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Industry : PHARMA

Innova Captab View all IPOs

Price Band

Rs. 426 – Rs. 448

Innova Captab is going public with a Fresh Issue & offer for Sale. The issue opens on 21st December 2023.

MOJO CALL

Why

Avoid

MOJO CALL

Avoid

Neutral

Declining Margins and Crippling Debt

Innova Captab is mainly a Contract Development Manufacturing Organization (CDMO) and also sells generics in the domestic and International markets. The company’s top line and bottom line have shown healthy growth in the last two years. Even the cash flow generation of the company has been healthy with CFO of Rs 47 crore in FY21 growing to Rs 67 crore in FY23.
The company has diversified its product mix from generating 91% of its revenue from CDMO in FY21 to 71% in FY23. The remaining is derived from the generics business. But this hasn’t improved the financials of the company as they have exhibited a decline in margins over the last three fiscals.
The ROCE of the company also has followed a declining trend mainly due to the company increasing its debt significantly over the last three years. The company’s debt which was Rs 45 crore in FY23 has increased to Rs 441 crore as of June 2023. This is a significant amount of debt for a company that only had a turnover of Rs 935 crore. Already experiencing declining margins, the company could see its financials being hampered further.

Valuations

As per FY23, the company is asking for a PE of 38x and a market cap to sales of 2.7x which in comparison to its peers is very expensive and we believe there is little scope for capital appreciation. Hence, we recommend avoiding this IPO

Issue Details

Issue Opens	21st December 2023
Issue Closes	26th December 2023
Price Band	Rs. 426 – Rs. 448
Issue size (Upper Band)	Rs. 570 Cr
Issue Type	FRESH ISSUE & OFFER FOR SALE
Market cap (based on upper band)	Rs. 2563 Cr
Sales- March 2023 (Rs./Crs)	936 Cr
Net Profit - March 2023 (Rs./Crs)	68 Cr
Industry	PHARMA
Promoters	MANOJ LOHARIWALA
Lead Manager	ICICI SECURITIES

Objective of the Issue

Details

Objectives of the Issue – Fresh Issue & Offer for Sale – Rs. 570 cr

The Objectives of the Offer are for:
1. Repayment of debt
2. Repayment of debt of subsidiary
3. Funding Working Capital Expenditure
4. General Corporate Purposes

List of Shareholders Selling Their Stake

Name	Type	No. of Shares	% of OFS
Manoj Kumar Lohariwala	Promoter	19,53,125	35%
Vinay Kumar Lohariwala	Investor	19,53,125	35%
Gian Prakash Aggarwal	Other	16,74,107	30%

Business Operations

About Company

Innova Captab is a Contract Development Manufacturing Organization (CDMO) and is involved in the business of generics which are sold in the domestic as well as International Markets.

The company has many customers which includes Cipla Limited, Glenmark Pharmaceuticals Limited, Wockhardt Limited, Emcure Pharmaceuticals Limited, Lupin Limited, J. B. Chemicals and Pharmaceuticals.

The generics product portfolio includes tablets, capsules, dry syrups, dry powder injection. Therapeutic portfolio includes Cardiovascular, Antimalarial, Antifungal and Erectile Dysfunction.

Segment Revenue Breakup

Revenue Breakdown by Segment:
Segment	H1FY24	FY 23	FY 22	FY 21
CDMO	71%	73%	86%	90%
Domestic Generics	18%	17%	4%	0%
International Generics	11%	10%	10%	10%

Financials

Financial Overview

The company’s revenue has grown at 51% over the last two years while net profit has declined by 40% over the last two years.

In FY23, The company’s Return on Equity is 25%

The Net profit margin of the company is 7% in FY23 which has been declining marginally over the last two years.

The company has generated positive cash flow from from operations and it has been growing since FY21. The company reported a CFO of Rs 41 crore which increased to Rs 68 crore

The company has a debt of Rs 441 crore as of June 2023 as compared to Rs 45 crore in FY21.

Financial Performance (Rs/crore)

Rs./Crs	Q1FY24	FY 23	FY 22	FY 21
Sales	234	936	803	412
Net Profit	18	68	64	35