Financial Analysis of Innova Captab IPO

Innova Captab Ltd, an Indian pharmaceutical company, is set to launch its IPO on December 21, 2023. Here's a overview of the company's business model, strengths, weaknesses, and growth prospects to assist investors in making informed decisions.

Innova Captab Ltd IPO Overview

Innova Captab Ltd, established in 2005, operates in three key segments. The first involves providing Contract Development and Manufacturing (CDMO) services to Indian pharmaceutical companies, handling manufacturing, logistics, and testing.

Second segment focuses on the domestic pharma business, dealing in branded generics based on a process patent approach. Third segment is the international business, supplying branded generics globally. The company's diverse product portfolio includes tablets, capsules, dry syrups, injections, ointments, and liquid medicines.

In FY23 and Q1 FY24, Innova Captab Ltd produced and sold over 600 generics under its own brands, exporting to 20 countries. The company employs 29 scientists and engineers in its advanced R&D laboratory and has a manufacturing facility in Buddi, Haryana. With a network of 5,000 distributors, 150,000 retail pharmacies, and key customers such as Cipla, Glenmark, and Lupin, Innova Captab Ltd has over 200 active product registrations, 20 pending renewals, and 218 new applications (ANDAs) in process with international authorities.

Innova Captab Ltd IPO IPO Strengths

1. It is a rapidly growing Contract Development and Manufacturing Organization (CDMO) in the Indian pharmaceutical formulations market. In the expanding CDMO space, major pharmaceutical firms are increasingly outsourcing R&D and manufacturing.

2. Innova Captab focuses on branded generics, involving the development, production, and distribution of generic formulation products marketed in India. Both the domestic and international export segments of the branded generics business have shown growth.

3. Secures steady revenue and cash flows by engaging in long-term CDMO agreements with clients, spanning two to five years.

4. Innova Captab Ltd counts leading pharmaceutical firms, including Cipla, Glenmark Pharma, and Mankind Pharma, among its clients.

Innova Captab Ltd IPO IPO Risk

1. Indian contract manufacturing market is both highly competitive and fragmented.

2. Pharmaceutical industry operates under strict regulations, and not meeting quality standards can have an impact on operations.

3. It relies heavily on a few CDMO customers, and any decrease in their number or challenges in maintaining relationships with them could negatively impact its business, financial results, and overall financial condition.

4. Its business heavily relies on manufacturing facilities, exposing it to risks like equipment breakdowns, industrial accidents, severe weather, and natural disasters.

Innova Captab Ltd IPO Details

Innova Captab Ltd IPO is scheduled from December 21 to 27, 2023. Has a face value of ₹10 per share, and the IPO's price range is ₹426-488 per share.

Financial Performance of Innova Captab Ltd IPO

In FY23, Innova Captab reported a margin of 13.30%, a slight increase from the previous fiscal year. In FY22, the margin stood at 12.40%, while in FY21, it was higher at 13.60%. These margin figures provide insights into the company's profitability.

Key Ratios

In the fiscal year 2023, the Profit After Tax (PAT) margins for the company stood at 7.26%, showing a decrease compared to the previous fiscal year's margin of 7.96% in FY22 and 8.37% in FY21. Additionally, the Return on Equity (ROE) trend declining to 24.58% in FY23 from 30.66% in FY22 and 23.83% in FY21. These metrics suggest a potential dip in profitability and the company's ability to generate returns for its shareholders.

Innova Captab Ltd IPO Vs Peers

In comparison to its peers, J. B. Chemicals and Pharmaceuticals Limited has the highest Earnings Per Share (EPS) of 53, indicating strong earnings performance. In contrast, among the mentioned peers, Innova Captab Limited has the lowest EPS of 14.16, showcasing differences in their respective profitability levels.

Promoters of Innova Captab Ltd

1. Manoj Kumar Lohariwala

2. Vinay Kumar Lohariwala

Innova Captab's promoters, Manoj Kumar Lohariwala and Vinay Kumar Lohariwala, currently hold a combined stake of 66.85% in the company. However, following the initial public offering (IPO), their ownership stake is expected to reduce to 51.68%.

Final Words

This article looks closely in to the Innova Captab IPO, open for subscription from December 21 to 27, 2023. It advises potential investors to carefully examine the company's details, financials, subscription status, and Grey Market Premium (GMP). GMP serves as an indicator of the expected listing performance, offering valuable insights for informed decision-making. As of December 21, Innova Captab IPO, GMP suggesting potential listing at ₹548 or 22.21% up from issue price,  but it is subject to change based on subscription data and market conditions.