India’s biggest enzyme company Advanced Enzyme Technologies Ltd IPO will be opened on 20th July, 2016. Advanced Enzyme Technologies is planning to raise 412 Cr with this IPO. Issue price of this IPO is fixed in the range of Rs 880 to Rs 896. Let’s explore and try to find out an answer that Advanced Enzyme Technologies Ltd IPO is worth for investment or not.
Advanced Enzyme Technologies Ltd is engaged in research, development, manufacturing and marketing of Healthcare, Nutrition and Bio-processing products. Advance Enzyme operates in two primary business verticals namely Healthcare & Nutrition (human and animal) and Bio-Processing (food and non-food).
The company is engaged in the research and development, manufacturing and marketing of over 400 proprietary products developed from 60 indigenous enzymes. Having more than two decades of fermentation experience in the production of enzymes, it ranks among the top 15 global companies in terms of enzyme sales and has the second highest market share domestically, next only to the world’s largest enzyme company Novozymes.
It offers products to its global clientele of more than 700 customers spanning presence across 50 countries worldwide.
Objects of the Issue:
The Offer consists of a Fresh Issue by the company and an Offer for Sale by the Selling Shareholders.
Prepayment / repayment of certain loans availed by its fully-owned subsidiary Advanced Enzymes USA.
Exit route for existing investors
General Corporate purpose
1. Mr. Chandrakant Laxminarayan Rathi
2. Mr. Vasant Laxminarayan Rathi
|Major shareholders in Advanced Enzyme|
|Name of shareholder||Equity Shares||Percentage (%)|
|Vasant Laxminarayan Rathi||7,480,900||34.37|
|Chandrakant Rathi Innovations and Projects Private Limited||4,295,400||19.73|
|Atharva Green Ecotech LLP||2,492,940||11.45|
|Vasant and Prabha Rathi Generation Trust||1,500,000||6.89|
|Pradip Bhailal Shah||750,800||3.45|
|Kotak India Venture Fund I||679,900||3.12|
|Mukund Madhusudan Kabra||381,100||1.75|
|Kishor Laxminarayan Rathi||343,200||1.58|
|Kotak India Venture (Offshore) Fund||336,600||1.55|
On performance front, the company has (on consolidated basis) posted turnover of Rs. 220.42 cr, Rs. 239.45 cr. Rs. 223.11 cr. Rs. 293.76 cr. and net profit of Rs. 49.22 cr., Rs. 20.09 cr., Rs. 50.10 cr., Rs 78.44 cr. for FY 13, FY 14, FY 15 and FY 16 respectively.
Thus is has posted CAGR of 14.4% for top lines and CAGR of 24.1% for bottom lines for these years despite troubled fiscal 2014.
Moreover, Advanced Enzume has a diversified customer base which includes Sanofi India, Cipla, Ipca Laboratories, Alkem Laboratories, and Emcure Pharmaceuticals. Its top 10 customers accounted for 41.4% of its consolidated revenues in FY2016 while geographical reach or dependence for business is also fairly diversified with 54.94% of revenue coming from USA, 36.44% from India, 3.84% from Europe, 3.63% from Rest of Asia, and 1.15% from other geographies in the latest FY.
The Company has 13 patents registered in its name and applications for registration of 4 patents are pending
The Company has very good R&D team consist of over 55 scientists, microbiologists, engineers, food technologists and biotechnologists.
Diversified product range and wide customer base.
Advanced Enzyme Technologies Ltd is 2nd largest enzyme company of India.
First IPO in enzyme segment
There are certain criminal matter against non executive and nominee director Mr. Kunisetty Venkata Ramakrishna of the company. Failure in this proceeding may have adverse impact on reputation of company.
There are significantly dependent on its foreign subsidiaries especially in North America for the sale and marketing of most of its products in these regions.
They have not entered into any long term or definitive agreement of its customers.
Is historical revenues have been significantly dependent on sales of its top five product groups.
Any reduction in demand or sell of these products will adversely impact on business.
Upper end pricing of the IPO values Advanced Enzyme at 24.9 times its consolidated earnings per share (EPS) of INR36.03 in FY2016. At 880 per share, the PE ratio drops to 24.4. Advanced Enzyme has no listed peers. The company has no listed peer in India while global enzymes leader Novozymes trades at a PE ratio of 35.5.
If we attribute the last earnings on post IPO equity then the asking price is at a P/E of 25 plus. As per RHP there is no listed peer for this company to compare with and this is being the first mover IPO in enzymes which are specialty chemicals for healthcare. Thus one may compare it with pharma sector that commands composite P/E of around 32.
Reasonable pricing makes this IPO a worthy bet for short to medium term. ( MARKET PREMIUM JUMPED TO 385-390 )
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