Medicamen Organics
- Medicamen Organics is coming out with initial public offering (IPO) of 31,00,000 shares of Rs 10 each in a price band Rs 32-34 per equity share.
- The issue will open for subscription on June 21, 2024 and will close on June 25, 2024.
- The shares will be listed on NSE Emerge Platform.
- The face value of the share is Rs 10 and is priced 3.20 times of its face value on the lower side and 3.40 times on the higher side.
- Book running lead manager to the issue is GYR Capital Advisors.
- Compliance Officer for the issue is Varsha Bansal.
Profile of the company
Medicamen Organics is engaged in developing, manufacturing and distribution of broad range of pharmaceutical dosage including generic dosage in form of Tablets, Capsules, Oral Liquids, Ointments, Gel, Syrups, Suspension and Dry powders for government (including both state and central governments) and private institutions as contract manufacturer / third party manufacturer. It markets its product to private pharma companies in domestic as well as international markets through third party distributors or on loan license basis. Further, the company is also strategically focusing on establishing a direct presence in international market for an instance in fiscal 2023 and 2024, it has directly exported its product in Burundi. It has a track record of operating B2B model which covers contract manufacturing model. Its products are marketed across India as well as African, CIS and south East Asian Countries like Congo, Benin, Cameg, Togo, Senegal, Burkina Faso, Philippines, Myanmar, Mozambique, Togo, Burundi, Kyrgyzstan and Kenya by its third-party distributor.
It has 2 WHO GMP approved manufacturing facilities. Its manufacturing facilities are capable of producing pharmaceutical formulations and products and has fully equipped quality control department with experienced and qualified staff to facilitate smooth manufacturing process. It has in-house testing laboratory and necessary infrastructure to test its raw materials and finished products to match the quality standards. It is ISO 9001:2015 certified company. Its core strength lies in product development and documentation, it is regularly engaged in research and development and launching new products. This gives it an exhaustive product list as well as fair pricing in the market. Its product portfolio consists of 84 products and comprises of wide range of drugs like, Anti-Bacterial, Anti Diarrheal, Anti-Fungal, Anti-Malarial, Anti Diabetic, Proton Pump Inhibitor, Anti Histamine, Anti-Hypertensive drugs, Anti Lipidemic Drug, Anti Parasitic, Multivitamin, Multimineral and Nonsteroidal anti-inflammatory drug (NSAIDS).
Proceed is being used for:
- Funding of expenses proposed to be incurred towards Product registration in the international markets
- Plant updation and increase in production capacity
- Funding working capital requirements
- General corporate purposes
Industry overview
India is the largest provider of generic drugs globally and is known for its affordable vaccines and generic medications. The Indian Pharmaceutical industry is currently ranked third in pharmaceutical production by volume after evolving into a thriving industry growing at a CAGR of 9.43% in 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 pharmaceutical manufacturing facilities that comply with the US Food and Drug Administration (USFDA) and has 500 API producers that makeup around 8% of the worldwide API market.
The market size of India's pharmaceuticals industry is expected to reach $65 billion by 2024, and around $130 billion by 2030. According to government data, the Indian pharmaceutical industry is worth around $50 billion with over $25 billion of the value coming from exports. About 20% of the global exports in generic drugs are met by India. India is among the top 12 destinations for biotechnology worldwide and 3rd largest destination for biotechnology in the Asia Pacific. In 2022, India’s Biotechnology industry crossed $80.12 billion, growing 14% from the previous year.
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 cardiovascular, anti-diabetes, anti-depressants, and anti-cancers, which are on the rise.
Pros and strengths
Wide range of products: It deals in Capsules, Tablets, Liquid Ointment, Gel, Syrups, Suspension and Dry powders. Its product portfolio comprises of vide range of drugs like Anti-Bacterial, Anti Diarrheal, Anti-Fungal, Anti-Malarial, Anti Diabetic, Dental Cure, Proton Pump Inhibitor, Anti Protozoal, Anti Histamine, Anti-Hypertensive drugs, Anti Lipidemic Drug, Multivitamin, Multimineral and Non-steroidal anti-inflammatory drug (NSAIDS). Its product portfolio consists of 84 products, as on March 31, 2024. It operates under different brand names across the globe.
Scalable business model: Its business model is customer centric and order driven, and requires optimum utilisation of its existing resources, assuring quality supply and achieving consequent economies of scale. The business scale generation is basically due to development of new markets and products both domestic and international by exploring customer needs, marketing expertise and by maintaining the consistent quality output.
Quality assurance: Its quality is an ongoing process of building and sustaining relationships. It is approved by WHO GMP since September 21, 2011 for manufacturing facility 1 and July 11, 2018 for manufacturing facility 2. It has obtained ISO 9001:2015 Certification for the Quality Management System from ISC (Global), 11, 7th floor, Bay Square, Business Bay, Dubai, UAE.
Risks and concerns
Dependent on few numbers of customers: Its top ten customers contribute 78.76%, 62.00% and 66.45% of its total sales for financial year ended on March 31, 2024, 2023 and 2022, respectively. Any decline in its quality standards, growing competition and any change in the demand, may adversely affect its ability to retain them. It cannot assure that it shall generates the same quantum of business, or any business at all, and the loss of business from one or more of them may adversely affect its revenues and results of operations. However, the composition and revenue generated from these customers might change as it continues to add new customers in the normal course of business. Though it will not face substantial challenges in maintaining its business relationship with them or finding new customers, there can be no assurance that it will be able to maintain long term relationships with such customers or find new customers in time.
Dependent on third party transportation for the delivery of products: The company uses third party transportation for delivery of its products. Though its business has not experienced any disruptions due to transportation strikes in the past, any future transportation strikes may have an adverse effect on its business. These transportation facilities may not be adequate to support its existing and future operations. Further, such goods 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 products which may also affect its business and results of operation negatively. An increase in the freight costs or unavailability of freight for transportation of its raw materials may have an adverse effect on its business and results of operations.
Delays and/or defaults in payments: It is exposed to payment delays and/or defaults by its customers, especially in the government sector. Its financial position and financial performance are dependent on the creditworthiness of its customers. Such delays in payments may require the Company to make a working capital investment. It cannot assure that payments from all of its customers will be received in a timely manner or to that extent will be received at all. If a customer defaults in making its payments on an order on which the Company has devoted significant resources, or if an order in which the company has invested significant resources is delayed, cancelled or does not proceed to completion, it could have a material adverse effect on the Company’s results of operations and financial condition.
Outlook
Medicamen Organics is engaged in developing, manufacturing and distribution of broad range of pharmaceutical dosage including generic dosage in form of Tablets, Capsules, Oral Liquids, Ointments, Gel, Syrups, Suspension and Dry powders for government (including both state and central governments) and private institutions as contract manufacturer / third party manufacturer. It markets its product to private pharma companies in domestic as well as international markets through third party distributors or on loan license basis. On the concern side, its business requires a significant amount of working capital. In the event, it is unable to source the required amount of working capital for addressing increase in inventory, 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 services.
The company is coming out with an IPO of 31,00,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 32-34 per equity share. The aggregate size of the offer is around Rs 9.92 crore to Rs 10.54 crore based on lower and upper price band respectively. On performance front, the revenue from operations of the company for fiscal year 2024 was Rs 2,527.17 lakh against Rs 2,214.71 lakh for Fiscal year 2023. An increase of 14.11% in revenue from operations. Profit after tax for the Fiscal year 2024 was at Rs 240.41 lakh against profit after tax of Rs 96.93 lakh in fiscal year 2023. An increase of 148.02%. Going forward, it intends to continue to enhance scale in existing products and introduce new products across high end and mid segment to capitalize on the opportunity to cater rising acceptance and demand of new products. Its wide product range provides its competitive edge over its competitors. In order to maintain its competitive edge, it will continue to add newer products to its products portfolio.
