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Nureca Ltd IPO review (May apply)

Review By Dilip Davda on Feb 10, 2021

  • Nureca is in the business of home healthcare and wellness products.
  • FY21, H1 performance in IPO year raises eyebrows.
  • Sustainability of super performance amidst a highly fragmented market remains a major concern.
  • Nureca is offering a discount of Rs. 20 per share to eligible employees only.

ABOUT COMPANY:
NURECA Ltd. (NURECA) is a B2C company engaged in the business of home healthcare and wellness products which offers quality, durability, functionality, usability and innovative designs. Post COVID-19 the health awareness is surmounting and devices like Pulse Oximeters, Thermometers, Nebulizers, Self-monitoring glucose Devices, Humidifier and Steamers, wheelchairs, walkers, lumbar, breast pumps, bottle sterilizers, bottle warmers, car seats, baby carrycots, Nutrition supplements, Lifestyle products etc. are catching attention.

According to WHO, markets for such devices is expected to grow at a CAGR of 10% + and India is the major market with around 84%+ market share. NURECA is marketing its products in India on its own website drtrust.in and also using third-party e-commerce platforms, distributors and retailers. According to management, since the onset of the COVID-19 pandemic in March 2020, the company has responded swiftly by implementing various processes to ensure continuous and seamless operations that have resulted in the boosted top and bottom lines. NURECA is selling its products under the brand names of 'Dr.Trust', 'Dr. Physio' and 'TRUMOM'.

While the company's own manufacturing unit at Chandigarh is operating at around 20% capacity utilization, it majorly outsources its products from domestic and international markets. (Page 112 of RHP)

As of the date of filing of its RHP, the company has received 66 trademarks, 6 copyrights and 92 designs registration and has applied for more 12 trademark registration.

Currently, the company's 95% revenue comes from e-commerce and digital channels. It is now expanding its offline outlets and has a marketing team of 21 employees and overall 74 headcounts as on December 31, 2020. The Company follows prudent inventory management which is a critical point for its business success. The company is operating in a highly fragmented market with many local and global players in the field.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its plans for incremental working capital (Rs. 75 cr.) and general corpus fund needs, the company is coming out with a maiden IPO worth Rs.100 cr. The company has fixed the price band of Rs. 396 - Rs. 400 per share of Rs. 10 face value. Based on the upper price band, the company will be issuing approx. 2500000 shares. It has reserved shares worth Rs. 1 cr. for eligible employees and will offer a discount of Rs. 20 per share to them. Minimum application is to be made for 35 shares and in multiples thereof, thereafter. The issue opens for subscription on February 15, 2021, and will close on February 17, 2021. Post allotment, shares will be listed on BSE and NSE. Issue constitutes 25% of the post issue paid up capital of the company.

The issue is solely lead managed by ITI Capital Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue.

According to the lead manager, since the company could not meet the required parameters for IPO and Listing guidelines, it had to opt for 75% QIB, 15% for HNI and 10% Retail investor's quota. As the issue is below Rs. 250 cr., its initial listing will be in 'T' group which may eliminate speculation for the said period.

Having converted initial equity at no cost, the company issued further equity under private placement at a price of Rs. 100 per share in October 2020. It has also issued bonus shares in the ratio of 6 for 1 in September 2020. The average cost of acquisition of shares by the promoters is Rs. NIL per share.

NURECA's current paid-up equity capital of Rs. 7.50 cr. will stand enhanced to Rs. 10.00 cr. post issue. Based on the upper band price of the IPO, it is looking for a market cap of Rs. 400 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, on a consolidated basis, NURECA has posted total income/net profits of Rs. 20.07 cr. / Rs. 3.11 cr. (FY18), Rs. 61.98 cr. / Rs. 6.27 cr. (FY19) and Rs. 99.49 cr. / Rs. 6.40 cr. (FY20). For the first half ended on September 30, 2020, it has earned a net profit of Rs. 36.18 cr. on a turnover of Rs. 122.97 cr. According to management, the company has reaped benefits from the ongoing pandemic and such performance is likely in the near term with changing lifestyle and rising awareness for hygiene and health related products.

For the last three fiscals, the company has reported an average EPS of Rs. 8.28 and an average RoNW of 77.69%. The issue is priced at a P/BV of 5.42 (at the upper price band) based on its NAV of Rs. 73.78 as on September 30, 2020, and at a P/BV of 2.55 based on its post IPO NAV of Rs. 156.62 (at the upper price band).

If we attribute annualize latest earnings on fully diluted post issue equity, then asking price is at a P/E of around 5.53, which makes it lucratively priced offer. Based on last three fiscals' average EPS the P/E stands at 64.41 and on FY20 earnings, the P/E comes 58.35 (based on post issue paid up equity capital). Sustainability of super performance in IPO year (for FY21 H1) is a major concern.

MAJOR CONCERNS:

  1. Forecast for its holding level days for trade receivables and trade payables are 50 and 10 days. Rising competition and Government policies may raise concern going forward. (refer p70 of RHP)
  2. The Higher magnitude of projected trade receivables for next three fiscals raises concern. (Refer p70 of RHP).
  3. Company's own assembling plant operated at just 20% capacity utilization for FY 21 (partial operation) with a team of just 4 employees. (Refer p111 and p112 of RHP)
  4. Current revenue is largely from selling third-party/assembled imported devices. Change in Government policies may impact it's working.
  5. Family dispute raises concern for its current lease of Chandigarh plant renewals. (refer p 38 of RHP)

COMPARISION WITH LISTED PEERS:
As per offer documents, NURECA has no listed peers to compare with.

BRLM'S TRACK RECORDS:
The Book Running Lead Managers associated with the offer has handled 1 public issue in the past three years which closed below the issue price on listing date.


Conclusion / Investment Strategy

Though IPO appears lucratively priced based on its super performance for FY21 H1, the sustainability of it raises concern. The company is in a highly competitive and fragmented segment. Its own plant which is on lease may face family dispute risk. Considering these aspects, cash surplus risk savvy investors may consider investment at their own risk.

Review By Dilip Davda on Feb 10, 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. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

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

Nureca limited IPO FAQs

  1. 1. Why Nureca limited IPO?

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

  2. 2. How is Nureca limited IPO?

    Read the Nureca limited IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Nureca limited IPO what should investors do?

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

  4. 4. Is Nureca limited IPO good?

    Our recommendation for Nureca limited IPO is to subscribe for long term.

  5. 5. Is Nureca limited IPO worth Investing?

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

  6. 6. When will Nureca limited IPO allotment status?

    The Nureca limited IPO allotment status will be available on or around Feb 23, 2021. The allotted shares will be credited in demat account by Feb 24, 2021. Visit Nureca limited IPO allotment status to check.

  7. 7. When will Nureca limited IPO list?

    The Nureca limited IPO will list on Thursday, February 25, 2021, at BSE, NSE.

1 Comments

1. Tera Baap  Feb 13, 2021 20:12
Since this is in the T category, listing day gains can't exceed 5% and sale can happen only after delivery. Doesn't seem like a stock to take a punt with for short term gains