Blue Jet Healthcare Ltd IPO
Published by Sharekhan Education | October 25, 2023
Amit Pathak | Sharekhan Education
Issue Details:
Blue Jet Healthcare Ltd IPO has an issue Size: ₹840.27 Crores, the price band is ₹329-346. The issue opens on October 25, 2023 and closes on October 27, 2023.
Company Overview:
Blue Jet Healthcare Ltd. is a unique pharmaceutical company specializing in niche products targeted towards both innovator and generic pharmaceutical companies. They have built a contract development and manufacturing organization (CDMO) business model with specialized chemistry capabilities in contrast media intermediates and high-intensity sweeteners. Their in-house manufacturing capabilities cover a range of products, including key starting intermediates and advanced intermediates. They operate three manufacturing facilities, strategically located in Shahad, Ambernath, and Mahad, all in the state of Maharashtra.
IPO Objectives:
The Blue Jet Healthcare Ltd IPO is an “offer for sale,” which means that the company won’t directly benefit from the proceeds. However, the listing of equity shares is expected to boost the company’s visibility and brand image. It will also provide liquidity to shareholders and create a public market for its equity shares in India. Investors can apply for a minimum of 43 shares and in multiples thereafter. Once allotted, the shares will be listed on both the BSE and NSE.
Competitive Strengths:
Blue Jet Healthcare Ltd. holds a competitive edge in the global contrast media market. This is primarily due to well-established customer relationships with leading contrast media manufacturers, a deep understanding of customer requirements, and a proven track record of forward integration. The company has honed its product development and process optimization capabilities, supported by in-house research and development. Furthermore, their manufacturing facilities have received accreditation from various regulatory agencies.
Business Strategy:
The company’s strategic vision involves acquiring new customers, with a particular focus on novel products in advanced development stages and complex chemistries. They aim to secure a larger market share with existing customers while working on expanding margins through improved operational efficiency, semi-automation, and capitalizing on economies of scale. Their production capacities in Unit II and Unit III are slated for expansion from 607.30 KL to 743 KL and from 213 KL to 499 KL by FY25.
Key Concerns:
Blue Jet Healthcare Ltd. operates in a heavily regulated environment, subject to government regulations governing the Indian and global pharmaceutical market. Non-compliance with regulatory requirements could lead to penalties. Additionally, the company may be obligated to pay royalty fees for the trademark owned by the Promoter, Akshay Bansarilal Arora. Foreign exchange risk is a concern, given that over 80% of their revenues come from exports. The geographical concentration risk is another issue, as all manufacturing facilities are situated in Maharashtra.
Financial Performance:
The company has exhibited robust financial growth over the past few years. Their revenue has seen a Compound Annual Growth Rate (CAGR) of 20.2% from FY21 to FY23. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) has increased at a CAGR of 3.1% over the same period, while the Profit After Tax (PAT) has grown at a CAGR of 8.5%. The EBITDA margin has contracted from 41.3% to 30.3%, primarily due to volatile fluctuations in raw material prices. Consequently, the Return on Equity (RoE) has decreased from 50.1% to 26.6%. At the upper end of the price band (₹329-346), the Post-IPO valuation appears to be fair, with a multiple of 34.02 times the FY23 earnings.
Source: IPO Red Herring Prospectus
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