IPO

Monday, November 07, 2016 Click here for Rating Reckoner
Greensignal Bio Pharma
2 products, 2 customers
CM RATING25/100
Incorporated in 2005 and promoted by P. Sundaraparipooranan and Dr. P Murali, Greensignal Bio Pharma (GSBP) is an Indian vaccine manufacturing company that develops, manufactures and sales BCG vaccine. It produces two products, i.e., BCG vaccine for immunization against tuberculosis and BCG-ONCO for immunotherapy (freeze dried) BP for the treatment of urinary bladder carcinoma under the brand name, Urovac. As both vaccines produced by the company are generic drugs it does not require any patents for the same, and hence the company has not applied for any patent and no patent is registered.

It is one of the four companies worldwide to have been WHO-prequalified to supply the BCG vaccine to UNICEF. In fact, this is the second company from India to get such pre-qualification and has secured a long term arrangements with UNICEF to supply the BCG vaccine to UNICEF subject to the purchase orders placed with the company. UN agencies and partnerships such as UNICEF, UNFPA, UNITAID, the Global Fund and the GAVI Alliance facilitate the supply of life-saving quality assured medicines and vaccines to millions of patients in resource-limited countries across the world. These agencies only buy products that have been through the WHO prequalification scheme, which ensures that medicines, vaccines and diagnostics meet international standards of quality, safety and efficacy.

The company supplies the BCG vaccine to the Ministry of Health pursuant to the tendering process.

It also supplies the BCG vaccine to international markets such as Indonesia and Nepal. The company intend to market its immunotherapy drug in other overseas jurisdictions such as Lebanon, Saudi Arabia, Turkey and Switzerland, subject to obtaining various regulatory approvals.

The company has a manufacturing facility located at Pappankuppam village, Gummidipoondi, Tiruvallur district, Tamil Nadu, equipped with advanced equipment dedicated for the manufacturing of live attenuated BCG vaccine and the BCG-ONCO for immunotherapy.

Of the total sales of FY 2016, around 54% came from domestic sales and rest from international markets.

The Offer and the Objects

The issue comprises of offer for sale of 1.46 crore equity shares by the selling shareholders, which at the lower price band of Rs 76 per share works out to issue size of Rs 110.80 crore and, at the higher price band of Rs 80 per share, works out to an issue size of Rs 116.64 crore. The selling shareholders comprises of Promoters and Group namely P. Sundaraparipooranan, P. Murali, Mallika Murali (total of 1.22 crore shraes) and other selling shareholders namely Avon cycles ( 23.75 lakh shares) and R Srinivasan ( 0.19 lakh shares).

The minimum bid lot is 175 equity shares and in multiples of 175 equity shares. The issue is made through a book building process and will open on 9th November and will close on 11 November, with anchor Investor bidding date of 8 November 2016.

The object of the offer is to achieve the listing benefits of equity shares on BSE and NSE and to enhance the visibility and brand image among the existing and potential customers and provide liquidity to existing shareholders.

Strengths

The global vaccines market is expected to reach US $ 57 billion by 2019 from US $ 33 billion in 2014, growing at a CAGR of 11.8% from 2014 to 2019.

On the back of strong focus of the government on increasing the immunization activities across the country, increasing awareness, availability of affordable vaccines, the Indian vaccine industry is expected to continue to grow at a CAGR of 12-15% over the next five years. India is one of the largest manufacturers and exporters of vaccines world-wide, with 12 major vaccine manufacturing facilities. These vaccines are used for the national and international markets (150 countries), which makes India a major vaccine supplier across the globe.

The company has obtained WHO prequalification from UNICEF for CY 2016, CY 2017 and CY 2018 which can drive earnings going forward.

Weakness

Small size, inconsistent track record and limited operating history

The vaccine business is highly regulated and any regulatory drawback can lead to severe material financial issues. Any change in government spending or allocation on the regulatory drugs can also lead to severe financial implications.

Complete dependence on two products and two customers. BCG vaccine constitutes around 82% of total revenue for FY 2016. UNICEF and the Ministry of Health account for around 64% and 46% of the total revenues, respectively, for the June 2016 quarter.

Tender based business. If the company is not able to obtain orders from the Ministry of Health, revenues will be lower as there are no other customers domestically. The company failed to get the orders in FY 2014 and in FY 2015 leading to substantially lower revenues and losses,

In India, the price of BCG drug is regulated by the government. Hence the future rise in sales will be only volume driven in India unless the company gets some more export contracts, which it started only from FY 2015 onwards, prior to which there was no export revenues.

The company had entered into sales and distribution agreement with Cadila Healthcare for five years and the same expired in June 2016. Under this contract, Cadila Healthcare was marketing its product BCG-ONCO for immunotherapy under its own brand name, Oncovac, in the domestic Indian market on an exclusive basis. Upon expiry of this exclusive sale and distribution agreement the challenge will be to market its product under its own registered brand name, Urovac, in India.

Cash flows from operating activities after adjusting for working capital changes are negative in FY 2016 and in June 2016 quarter due to increase in sundry debtors.

Exposed to exchange risk fluctuations

In March 2016, the company issued 17.73 lakh equity shares at Rs 80 to some of the promoters and has also issued bonus on these shares in the ratio of 3 for 2 in May 2016. Now the promoters are selling the shares at Rs 76-Rs 80.

Valuation

The company posted an inconsistent top line, with losses for FY 2012 to FY 2015 largely due to ongoing investments and inability to win key tenders as also reduced orders from Cadila Healthcare.

For the June 2016 quarter, the company reported net sales of Rs 10.15 crore with the OPM of 40.3% resulted in an OP of Rs 4.09 crore. Interest costs stood at Rs 0.66 crore and depreciation at Rs 1.19 crore. After providing total tax of Rs 0.79 crore, PAT for the June 2016 quarter stood at Rs 2.94 crore. EPS for the June 2016 quarter is not annualized due to the seasonality of business.

For FY 2016, the net sales were up by 211% to Rs 20.39 crore. The OPM stood at 42.6% as compared to 27.6% for FY 2015, thus leading to a 380% increase in OP to Rs 8.69 crore. Interest costs stood at Rs 0.66 crore down by 9% and depreciation was up by 3% to Rs 1.19 crore. After providing total tax of Rs 1.63 crore, PAT for FY 2016 stood at Rs 5.31 crore. On equity share capital of Rs 38.37 crore of face value of Rs 10 each, EPS for FY 2016 works out to Rs 1.4. At a higher price band of Rs 80 per equity share, the scrip is offered at P/E multiple of 57.8.

Greensignal Bio pharma: Issue highlights
Offer size (in Rs crore )
- On lower price band110.80
- On upper price band116.64
Total Offer for sale (number of shares)1.46 crore
Price band (Rs)76-80
Post issue share capital (Rs crore) 38.37
Post-issue Promoter & Group shareholding (%)51.8
Issue open date09-11-2016
Issue closed date11-11-2016
ListingBSE,NSE
Rating 25/100

Greensingal Bio Pharma: Financials
1203(12)1303(12)1403(12)1503(12)1603(12)1606(06)#
Net Sales11.2711.683.516.5620.3910.15
OPM (%)28.2%21.5%34.5%27.6%42.6%40.3%
OP3.182.511.211.818.694.09
Other income 0.000.020.020.040.100.06
PBDIT3.182.531.231.858.794.15
Interest2.111.581.160.710.660.12
PBDT1.070.950.071.148.134.03
Dep.1.121.121.131.151.190.30
PBT -0.05-0.17-1.06-0.016.943.73
EO 0.000.000.000.000.000.00
PBT after EO-0.05-0.17-1.06-0.016.943.73
Tax (including Deferred Tax)0.430.330.240.201.630.79
PAT-0.48-0.50-1.30-0.215.312.94
EPS (Rs)*----1.4#
*EPS is on post issue equity capital of Rs 38.37 crore of face value of Rs 10 each
#EPS not annualised due to seasonality of business
Figures in crore
Source: Capitaline Database

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