Medico Remedies BSE SME IPO review (Avoid)

Review By Dilip Davda on Jan 20, 2018

Medico Remedies Ltd. (MRL) is a pharmaceutical formulation manufacturing company with manufacturing and marketing capabilities in formulation with focus on anti-infective, Beta-Lactums, cephalosporins, antimalarial, antiretroviral, anti-ulcer drugs and antacids, vitamins, haematinics and other supplements. Further in addition to the above, Company also has manufacturing and marketing capabilities in other drugs such as NSAIDS, antihistaminic, anti-diabetics, cardio vascular drugs, diuretics, anti-epileptics, combination drug kits, syrups and cream & gel for various therapeutic segments. Currently it is engaged in manufacture of formulations for various medicines. Its clients include Indian as well as foreign pharmaceutical companies like Anphar Limited, Saad Medical, Manfes Pharmaceuticals & Chemical Industries, Award Global Company Limited, Directorate of Health Services (DHS, Maharashtra) to name a few. MRL also earns revenue from the sale of licenses such as FMS license, FPS license and MESI license.

To meet plans of repayment of loans, funding of expenditures and general corpus fund needs, MRL is coming out with a maiden IPO of 1099200 equity shares of Rs. 10 each at a fixed price of Rs. 100 per share to mobilize Rs. 10.99 crore. Issue comprises fresh equity issue of 949200 shares and OFS of 150000 shares. Issue opens for subscription on 29.01.18 and will close on 31.01.18. Minimum application is to be made for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue is solely lead managed by Aryaman Financial Services Ltd. and Cameo Corporate Services Ltd. is the registrar to the issue. Issue constitutes 26.49% of post issue paid up capital of the company. Having issued initial equity at par, it raised further equity in the price range of Rs. 75 to Rs. 125 between April 2007 and December 2014. It has also issued bonus shares in the ratio of 1 for 1 in September 2016. Post issue, its current paid up equity capital of Rs. 3.2 crore will stand enhanced to Rs. 4.15 crore.

On performance front, MRL posted turnover/net profits of Rs. 44.98 cr. / Rs. 0.63 cr. (FY14), Rs. 51.10 cr. / Rs. 0.79 cr. (FY15), Rs. 66.92 cr. / Rs. 1.13 cr. (FY16) and Rs. 54.78 cr. / Rs. 1.63 cr. (FY17). Though its top line declined, it reported higher net for FY17. For first half of the current fiscal, it has reported net profit of Rs. 0.40 cr. on a turnover of Rs. 29.76 cr. indicating pressure on margins. For last three fiscals it has posted an average EPS of Rs. 4.17 and average RoNW of 8.49%. Asking price is at a P/BV of 1.95 on the basis of its NAV of Rs. 51.16 as ib 31.03.17. If we annualize latest earnings and attribute it on fully diluted equity post issue, then issue is priced at a P/E of around 52 against its peers trading in the range of 13 to 31 P/E. Thus issue is priced very aggressively.

On merchant banker’s front, this is the 25th mandate from its stable in last three fiscals. Out of last 10 listings 2 opened at a discount, 3 around par and the rest with a premium ranging from 1 to 20% on the day of listing. (With listing of Silly Monk as on 18.01.18)

 


Conclusion / Investment Strategy

There is no harm in giving this aggressively priced offer a miss.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Jan 20, 2018

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

Medico Remedies IPO FAQs

  1. 1. Why Medico Remedies IPO?

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

  2. 2. How is Medico Remedies IPO?

    Read the Medico Remedies IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Medico Remedies IPO what should investors do?

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

  4. 4. Is Medico Remedies IPO good?

    Our recommendation for Medico Remedies IPO is to avoid.

  5. 5. Is Medico Remedies IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Medico Remedies IPO.

  6. 6. When will Medico Remedies IPO allotment status?

    The Medico Remedies IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Medico Remedies IPO allotment status to check.

  7. 7. When will Medico Remedies IPO list?

    The Medico Remedies IPO will list on Thursday, February 8, 2018, at BSE SME.








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