Ami Organics Ltd IPO

Competitive Strengths:

Some of the competitive strengths are as follows

1.  Diversified product portfolio ably supported by strong R&D and process chemistry skills.
Based on the existing business strategy of early identification of molecules for development and supply, Ami Organics has developed and commercialised over 450 Pharma Intermediates for APIs including Dolutegravir, Trazodone, Entacapone, Nintedanib and Rivaroxaban and NCEs across 17 high growth therapeutic areas since inception, such as anti-retroviral, anti-inflammatory, anti-psychotic, anti-cancer, anti-Parkinson, anti-depressant and anti-coagulant. As a result of their R&D capabilities, the company has been able to file eight process innovation patent applications in India applications (in respect of intermediates used in the manufacture of Apixaban, Rivaroxaban, Nintedanib, Vortioxetine, Selexipag, Pimavanserin, Efinaconazole and Eliglustat).

2. Extensive geographical presence and diversified customer base with long standing relationships
Ami Organics caters to domestic and certain multi-national pharmaceutical companies which cater to the large and fast-growing markets of Europe, China, Japan, Israel, UK, Latin America and the USA. In FY21 the company’s revenue from exports contributed 51.57% of the total revenue from operations. The company supplies their products to 25 countries and has long-standing relationships with     numerous domestic and global pharmaceutical companies. Diversification of their customer base across the domestic and global markets has limited the company’s exposure to a risk of concentration, enabling them to further diversify and expand their business relationships. Thirteen of Ami Organic’s customers have been their customers since the past 10 years and fifty of their customers have been customers since the past five years.

3. High entry barriers in the chemicals manufacturing industry
The pharmaceutical intermediates business has high entry barriers inter alia due to: (a) a long gestation period to be enlisted as a supplier with the customers, particularly with the customers in US and European countries, which requires suppliers to adhere to strict compliance requirements, leading to a high regulatory gestation period; and (b) the involvement of complex chemistries in the manufacturing process, which is difficult to commercialize on a large scale. APIs and NCEs manufactured by Ami Organic’s customers, where their products are used, and where such use has been formally recognised in filings with regulatory agencies, any change in the vendor of the product may require significant time and cost for the customer resulting in a propensity amongst customers to continue with the same set of suppliers. This highlights the high entry barriers in the industry in which they operate.

Risk Factors:
Some of the risk factors are as follows

1.    The continuing impact of the COVID-19 pandemic on their business and operations is uncertain and it may be significant and continue to have an adverse effect on their business.
2.    The company is subjected to strict quality requirements, regular inspections and audits, and any failure or quality control problems can damage their reputation and have an adverse effect on their business.
3.    Non-compliance with and adverse changes in health, safety, labour, and environmental laws and other similar regulations applicable to their manufacturing operations may adversely affect their business.

Ami Organics 5paisa Review

Considering the future growth potential of the specialty chemical industry, plans for strategic acquisition and expansions, diversified products and customer base, and strong technical capabilities of the company, we recommend ‘Subscribe’ to the issue with a long-term perspective.