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Review By MLR Securities Private Ltd on May 9, 2011
Issue Date: 9th May - 12th May
Price Range: INR 228-240
Issue Size: INR 114-120 Cr
Mcap: INR 287-302 Cr
IPO Grading: CRISIL IPO Grade 1
Promoters Holding: 60% (Post Issue)
BRLM: Anand Rathi, IDBI Cap
Listing: BSE,NSE
Incorporated in 2006, Aanjaneya is engaged in manufacturing and marketing of APIs (active pharmaceutical ingredients) with focus on anti-malerial and finished dosage forms (FDFs) catering to various therapeutic segments. The company aims to be an integrated player through bulk drug manufacturing, intermediate drugs and finished dosage forms.To achieve this, it acquired assets of Prophyla Biologicals at Mulshi, Pune in 2010. Prophyla Biologicals is engaged in the business of formulations and FDFs contract manufacturing. Aanjaneya's portfolio consists of second and third-generation anti-malarial APIs and FDF's. It plans to enter various other therapeutic areas such as pain management, hormone replacement therapy, anti obesity and others. It also supplies contract manufacturing services to Wockhardt, Cipla and Glenmark. It has a few products in branded segment too.
Promoters are Finaventure Capital Ltd (name changed to Aasda Life Care Ltd, yet to be approved by the BSE) and Dr. Kannan K. Vishwanath. Finaventure Capital Ltd is a BSE-listed company with a market capitalisation of Rs 100 Cr. Dr. Kannan K. Vishwanath and his father Mr Kashi Vishwanathan were the erstwhile promoters of Benzo Chemicals, which focused on anti-malarial and anti-cancer segments.
Cinchona Bark - A key raw material
The major raw material used by ALL in its production of salts of Quninie (Anti-Malarial API) is cinchona bark which is sourced from Africa. It constituted 87% and 55% of the raw material consumed in FY10 and 10mFY11 respectively. Any shortfall or non availability of the cinchona bark as well as any fluctuations in its prices would affect the operations and margins of the company.
Concentration of revenues
The company's top five customers contributed approximately 53% and 84% and top 10 customers contributed approximately 78% and 95% of revenues for FY10 and for 10mFY11 respectively. The company has not entered into long term contracts with any of its customers. Any loss of business from one or more of them may adversely affect
the revenues and profitability of ALL.
Investment Rationale
The company's market cap is coming to Rs 287-302 Cr on a price band of Rs 228-240. The company is asking for a P/E of 7.7-8.1 on an annualized EPS of FY11 which is at a premium to other players of its size like Ind-swift Laboratories and Parabolic Drugs which are available at 3.9 and 5.6 times their TTM EPS. We recommend investors to Avoid the Issue.
Review By MLR Securities Private Ltd on May 9, 2011
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