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Fabino Life BSE SME IPO review (Avoid)

Review By Dilip Davda on Dec 29, 2021

•    FLSL is engaged in the pharma/healthcare-related products segment.
•    It has posted erratic financial performances for the past three fiscals. 
•    Based on the latest earnings, the issue is exorbitantly priced. 
•    Poor performance during the pandemic period is a bit surprising.
•    There is no harm in ignoring this IPO. 

ABOUT COMPANY: 
Fabino Life Sciences Ltd. (FLSL) is a growing pharmaceutical and other wellness-focused consumer Products Company operating from Delhi and Haryana. The company emphasizes developing high-quality and affordable products for all sections of society by harnessing the skills of competent manpower and other resources. 

FLSL is engaged in manufacturing, marketing, trading and Packing of pharmaceutical and other wellness-focused consumer products. Its core business is the marketing of Pharmaceutical formulation & products in the domestic market through its own distribution network and Salesforce under its own brand name. 

It is getting Ayurvedic formulations manufactured through Loan Licensing facilities, Packing, Labeling etc. The company exports wellness and FMCG products like Coffee, Malt powder, Protein powder, Hair shampoo which is marketed by it. FLSL's Ayurvedic/Herbal business operations are supported by loan licensing facilities that are approved by relevant authorities. It typically enters into Loan License Agreement for periods ranging from one to five years. As of June 30, 2021, it had 8 employees on its payroll. It is selling its products under 97 trademarks. 

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for part repayment of loans (Rs. 0.25 cr.), working capital (Rs. 2.05 cr.) and general corporate purpose (Rs. 0.50 cr.), FLSL is entering the capital market with its maiden IPO of 900000 equity shares of Rs. 10 each at a fixed price of Rs. 36 per share to mobilize Rs. 3.24 cr. The issue opens for subscription on December 31, 2021, and will close on January 05, 2022. Minimum application is to be made for 3000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 42.86% of the post issue paid-up capital of the company. FLSL will spend around Rs. 0.44 cr. for this IPO process. 

The issue is solely lead managed by Aryaman Financial Services Ltd., and Bigshare Services Pvt. Ltd. is the registrar to the issue. Aryaman Capital Markets Ltd. is the market maker for this IPO. 

Having issued initial equity at par, it raised further equity at a price of Rs. 50 per share in April 2015. It has also issued bonus shares in the ratio of 3 for 1 in September 2020. The average cost of acquisition of shares by the promoters is Rs. 10.22 per share. 

Post issue, FLSL's current paid-up equity capital of Rs. 1.20 cr. will stand enhanced to Rs 2.10 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 7.56 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, FLSL has posted turnover/net profits of Rs. 2.76 cr. / Rs. 0.001 cr. (FY19), Rs. 7.52 cr. / Rs. 0.07 cr. (FY20) and Rs. 3.06 cr. / Rs. 0.03 cr. (FY21). For the first three months of FY22 ended on June 30, 2021, it has earned net profits of Rs. 0.01 cr. on a turnover of Rs. 1.13 cr. Surprisingly despite operating in the healthcare segment, it has posted lower top and bottom lines during pandemic periods and has been posting static margins. 

For the last three fiscals, the company has posted an average EPS of Rs. 0.63 and an average RoNW of 4.58%. The issue is priced at a P/BV of 3.28 based on its NAV of Rs. 10.97 as of June 30, 2021, and at a P/BV of 1.66 based on its post-issue NAV of Rs. 21.70 per share. 

If we annualize FY22 earnings and attribute it to the fully diluted post issue equity capital, then the asking price is at a P/E of around 133. Thus the issue is exorbitantly priced. 

COMPARISON WITH LISTED PEERS:
As per offer documents, FLSL has shown Earum Pharma, Vaishali Pharma and Chandra Bhagat Pharma as its listed peers. They are currently trading at a P/E of 00, 14.94 and 356 (as of December 29, 2021). However, they are not truly comparable on an apple-to-apple basis. 

DIVIDEND POLICY:
The company has not declared any dividend for the referred periods of offer documents. It will adopt a prudent dividend policy post listings based on its financial performance and future prospects.

MERCHANT BANKER'S TRACK RECORDS:
This is the 17th mandate from Aryaman Financial in the last three fiscals (including the ongoing one). Out of the last 10 listings, 1 opened at discount and the rest with premiums ranging from 0.04% to 2.16% on the day of listings. Thus it has an average track record. 


Conclusion / Investment Strategy

The company has posted erratic financial performance with poor earnings in pandemic periods. The issue is exorbitantly priced based on its latest earnings. Higher promoter’s dilution and lower equity base post IPO are concerned. There is no harm in ignoring this pricy issue.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Dec 29, 2021

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the past, SME IPOs drew the attention of investors across the board. However, as SME issues have entry barriers and continued low preference from the broking community, any reader taking decisions based on any information published here does so entirely at own risk. The above information is based on information available as on date coupled with market perceptions. The Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

Fabino Life Sciences IPO FAQs

  1. 1. Why Fabino Life Sciences IPO?

    The initial public offer (IPO) of Fabino Life Sciences Limited offers an early investment opportunity in Fabino Life Sciences Limited. A stock market investor can buy Fabino Life Sciences IPO shares by applying in IPO before Fabino Life Sciences Limited shares get listed at the stock exchanges. An investor could invest in Fabino Life Sciences IPO for short term listing gain or a long term.

  2. 2. How is Fabino Life Sciences IPO?

    Read the Fabino Life Sciences IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Fabino Life Sciences IPO what should investors do?

    Fabino Life Sciences IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Fabino Life Sciences IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is Fabino Life Sciences IPO good?

    Our recommendation for Fabino Life Sciences IPO is to avoid.

  5. 5. Is Fabino Life Sciences IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Fabino Life Sciences IPO.

  6. 6. When will Fabino Life Sciences IPO allotment status?

    The Fabino Life Sciences IPO allotment status will be available on or around Jan 10, 2022. The allotted shares will be credited in demat account by Jan 12, 2022. Visit Fabino Life Sciences IPO allotment status to check.

  7. 7. When will Fabino Life Sciences IPO list?

    The Fabino Life Sciences IPO will list on Thursday, January 13, 2022, at BSE SME.