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JFL Life NSE SME IPO review (May apply)

Review By Dilip Davda on Aug 16, 2022

•    JFLL is engaged in pharma products like injectables, capsules, and tablets. 
•    Due to the pandemic and expansion on hand, it marked a static top line.
•    Added capacities helped it to increase its margins as reflected in FY22 earnings.
•    The issue is fully priced on the basis of its latest financial performance.
•    Considering fancy for pharma counters, investors may consider an investment with a medium to long-term perspective. 

ABOUT COMPANY:
JFL Life Sciences Ltd. (JFLL) is engaged in the business of manufacturing pharmaceutical products. The company is engaged in domestic as well as international business. With a market presence in PAN India, products of JFL are supplied to 10 developed and developing countries throughout the World. To maintain its competitiveness and to further the cause of health care JFL has laid a strong R&D foundation and an FDA-approved state-of-the-art manufacturing facility near Ahmedabad. 

JFLL is a manufacturing company, so its sales strategy is to sell products in bulk to pharmaceutical marketers and traders who in turn provide the channel for sales to customers. The company do not sell it under any brand name and uses the same strategy for both domestic & international market. Its product portfolio includes - Dry powder injections, Tablets & Capsules (B-Lactam) solid oral dosage form, Tablet and capsules (General), and Oral Rehydration Solutions (ORS).

It exports products majorly to African countries, Middle Eastern countries, and CIS countries, mainly through merchant exporters. The Company is registered with the MOH of Kenya, Nigeria, Yemen, Cambodia & Myanmar for the manufacturing of a particular product. A few of its products are also registered with Ukraine, Uzbekistan, and Kazakhstan (CIS countries) through merchants. As of February 28, 2022, it had 36 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for repayment of loans (Rs. 7.50 cr.), working capital (Rs. 6.00 cr.), and general corporate purposes (Rs. 4.27 cr.), JFLL is coming out with a maiden IPO of 2978000 equity shares of Rs. 10 each at a fixed price of Rs. 61 per share to mobilize Rs. 18.17 cr. The issue opens for subscription on August 25, 2022, and will close on August 30, 2022. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 27.08% of the post-IPO paid-up capital of the company. JFLL is spending Rs. 0.40 cr. for this IPO process. 

The issue is solely lead managed by GYR Capital Advisors Pvt. Ltd. (erstwhile known as Alpha Numero Services Pvt. Ltd.), KFin Technologies Ltd. is the registrar to the issue, and Econo Broking Pvt. Ltd., is the market maker for this IPO. 

Having issued initial equity at par, the company issued further equity shares in the price range of Rs. 90 - Rs. 130 between March 2013 and January 2021. It has also issued bonus shares in the ratio of 12 for 1 in January 2022. The average cost of acquisition of shares by the promoters is Rs. 9.00 and Rs. 9.31 per share. 

Post-IPO, JFLL's current paid-up equity capital of Rs. 8.02 cr. will stand enhanced to Rs. 11.00 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 67.09 cr. 

FINANCIAL PERFORMANCE: 
On the financial performance front, for the last three fiscals, JFLL has posted turnover/net profits of Rs. 31.78 cr. / Rs. 0.30 cr. (FY19), Rs. 30.20 cr. / Rs. 0.36 cr. (FY20), Rs. 32.87 cr. / Rs. 0.54 cr. (FY21). For the first 11 months of FY22 ended on February 28, 2022, it earned a net profit of Rs. 2.53 cr. on a turnover of Rs. 25.63 cr. It marked static top lines so far but has shifted its focus to high-margin products. Though it primarily focused on injectable products, it has now added capsules and tablet manufacturing plants. As clarified by its management, the company has created extra production facilities and also completed the registration and approval process, it is now ready to reap the benefits of its expansion. Its turnover includes over 77% of export earnings. 

For the last three fiscals, JFLL has posted an average EPS of Rs. 0.76 and an average RoNW of 7.18%. The issue is priced at a P/BV of 4.46 based on its NAV of Rs. 13.67 as of February 28, 2022, and at a P/BV of 2.30 based on its post-IPO NAV of Rs. 26.48 per share. 

If we attribute FY22 annualized earnings on post IPO fully diluted equity, then the asking price is at a P/E of around 26.52 making it a fully priced issue. 

COMPARISON WITH LISTED PEERS:
As per the offer document, JFLL has shown Zenith Health and Vaishali Pharma as its listed peers. They are currently trading at a P/E of 194.33 and 19.27 (as of August 16, 2022). However, they are not truly comparable on an apple-to-apple basis. 

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

MERCHANT BANKER'S TRACK RECORDS:
This is the 6th mandate from GYR Capital in the last two fiscals (including the ongoing one). Out of the last four listings, all were listed with a premium ranging from 2.45% to 6.15% on the day of listing. Thus it has an average track record.


Conclusion / Investment Strategy

The company is in the pharma sector and has already created an extra facility for its product lines and has the necessary certifications in hand for global markets. Due to the pandemic and the thrust for expansion, it posted static top lines but managed to get higher margins for certain products. It is now ready with additional capacities to reap the benefits of demand. Considering fancy for pharma sector counters, investors may consider an investment with a medium to long-term perspective in this fully priced issue.

Review By Dilip Davda on Aug 16, 2022

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

JFL Life Sciences IPO FAQs

  1. 1. Why JFL Life Sciences IPO?

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

  2. 2. How is JFL Life Sciences IPO?

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

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

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

  4. 4. Is JFL Life Sciences IPO good?

    Our recommendation for JFL Life Sciences IPO is to subscribe for long term.

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

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the JFL Life Sciences IPO.

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

    The JFL Life Sciences IPO allotment status will be available on or around Sep 5, 2022. The allotted shares will be credited in demat account by Sep 7, 2022. Visit JFL Life Sciences IPO allotment status to check.

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

    The JFL Life Sciences IPO will list on Thursday, September 8, 2022, at NSE SME.

1 Comments

1. AAvi  
Sir
Humble request if you include few lines on company debt position and its effect.
Regards