Based on the price discovered, there will be a fresh issue of 2.15 - 2.46 crore equity shares of Rs. 10 each, enabling the company to raise Rs. 183 - 185 crore. Fresh issue will result in 37%-40% dilution on the expanded equity. The offer for sale by two private equity (PE) investors is a mere 8% of the total issue size.

The company, manufacturing active pharmaceutical ingredients (APIs) and providing contract research and manufacturing services (CRAMS), plans to establish new facilities for widening the product portfolio and undertake R&D activities, besides repayment of loans and general corporate purposes, through the IPO proceeds.

In the balance sheet, as on , there is no capital work-in-progress nor have any funds been deployed towards the object of the issue, till . All funds will be deployed in FY11 and FY12, benefits of which will accrue only from FY12 onwards.

The consolidated balance sheet, as on , shows huge debts (secured and unsecured) of Rs.367 crores, on networth of Rs.112 crores, resulting in a debt to equity ratio of 3.3. Through the IPO proceeds, the company will make part pre-payment of the secured loans to the extent of Rs.38.8 crores. However, balance Rs.264.3 crores of secured loans will be subject to interest rate risks, as they are linked to floating rates of interest. One wonders, if the company is compelled to take the IPO route, to fund its expansion, since it is constrained to further leverage its balance sheet?

For 9 months ended , the company reported sales of Rs.346 crores and EBITDA of Rs.62 crores and PAT of Rs.21.4 crores. Annualised EPS for FY10 is estimated at Rs.7.75 per share, resulting in P/E multiple of 9.7 times on lower end and 11 times on the higher end of the price band. Companies in the same sector like Nectar Life and Dishman, which are also bigger in size and having better margins, are presently ruling at PE multiples of 8 to 12 times. Thus the IPO does not leave much on the table (read listing gains) for retail investors. Even the price-to-book ratio of 2.5 to 2.8 times is quite high.   

During financial year ended 31^st March 2009 and 9 months ended 31^st December 2009, the company incurred forex losses to the tune of Rs.4.7 crores and Rs.5.6 crores respectively, due to uncovered positions in the foreign exchange market.

The inventory, as on , was Rs.230 crores, representing 6 months of sales. Likewise, the debtors of Rs.157 crores, as on that day, represent over 4 months of sales. This shows that the company has not been utilizing its current assets efficiently.

In January 2010, the company had placed 4 lakh equity shares of Rs.10 each with Kyodo International, at Rs.100 per share, as part of marketing strategy for new geography. This placement, though made at a higher price, is very tiny and not material.

Better companies are available at attractive valuations in the secondary market. Also, off late, investors have got disenchanted with the primary market offerings and hence under the circumstances, best to give this issue a complete miss!