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Tarsons Products IPO review (Apply)

Review By Dilip Davda on Nov 10, 2021

•    TPL is a plastic labware company enjoying the most preferred vendor status.
•    The company is gearing for expansion to meet rising demand.
•    Health-related segments have expanded post-pandemic, this augurs well for the company.
•    Issue appears reasonably priced and may be lapped up for medium to long term rewards.
•    The list of customers has many renowned end users with long term relationships. 

ABOUT COMPANY:
Tarsons Products Ltd. (TPL) is an Indian labware company engaged in the designing, development, manufacturing and marketing of 'consumables', 'reusables' and 'others' including benchtop equipment, used in various laboratories across research organizations, academia institutes, pharmaceutical companies, Contract Research Organizations ("CROs"), Diagnostic companies and hospitals (Source: Frost & Sullivan Report). It manufactures a range of quality labware products that helps advance scientific discovery and improve healthcare (Source: Frost & Sullivan Report). 

As of June 30, 2021, the company had a diversified product portfolio with over 1,700 SKUs across 300 products. Its product portfolio is classified into three key categories which include consumables, reusables, and others. 'Consumables' category includes products such as centrifuge ware, cryogenic ware, liquid handling, PCR consumables and petri dish, transfer pipettes and others. 'Reusables' category includes products such as bottles, carboys, beakers, measuring cylinders and tube racks. 'Others' category includes benchtop instrumentation such as vortex shakers, centrifuges pipettors and others. Consumable products which fall under the "Use and Throw" category accounts for nearly 62% of overall revenue and this brings regular business for the company. 

TPL caters to a diverse range of end customers across various sectors which include research organizations, academic institutions, pharmaceutical companies, CROs, diagnostic companies, and hospitals. Some of its end customers include customers such as Indian Institute of Chemical Technology, National Centre for Biological Sciences across academic institutes and research organizations; Dr Reddy's Laboratories, Enzene Biosciences across pharmaceutical sectors; Syngene International, Veeda Clinical Research across CROs; and Molbio Diagnostics, Agappe Diagnostic, Metropolis Healthcare, Dr Lal Path Labs, Mylab Life Solutions across other sectors such as diagnostics. TPL distributes products to these end customers on a Pan-India basis through authorised distributors. The company has long-standing relationships with end customers as well as distributors, which it has achieved by aligning offerings with their business needs and through the support of an on-ground sales and marketing team. 

The company currently operates through five manufacturing facilities located in West Bengal. These facilities are vertically integrated and equipped with automated support systems that help the company in maintaining quality, increasing productivity, and reducing costs. Its key manufacturing facilities are ISO 9001:2015 and ISO 13485:2016/NS-EN ISO 13485:2016 certified. In addition, it has received a CE-IVD certificate for products such as micro and macro tips, cryovials and centrifuge tubes which indicates that the products of the company have been assessed by the manufacturer and deemed to meet EU safety, health and environmental protection requirements enabling the Company access to the European region.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its plans for repayment/prepayment of certain borrowings (Rs. 78.54 cr.), funding proposed capex (Rs. 62.00 cr.) and general corporate purposes, TPL is coming out with a maiden combo book building process IPO consisting of fresh equity issue worth Rs. 150 cr. (approx. 2265868 shares at the upper cap) and an offer for sale (OFS) of 13200000 equity shares of Rs. 2 each (approx. Rs. 873.84 cr. at the upper cap). Thus the overall size of the issue is Rs. 1023.84 cr. (approx. 15465868 shares). The company has fixed the price band of Rs. 635 - Rs. 662 per share. 

The minimum application to be made is for 22 shares and in multiples thereon, thereafter. The issue opens for subscription on November 15, 2021, and will close on November 17, 2021. Post allotment, shares will be listed on BSE and NSE. The company has reserved 60000 shares for its eligible employees and offering them a discount of Rs. 61 per share. Out of the residual portion, it has allocated 50% for QIBs, 15% for HNIs and 35% for the Retail investors. The issue constitutes 29.07% of the post issue paid-up capital of the company. The joint Book Running Lead Managers (BRLMs) to this issue are ICICI Securities Ltd., Edelweiss Financial Services Ltd. and SBI Capital Markets Ltd. and KFin Technologies Pvt. Ltd. is the registrar to the issue. 

Having issued initial equity at par, the company converted some equity in the swap ratio of 1 for 82 shares for the amalgamation scheme. It has also issued bonus shares in the ratio of 52 for 1 in June 2021. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 0.03, Rs. 1.78 and Rs. 51.83 per share. 

Post issue, TPL's current paid-up equity capital of Rs. 10.19 cr. will stand enhanced to Rs. 10.64 cr. Based on the upper price band of the issue price, the company is looking for a market cap of Rs. 3522.26 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, TPL has posted a turnover/net profit of Rs. 184.72 cr. / Rs.38.96 cr. (Proforma-Standalone basis) for FY19, Rs. 180.05 cr. / Rs. 40.53 cr. (on a standalone basis) for FY20 and Rs. 234.29 cr./ Rs. 68.87 cr. (on a consolidated basis) for FY21. For the Q1 ended on June 30, 2021, for FY22 it has earned a net profit of Rs. 24.84 cr. on a turnover of Rs. 71.13 cr. (on a consolidated basis). Thus it has been reporting growth in bottom lines amidst all odds. 

For the last three fiscals, the company has posted an average EPS of Rs. 10.55 and an average RoNW of 25.73%. The issue is priced at a P/BV of 12.54 based on its NAV of Rs. 52.80 as of June 30, 2021, and at a P/BV of 8.41 based on its post-issue NAV of Rs. 78.74 (at the upper price band). 

If we annualize FY22 earnings and attribute it to fully diluted post issue equity capital, then the asking price is at a P/E of around 35.46. Thus considering the segment, the issue appears reasonably priced.

COMPARISON WITH LISTED PEERS:
As per the offer documents, TPL has no listed peers to compare with.

DIVIDEND POLICY:
The company has not paid any dividend till the filing of this offer RHP. However, it will adopt a prudent dividend policy post listing based on its financial performance and future prospects. 

MERCHANT BANKER'S PERFORMANCES:
The three BRLMs associated with this issue have handled 42 issues in the past three years and out of which 16 issues closed below the offer price on the listing date.


Conclusion / Investment Strategy

TPL is the second-largest player in plastic labware and post-pandemic, due to rising concerns for health, this company is poised for bright prospects ahead. It is expanding to meet the rising demand for its products. The issue appears reasonably priced based on its financial data and future prospects. TPL is enhancing its role and expanding its product portfolio. The scrip is expected to generate first-mover fancy post listing, Investors may consider investment for the medium to long term rewards.

Reviewer recommends Subscribing to the issue.

Review By Dilip Davda on Nov 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

Tarsons Products IPO FAQs

  1. 1. Why Tarsons Products IPO?

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

  2. 2. How is Tarsons Products IPO?

    Read the Tarsons Products IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Tarsons Products IPO what should investors do?

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

  4. 4. Is Tarsons Products IPO good?

    Our recommendation for Tarsons Products IPO is to subscribe.

  5. 5. Is Tarsons Products IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe to the Tarsons Products IPO.

  6. 6. When will Tarsons Products IPO allotment status?

    The Tarsons Products IPO allotment status will be available on or around Nov 23, 2021. The allotted shares will be credited in demat account by Nov 25, 2021. Visit Tarsons Products IPO allotment status to check.

  7. 7. When will Tarsons Products IPO list?

    The Tarsons Products IPO will list on Friday, November 26, 2021, at BSE, NSE.

1 Comments

1. balakrishnan  Nov 15, 2021 3:47:15 PM I Like It. | Report Abuse Reply
Why the inconsistency in reporting the financials. for one year it is consolidated and another it is standalone. how to see the consistency in growth