Eris
is promoted by Mr. Amit I. Bakshi, Mr. Himanshu J. Shah and Mr.
Inderjeet Singh Negi having an average experience of more than a decade
in pharmaceuticals industry. In FY17, Eric was ranked at 20th place out
of 377 domestic and MNCs Chronic segment players of Indian
pharmaceutical market in terms of revenues.
As
of Mar’17, its product portfolio comprises of 80 mother brand
groups with primary focus on niche therapies. Eris owns and operates a
manufacturing facility in Guwahati (Assam) with capacity utilization of
30%. Assam plant contributes 85% to its revenue and outsourcing (~20
third party manufacturers) contributes the rest. As of Mar’17, the
Company has 7 sales divisions with 1,501 marketing representatives.
Eris
is coming out with an Initial Public Offering (IPO) with Offer for
Sale (OFS) of 28.87mn equity shares of Rs1 each to raise up to
Rs17.3-17.4bn. The Issue comprises of net offer to public up to 28.72mn
equity shares with an Employee Reservation Portion of 15 lakh equity
shares. Eris will not receive any proceeds from the Offer, as the
proceeds will go to the selling shareholders, in proportion to the
equity shares offered by the respective selling shareholders.
The
Issue will open for subscription on Friday, June 16, 2017 and close
on Tuesday, June 20, 2017. The price band of the Public Issue is fixed
at Rs600 to Rs603 per share. At the upper end of the price band, Eris’
market capitalization works out at Rs82.91bn. The shares will be listed
on BSE and NSE.
Outlook & Valuation
Eris
has reported strong growth in sales (17% CAGR) and PAT (43% CAGR)
with margin expansion of ~1,500bps to 37% over FY13-17. Further, RoE and
RoCE ratios are very impressive at 45% and 38%, respectively. Looking
ahead, we expect huge scope for margin improvement with increase in
capacity utilization at Guwahati (Assam) plant from current level of
30%.
At
the upper end of the IPO price band, the stock is valued at P/E
ratio of 34x FY17 earnings of Rs17.6. Despite expensive valuation, we
recommend SUBSCRIBE to the IPO as Eris is expected to be benefitted from
imminent growth opportunity on account of secular growth in Indian
pharma market led by favourable macro environment, high return ratios,
and healthy earnings/EBITDA growth.
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