components on a timely basis, or at all, from such third parties and on commercially suitable terms, could affect its ability to deliver finished products. Its dependence on a limited number of suppliers and manufacturers exposes it to risks of delays or inability to meet the demand for the raw material and components.
Depend significantly on customers and their spending in the healthcare industry: The company depends significantly on customers and their spending in the healthcare industry and any decline in the spending on healthcare infrastructure in India, could adversely affect its business and profitability. Any reduction in the budgetary allocation or support by the Central and/or the State Governments may have a significant impact its business prospects. Its business is directly and significantly dependent on projects awarded by them. In the event of any adverse change in budgetary allocations or a downturn in available work in this sector resulting from any change in government policies or priorities, its business prospects and its financial performance, may be adversely affected. Factors that may result in a loss of a client include service of its healthcare products, its performance, reductions in budgets due to macroeconomic factors or otherwise, shift in policies and political or economic factors or changes in their outsourcing strategies. These factors may not be predictable or under its control and any adverse change may affect its operations.
Face competition: The healthcare and medical devices market is competitive and is characterized by rapid technological change. Its customers consider many factors when choosing suppliers, including product reliability, clinical outcomes, breadth of product portfolio, price and product services provided by the manufacturer, product availability and market share can shift as a result of technological innovation and other business factors. Major shifts in industry market share have occurred in connection with product problems, physician advisories and safety alerts, reflecting the importance of product quality in the medical health product industry, and any quality problems with its processes, goods and services could harm its reputation and erode its competitive advantage, sales and market share. Its competition varies by market, geographic areas and type of product.
Outlook
Incorporated in 1989, Hemant Surgical Industries is engaged in the business of manufacturing, importing, assembling, and they market a comprehensive portfolio of medical equipments and disposables. It has a diversified product portfolio of medical equipments and disposables catering to renal care solution, cardiovascular disease, respiratory disease, Critical Care and Radiology and surgical disposables. It deals in a wide range of products, which enables it to cater to a widespread customer base across India and also expand its reach in international locations like Philippines, Bangladesh, Kenya, Bhutan, Burundi, Camaroon, Congo, Nepal, Nigeria, Ivory Coast, France, Seychelles, etc. It has an extensive sales network and access to comprehensive market across India. The scale and reach of its sales network across its key markets enables it to effectively market and distribute products. On the concern side, the company requires certain statutory and regulatory licenses, registrations and approvals to operate its business, some of which the company has either received, applied for or is in the process of application. Many of these approvals are granted for fixed periods of time and need renewal from time to time.
The company is coming out with an IPO of 27,60,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 85-90 per equity share. The aggregate size of the offer is around Rs 23.46 crore to Rs 24.84 crore based on lower and upper price band respectively. On performance front, total income for the financial year 22-23 stood at Rs. 11,149.68 lakh whereas in Financial Year 21-22 the same stood at Rs 10,577.02 lakh representing significant increase of 5.41%.The company reported Restated profit after tax for the financial year 22-23 was Rs 765.11 lakh in comparison to Rs 461.40 lakh in the financial year 21-22. Meanwhile, the company seeks to leverage its capabilities, including its manufacturing facilities and quality control practices, to further expand its product portfolio. It intends to enhance its capabilities and hence grow value chains to supply wide range of medical equipments with a healthy mix of critical care equipments and surgical disposables. It intends to focus on creating value and increase profit margins by leveraging direct contracting, increasing brand awareness and other economies of scale.
