IPO Size: Rs. 582 cr

• Rs. 500 cr Fresh Issue for (i) capex Rs. 107 cr (ii) working capital Rs.103 cr (iii) debt repayment Rs. 93 cr, of Rs. 242 cr gross debt (iv) unidentified acquisition and general corporate purpose
• Rs. 82 cr Offer for Sale (OFS): half by the promoter (67% to drop to 46% post IPO) and half by public investor (4% to drop to 1%)

Price band: Rs. 372-391 per share

M cap: Rs. 1,773 cr, implying 33% dilution

IPO Date: Fri 20^th Dec to Tue 24^th Dec 2024, Listing Mon 30^th Dec 2024

Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.

Pharma Research & Manufacturing Company

Senores Pharmaceuticals is a 7 year old B2B developer and manufacturer of generic and specialty, complex niche pharmaceutical products. It is R&D-focused, spending ~10% of topline on research. Regulated markets (mainly US) account for 60% of Rs. 180 cr topline in H1FY25, with emerging markets contributing 32%. Contract development and manufacturing operations (CDMO) is ~14% of overall topline.

Limited History

Business has scaled up, post two acquisitions in FY24 (i) 67% stake acquired in May 2023 in Havix Group, having a US FDA approved manufacturing facility in US and (ii) 69% stake bought in Dec 2023, in India-based Ratnatris Pharma. Thus, H1FY25 financials capture the combined business, and are relevant for analysis, as FY23 revenue was just at Rs. 35 cr.  

Growing Topline with High Margins

FY24 revenue stood at Rs. 215 cr, with PAT of Rs. 33 cr, translating into 15% net margin. H1FY25 revenue came in at Rs. 181 cr, with 50% gross margin, 35% EBITDA margin and 13% net margin. On H1FY25 PAT of Rs. 24 cr, EPS was at Rs. 7, against Rs. 12 for FY24.

The US manufacturing plant, which contributed to Rs. 99 cr revenue in FY24, accounted for Rs. 76 cr revenue in H1FY25, implying a healthy 25%+ growth rate.

New Areas of Growth

After oral dosage manufacturing capability, company is investing Rs. 107 cr, via fresh issue proceeds, to establish a high value-added sterile injectable facility in US, to be completed in next 3 years.

As of 30.9.24, capital work in progress stood at Rs. 50 cr (Rs. 34 cr added in H1FY25 itself), on Rs. 150 cr net fixed assets, indicating ongoing capacity addition.

Micro-cap Stock

On H1FY25 annualised EPS of Rs. 14, IPO is priced at a PE multiple of 27x, on a current year basis. Business is growing well, with high margins and 18% annualized RoE. This makes it’s a good long term story, as current size of operations are quite small with long working capital cycles (as export operations), making it a micro-cap stock.