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Sudarshan Pharma BSE SME IPO review (Avoid)

Review By Dilip Davda on March 3, 2023

• SPIL is in the business of trading specialty chemicals, and intermediates for the pharma industry.
• It originally planned its maiden IPO in June 2019 but failed to sail through.
• This is the second time it is trying its luck with a more than 10-fold rise in IPO expenses.
• Based on the current financial data, the issue is fully priced and discounts near-term positives.
• There is no harm in skipping this "high-risk/low-return" bet. 

This company originally tried its luck for the maiden float in June 2019, but after getting just around 47% subscription till the last day, it was withdrawn. At that time the mandate was with First Overseas Capital Ltd. for an IPO of Rs. 24.77 cr. at a price of Rs. 72 per share (at a P/E of around 41) with an estimated issue expense of around Rs. 0.75 cr. and dilution of 26.49%. In this issue offer document, it referred to Torrent Pharma, Alembic, Shilpa Medi., TTK Health and Biocon as their listed peers. 

Now with a different Lead Manager (LM) i.e. Gretex Corporate Services Ltd., it is coming with a book-building process IPO worth Rs. 50.10 cr. with estimated issue expenses of Rs. 7.90 cr. - A whopping rise in expenses indicates the arrangement of IPO funding. For this IPO, it has announced a price band of Rs. 71-Rs. 73 per share. (at a P/E of around 24.33) and a dilution of 28.52%. This offer document has shown Eris, Sigachi and Aarti Drugs as their listed peers.

[Clarification by the company] Since the last issue in 2019, the company has undergone product mix which were not comparable to the peers mentioned in that offer document. Hence, to provide correct information to the investor the company has mentioned Eris, Sigachi and Aarti Drugs prevailing listed peers. Once the company commissions the new plant in next 2 years the competitors are bound to change as it moves up the value chain.

So even if we compare these two offer documents, the change in LM and list of peers raises major concerns. Almost 10 times hike in issue expenses for the nearly double size of IPO also remains a tricky aspect. Other major concerns are direct tax cases against promoters for Rs. 7.41 cr. (excluding penalty/interest). Its borrowing more than doubled from Rs. 20.81 cr. as of March 31, 2020, to Rs. 49.41 cr. as of September 30, 2022. (refer to pages 24 and 25 of the offer document).

The only plus point is the growth reported in its working. But the asking price fully discounts it with the near-term positives. In fact, the greed in the pricing of the IPO still persists.

Sudarshan Pharma Industries Ltd. (SPIL)was originally incorporated as Sudarshan Specialty Chemsolve Pvt. Ltd. in 2008 and over the period, it changed its name to the current one. It is engaged in the business of specialty chemicals and intermediates for pharma, agrochemicals, coating, paints, adhesives and various other industries. It is also in Active Pharmaceuticals Ingredients (APIs). It is also engaged in the import and export of specialty chemicals. Some products it outsources from manufacturers at its toll manufacturing facilities. 

The company is also involved in contract manufacturing, outsourcing and supply of generic pharma formulations and medicines to healthcare institutions, governments, NGOs, and Hospitals. Most of the products are outsourced from a third party that is approved by FDA, WHO, and other relevant authorities. It normally enters into one to three years contracts for manufacturing agreements.

SPIL has launched a wide product range in pharma formulations such as Setdown, Pulmo relief, Fix Pollen, Flupimac and many more as well as has established goodwill for quality products and has regular clients for the same. It has entered into MOU / Agreements with Storage Houses / Warehouses facility providers at Bhiwandi Thane, Maharashtra, Wada Palghar, Maharashtra and Baddi, Himachal Pradesh for using their premises for the stock keeping of products. 

To develop its export business, the company is in the process of applying for 16 formulation registrations in countries like Ghana, Georgia, Myanmar, Nigeria, Kenya, Malaysia & MINA region. The product registrations will boost exports and Pharma business operations. 

SPIL is planning for business expansion by having its own state-of-the-art manufacturing facility at Mahad along with its mini manufacturing facility at Wada Area, Formulation GMP unit at Tarapur, Maharashtra. It also plans to develop a distributor network & logistic facilities in Mumbai, Delhi, Chennai, Hyderabad and Ahmedabad. This shall also support E-commerce and Online marketing of the company's products. It will be equipped with ultra-modern facilities to execute all types of manufacturing activities from manufacturing intermediates and further API (Active Pharma Ingredients) including Vitamin B6 which is been granted to the company by Government under the PLI scheme. As of November 30, 2022, it had 43 employees on its payroll and also hires contract labour as and when required. 

The company is coming out with a maiden IPO (a second try) of 6862400 equity shares of Rs. 10 each via book building process to mobilize Rs. 50.20 cr. at the upper cap. It has announced a price band of Rs. 71 - Rs. 73 per share. The issue opens for subscription on March 09, 2023, and will close on March 14, 2023. The minimum application to be made is for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 28.52% of the post-issue paid-up capital of the company. SPIL is spending a whooping Rs.7.90 cr. for this IPO process and from the net generation, it will utilize Rs. 32 cr. for working capital and the rest for general corporate purposes. 

Gretex Corporate Services Ltd. is the sole lead manager and KFin Technologies Ltd. is the registrar of the issue. Gretex group company Gretex Share Broking Pvt. Ltd. is the market maker for the company.

Having issued initial equity shares at par, SPIL issued further equity shares in the price range of Rs. 11.00 to Rs.130.00 per share between October 2016 and October 2022. It also issued bonus shares in the ratio of 15 for 1 in September 2016, 7 for 10 in August 2018, and 1 for 2 in November 2022. The average cost of acquisition of shares by the promoters is Rs. 6.76 and Rs. 14.08 per share. 

Post-IPO, SPIL's current paid-up equity capital of Rs. 17.20 cr. will stand enhanced to Rs. 24.07 cr. Based on the upper cap of the IPO price, the company is looking for a market cap of Rs. 175.68 cr. With this capital base, it is coming on SME listing, which also surprises all.

[Clarification by the company] company contemplated to get listed on the main board but considering the time and size it decided to go with SME listing.

On the financial performance front, for the last three fiscals, SPIL has posted a turnover/net profit of Rs. 148.00 cr. / Rs. 1.28 cr. (FY20), Rs. 193.73 cr. / Rs. 2.67 cr. (FY21), and Rs. 357.56 cr. / Rs. 5.30 cr. (FY22). For H1 of FY23 ended on September 30, 2022, it earned a net profit of Rs. 3.61 cr. on a turnover of Rs. 195.90 cr. The sudden boost in its bottom lines for the last 18 months raises eyebrows. 










Net Profit





PAT Margin





[Clarification by the company] As seen in the above table, the growth in PAT Margin is not abnormal. As mentioned, the company has started focusing on high margin product mix and hence the company has been reporting better profit margins.

For the last three fiscals, the company has reported an average EPS of Rs. 3.92 and an average RoNW of 13.93%. The issue is priced at a P/BV of 2.21 on the basis of its NAV of Rs. 33.00 as of September 30, 2022, and at a P/BV of 1.80 based on its post-IPO NAV of Rs. 40.65 per share (at the upper cap). 

If we annualize FY23 earnings and attribute it to the post-IPO fully paid-up equity capital base, the asking price is at a P/E of around 24.33. Thus the greed in the pricing of the IPO still persists.

[Clarification by the company] Even if the company doesn't raise the capital, they are capable to achieve the annualized FY23 earnings assumed in the calculation. Having said that, the capital raised through this IPO will be fully utilized during next fiscal i.e. FY23-24 which would only enhance our profitability and thereby make our P/E attractive. There is no question of greed.

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

As per the offer document, the company has shown Eris Lifesciences, Sigachi Ind., and Aarti Drugs as their listed peers. They are trading at a P/E of 21.62, 18.37, and 22.12 (as of March 03, 2023). However, they are not truly comparable on an apple-to-apple basis. This time, it has shown a different set of peers which raises eyebrows. All these big players are trading at a lower P/E than SPIL. 

This is the 15th mandate from Gretex Corporate in the last three fiscals (including the ongoing one). Out of the last 10 listings, 2 opened at a discount and the rest were listed at premiums ranging from 0.47 % to 67.71 % on the listing date. It has a poor track record.

[Clarification by the company] Gretex Corporate has given investors a suitable return. Some of the examples are as below: A company's performance cannot be determined on what returns it makes on a Listing Day.


Date of


Issue Price

Current Market Price

Rate of


Railway Electrification





Plastic Packaging





OEM & Civil Construction





Industrial Plastic Products





Speciality Chemicals





Conclusion / Investment Strategy

SPIL which failed to sail through its maiden IPO in June 2019 is trying for the second time for nearly double the amount. It is spending whooping Rs. 7.90 cr. (over 10 times projected for the first try) for this IPO process. It has changed the lead manager for this offer and the list of listed peers. Higher borrowings (Rs. 49.41 cr.), and tax notices of Rs. 7.41 cr. (excluding interest/penalty thereon) raises concern. Though it has posted growth in its financial data, it is fully mirrored including the near-term positives in the asking price. Off late we are witnessing a faded out of fancy for the pharma/healthcare segment post-pandemic. There is no harm in skipping this “High-Risk/Low-Return” bet.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on March 3, 2023

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. My reviews do not cover GMP market and operators game plans. Readers must consult a qualified financial advisor before making any actual investment decisions, based the on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the recent past, SME IPOs drew the attention of investors across the board and lead to seer madness. 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 their own risk. The above information is based on information available as of date coupled with market perceptions. The Author has no plans to invest in this offer.

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.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: ).

Sudarshan Pharma Industries IPO FAQs

  1. 1. Why Sudarshan Pharma Industries IPO?

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

  2. 2. How is Sudarshan Pharma Industries IPO?

    Read the Sudarshan Pharma Industries IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Sudarshan Pharma Industries IPO what should investors do?

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

  4. 4. Is Sudarshan Pharma Industries IPO good?

    Our recommendation for Sudarshan Pharma Industries IPO is to avoid.

  5. 5. Is Sudarshan Pharma Industries IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Sudarshan Pharma Industries IPO.

  6. 6. When will Sudarshan Pharma Industries IPO allotment status?

    The Sudarshan Pharma Industries IPO allotment status will be available on or around March 17, 2023. The allotted shares will be credited in demat account by March 21, 2023. Visit Sudarshan Pharma Industries IPO allotment status to check.

  7. 7. When will Sudarshan Pharma Industries IPO list?

    The Sudarshan Pharma Industries IPO will list on Wednesday, March 22, 2023, at BSE SME.


1. Pankaj Parekh     Link|March 9, 2023 1:43:05 PM

I have known Sudarshan Pharma Ind. since their inception, they are young, dynamic and competent. While most companies in the pharma sector are struggling, Sudarshan Pharma is growing fast. The company manufactures a wide range of pharma as well as premium chemicals products and is further developing. They seem to be in debt due to their capex and plant expansion. Any fast-growing company that has a vision and capital infusion will naturally have early-stage debt. At most they face IT notice which was during covid time and the case is pending with IT department. After considering all aspects, a growing company with a good vision is likely to pay off going forward.