Saroja Pharma Industries coming with an IPO to raise Rs 9.11 crore

Saroja Pharma Industries

• Saroja Pharma Industries is coming out with an initial public offering (IPO) of 10,84,800 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 84 per equity share. 
• The issue will open for subscription on August 31, 2023 and will close on September 5, 2023.
• The shares will be listed on NSE Emerge Platform.
• The share is priced 8.40 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Swastika Investmart.
• Compliance Officer for the issue is Nikita Kumar. 

Profile of the company

The company is amongst the leading traders, exporter and suppliers of Specialty Chemicals. The offered range is widely praised for its superior effectiveness, shelf life and perfect composition. The company was incorporated with the objective of the best service deliverance in chemical trading with the best premium pharmaceutical companies in India and abroad for cost effective human and veterinary medicine. The Company trade in Pharma API, Pharma Intermediates, Chemicals, Solvents used for pharmaceutical products human and veterinary medicine. The Company was formed with a mission being providing clientele specification based approved product at a competitive pricing with hassle free dispatch within India or aboard contributing to cost effectiveness in end product for human and veterinary medicine.

The product demand by its clientele is manufactured as per their specifications by its suppliers initially in sample size thereafter on clients testing and approving the order is finalized. The approved specified product is manufactured for the order quantity to be dispatched by the appropriate mode of transport within India or abroad. Since its inception, Saroja Pharma Industries India has witnessed a substantial expansion in its clientele base over the past two years. This growth has propelled the company to venture into the manufacturing of API Pharma products, for veterinary use. By broadening its product portfolio, Saroja Pharma Industries India aims to provide a comprehensive range of pharmaceutical solutions that cater to the diverse needs of its expanding customer base. This strategic move not only enhances the company's value proposition but also reinforces its commitment to delivering affordable healthcare solutions globally.

Proceed is being used for:

• Setting-up a manufacturing unit
• Repaying the unsecured loans
• Public issue expenses

Industry overview

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. Indian pharmaceutical industry also plays significant role globally. India has the highest number of United States Food and Drug Administration (USFDA) compliant Pharma plants outside of USA. There are 500 API manufacturers contributing about 8% in the global API Industry. India is the largest supplier of generic medicines with 20% share in the global supply by manufacturing 60000 different generic brands across 60 therapeutic categories. Access to affordable HIV treatment from India is one of the greatest success stories in medicine. 

Active Pharmaceutical Ingredient (API) is a crucial segment of the pharma industry, contributing to around 35% of the market. API is the biologically active component of a drug that causes an intended medical effect. According to World Health Organization, API is any substance or combination of substances used in a finished pharmaceutical product (FPP) intended to furnish pharmacological activity or to otherwise have direct effect in the diagnosis, cure, mitigation, treatment, or prevention of disease, or to have an immediate impact in restoring, correcting, or modifying physiological functions in human beings.

Pros and strengths

Experienced promoters and management team: Its Promoters have played a key role in guiding, developing, and growing its business. Under the leadership and experience of its Promoters, the company has seen significant growth in the overall business since 2019. Its leadership is the result of teamwork where a consensus is arrived at for implementation of new ideas & business practices to widen its competitive advantage. Its Promoters, who also form part of the Board of Directors of the company, have a proven background and experience in the chemical segment and finished pharmaceutical formulations.

Wide and diverse range of product offerings: The Company has a wide product portfolio comprising of pharmaceuticals, Pharma API and Pharma intermediates. At present, it is supplying products like Liquide Bromine use as Agro Intermediate, Ethyl Acetate use as API solvent as agro intermediate, other drugs that are used for the human and veterinary medicines and some of them are API solvent. It also customize products based on needs and requirements of the clients and its market.

Diversified business operations and revenue base: Its business is diversified in terms of geographies, it has marked its presence in India and International Markets. It has exported to mainly in Pakistan, Egypt, Russia, Jordan, Hong Kong, Singapore etc. 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

No long term supply agreements with vendors/suppliers: It does not have long term arrangements 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. 

Highly competitive industry: As a pharma industry provider providing a wide range of services to its clients, it competes with a range of organized and unorganized competitors, depending on the nature and location of services provided. Such competitors collectively compete with the majority of its services. The market for pharma industry is highly competitive with few organized players and localised smaller unorganised players. Important factors affecting competition in the pharma sector include project management ability, past track record, existing relationship with the clients, reliability, technical knowledge, chemical components, price, scope and quality of services offered to customers. Its competitors’ companies that may have greater financial, marketing or other resources than it does and, therefore, may be better able to compete for new work and skilled professionals. Its competitors may be willing and able to develop and provide service offerings faster or at a lower price than it. Its competitors also may affect its business by entering into exclusive arrangements with existing or potential clients.

Dependent on third party transportation: It is dependent on third party transportation providers for delivery of trading goods and materials to it from its suppliers and delivery of trading goods and materials to its clients. Any failure on part of such service providers to meet their obligations could have a material adverse effect on its business, financial condition and results of operation.  As trading is its 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 buyers/clients, both of which is subject to various uncertainties and risks.

Outlook

Incorporated in 2019, Saroja Pharma Industries India was incorporated with the objective of the best service deliverance in chemical trading with the best premium pharmaceutical companies in India and abroad for cost effective human and veterinary medicine. On the concern side, it is dependent on third party transportation providers for delivery of trading goods and materials to it from its suppliers and delivery of trading goods and materials to its clients. Any failure on part of such service providers to meet their obligations could have a material adverse effect on its business.

The company is coming out with an IPO of 10,84,800 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 84 per equity share to mobilize Rs 9.11 crore. On performance front, during FY 2022-23 the revenue from operation and other income of the company decreased to Rs 5035.09 lakh as against Rs 5595.97 lakh in FY 2021-22. The Restated profit after tax for FY 2022-23 decreased to Rs 106.06 lakh as against Rs 114.01 lakh in the FY 2021-22. Going forward, the company’s plans to increase its customer’s base by supplying orders in hand on time, maintaining and renewing its relationship with existing clients. To develop its export operations, aim will be to expand its business by continuing to file product registrations in international markets for business growth.