Amidst the falling stock market, Vaccine-Maker GreenSignal Bio Pharma IPO is going to hit capital market on 9th November at a price band of Rs.76 to Rs.80 per share. The company is looking to raise Rs.116 core through this IPO. The offer constitutes 38% of the fully diluted post-offer paid-up capital of the company. Let’s see whether GreenSignal Bio Pharma IPO is worth investing or not.
About GreenSignal Bio Pharma Limited
GreenSignal Bio Pharma Limited was Incorporate in 2005 having its registered office in Chennai. The company is engaged in the development, manufacture and the sale of BCG Vaccine and amongst the four companies globally who have been qualified to supply the BCG Vaccine to the UNICEF for long term. Besides UNICEF, company supplies BCG vaccine to Indonesia, Nepal and had also procured orders through bidding process for supplying vaccine to Indian Ministry of Health for the past five years. Company has a manufacturing facility located at Tamil Nadu which is equipped with advanced equipment for manufacturing of BCG Vaccine and has amongst the top Indian companies supplying vaccines across the globe.
Till now company was in arrangement with Cadila Healthcare Limited and producing the BCG ONCO Vaccine under the brand name of Oncovac. The arrangement has expired on June 29th, 2016 and the company has started producing the same vaccine under its own registered brand name of Urovac.
The company’s operations are classified according to geographical areas i.e. international and domestic (India) geographical areas. For the last financial year 2015-16, company’s domestic operations accounted 53.79% of the net revenue while rest 46.20% comes from the international operations.
Features of GreenSignal Bio Pharma IPO
- Issue Opens On: Wednesday November 9th, 2016
- Issue Closes On: Friday November 11th, 2016
- Issue Type:100% Book Building
- Issue Price Band: Rs.76–Rs.80 per share
- Discount: No Discount to Retail Category Only
- Face Value Per Share: Rs.10
- Minimum Bid Lot: 175 Equity Shares and in multiples of 175 equity shares thereafter
- Minimum Order Value: Rs.13,300 to Rs.14,000
- Issue Size: Rs.116crore
- Proposed Listing: Bombay Stock Exchange and National Stock Exchange
- Lead Managers: Indian Overseas Bank (Merchant Banking Division)
- Registrar: Bigshare Services Pvt Ltd
- Company Promoters: Mr. P.Sundaraparipooranan and Dr. P.Murali
- Download GreenSignal Bio Pharma IPO Prospectus HERE
Objectives of GreenSignal Bio Pharma IPO
GreenSignal Bio Pharma IPO is an Offer for Sale (OFS) by promoters P Sundaraparipooranan, P Murali, R Srinivasan and Avon Cycles. Thus whole sale proceeds will go to them and the company will not receive any proceeds from the offer.
Category wise Proportion of GreenSignal Bio Pharma IPO
|Allocation (% of Issue Size)||No. of Equity Shares||Percentage|
|Qualified Institutional Buyers (QIB)||At least 1,09,34,670 Equity Shares||75%|
|Non‐Institutional Buyers (NIB)||Not more than 21,86,934 Equity Shares||15%|
|Retail Investors||Not more than 14,57,956 Equity Shares||10%|
Financial Performance of GreenSignal Bio Pharma Limited
- Company has posted net revenue from operations of Rs.20.39 crore for the fiscal year ended 31st March, 2016 i.e. massive jump of 210 percent from FY 2015 which stood at Rs.6.56 crore. Company has reported CAGR of 12.59% for the last five financial years and for the 3 months ended 30th June, 2016 Company has posted net revenue of Rs.10.39 crore.
- The EBIDTA margin has also surged at a massive rate i.e. from 28% in FY 2015 to 73% in FY 2016. The same EBIDTA margin of 68% is reported for the 3 months ended 30th June, 2016.
- The company has turned profitable only in the last financial year i.e. in 2016 and has posted PAT of Rs.5.31 crore. Past 4 years preceding to the last financial year were not good for the company as seen in the table below.
- RoNW was also negative for FY 2014 and FY 2015. However, for FY 2016 Company has recorded RoNW of 11.86%.
- Earnings per share has also turned positive in the last FY. The same trend is seen carried forward in the current fiscal year.
Turn-on Points of GreenSignal Bio Pharma IPO
- GreenSignal BIO Pharma is amongst four companies who have been WHO-prequalified to supply BCG vaccines to UNICEF. Further, company has procured long term arrangements with UNICEF to supply the BCG vaccine
- Company has managed to retain its position of highest exporter of BCG vaccine and is exporting products to 17 countries either directly through UNICEF or indirectly, through supply, distribution and other arrangements.
- The clients list of the company includes Indian Ministry of Health, UNICEF, Nepal, Indonesia and other countries. However, MoH and UNICEF together constitute more than 50% revenue of the company.
- Company’s product BCG and BCG-ONCO both are generic drugs and thus do not require any patent for the same. However, company has procured a registered trademark for BCG ONCO name Urovac.
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Turn-off Points of GreenSignal Bio Pharma IPO
- Company’s performance has been very inconsistent in the past. For FY 2014 and FY 2015 revenues were declined sharply on account of losing bid of MoH Tenders due to price increase under the arrangement with Cadila Healthcare Limited and corresponding lower quantity ordered by Cadila Healthcare Limited.
- Company has been working with one of the biggest drug maker of India and has recently separated with them. The impact of the same is yet to be seen as company has not posted its September quarter results.
- Indian Government vide notification has capped the price of BCG vaccine to Rs.5.58 per dose. This limits the profitability of the company. Further, the contract with main client of the company i.e. UNICEF is going to expire by November 2018 and there is no assurance that the same will be renewed.
- Company is involved in legal tussle relating to trademark at present. In past also, there had been criminal litigations initiated by Central Bureau of Investigation.
Should You Invest in GreenSignal Bio Pharma IPO?
The demand of the BCG vaccines is estimated at approximately 28 crores doses annually, with the highest requirement coming from India. The total shortfall for BCG vaccination is estimated nearly 3 crore annually. The company has installed and approved capacity of 1 crore vials per year but currently operating at only 50 percent, the unutilized capacity can be put to use to meet the deficiency.
Currently company has order book of 84 lakhs vials which are to be executed in the next two years.
|Institution||Year||Number of Vials||Rates per Vial|
|Government of India||2016-2017||25 lacs||Rs.36.75|
|UNICEF||2016||08 lacs||US $ 1.36|
|2017||10 lacs||US $ 1.50|
|2018||10 lacs||US $ 1.80|
|Nepal||2016||02 lacs||US $ 1.50|
|2017||02 lacs||US $ 1.50|
|2018||02 lacs||US $ 1.50|
Coming on the pricing of IPO, taking diluted EPS of Rs.1.45 per share PE works out to be in range of whopping 52X to 55X at an asking price band of Rs.76 to Rs.80 per share. Since company has no listed peers, price comparison cannot be made.
Keeping in mind that company is just separated from Cadila health care. I would first like to wait for few quarter to see whether the management is able to maintain the same margins and sale as in first quarter ended in June before investing. Also, company has not posted healthy financials in the past years and is totally dependent on two products, so wait and watch would be the strategy for GreenSignal Bio Pharma IPO as of now.