Ganga Pharma IPO – Should you invest?
Mumbai based, Ganga Pharma IPO would open for subscription on 21st January, 2016. Ganga Pharmaceuticals Ltd is established as a producer of quality Bulk Ayurvedic Medicines in Mumbai. It revenues grown at a CAGR of 11% in last 5 years. What are the positive factors of Ganga Pharma IPO? What are its hidden factors in Ganga Pharma IPO? Should you invest in such IPO?
About Ganga Pharma Limited
Ganga Company was established as a producer of quality Bulk Ayurvedic Medicines in Mumbai. Apart from manufacturing, the company is also into marketing, distribution of Bulk Ayurvedic Medicines. Under the Management of Late Shri Brijmohan Sharma, the Company had created an exceptional market reputation not only in Mumbai but all over Maharashtra.
Issue details of Ganga Pharma IPO
- IPO opens: 21-Jan-2016
- IPO closes: 3-Feb-2016
- Face Value: Rs 10 per share
- Issue price: Rs 15 per share
- Minimum Shares: 8,000 shares and multiples of 8,000 shares there-of
- Minimum amount: Rs 120,000
- Issue size: Rs 1.46 Crores
- Lead Managers: First Overseas Capital Ltd
- Listing: BSE SME
- Download Ganga Pharma IPO Prospectus from SEBI Website at this link
Purpose of the IPO
1. Listing benefits
2. General corporate purpose
3. Issue Expenses
Company Financials (reinstated)
- Company generated revenue of Rs 187.09 Lakhs for the year ended Mar-11 and Rs 286.7 Lakhs for the year ended Mar-15. For 3 months ended Jun-15, company generated revenue of Rs 65.87 Lakhs.
- Company posted a profit of Rs 1.29 Lakhs for the year ended Mar-11 and Rs 4.89 Lakhs for the year ended Mar-2015. For 3 months ended Jun-15, company generated profit of Rs 4.98 Lakhs.
- Its restated standalone EPS for FY 2015 is Rs 0.14 and last 3 years average EPS of Rs 0.13.
Reasons to invest Ganga Pharma IPO
- Revenue has increased at a CAGR of 11% in last 5 years.
Reasons not to invest in Ganga Pharma IPO
- It generated thin margins of 1.5% to 1.7% in last 4 years.
- There are Outstanding Litigations against the company.
- There are Litigations against Promoters & Promoter Group Companies.
- They are dependent upon key suppliers for its products and any disruption in their supply could disrupt its business and adversely affect its financial results.
- Company operates under several statutory and regulatory permits, licenses and approvals. Failure to obtain and/or renew any approvals or licenses in future may have an adverse impact on its business operations
- Strong competition in the Ayurvedic & Herbal Medicine sector could decrease the market share and compel the company to either reduce the cost charged or increase the sales prices being charged to the end consumer. In either of the cases, we may have an adverse impact on the revenues and profitability.
- Significant portion of its sales is dependent on few of its distributors/ dealer/ retailers/ traders and a loss of one or more such significant seller or a reduction in their sales of its products could adversely affect its financial condition thereby reducing its revenues.
- The company contingent liabilities could adversely affect its financial condition.
- Company had negative cash flow in recent fiscals. Sustained negative cash flow could adversely impact its business, financial condition and results of operations.
- Company has unsecured loans outstanding which may be recalled by the lenders at any point of time.
- Other risk factors (Internal and external) can be viewed in prospectus Page no. 15 onwards.
Recommendation / Investment strategy
On the issue price of Rs 15, based on FY2015 EPS of Rs 0.14, its P/E Ratio works out to be 107. Similarly based on EPS of Rs 0.13 P/E Ratio works out to be 115. Means company is asking issue price of P/E ratio of 107 to 115. Its competitor Albert David is trading at P/E ratio of 10.8 and industry average P/E ratio is 3.6. Hence issue price of Rs 15 is very high.
Ganga Pharma Limited revenues have been growing consistently at 11% CAGR in last 5 years. However, it generates thin margins of around 1.7%. Also it is asking for issue price of Rs 15 per share which is high compared to its peers. Investors should avoid such IPO’s.
Disclaimer: I do not have an interest in investing in this IPO. The idea of giving positive and negative factors to investors in this article is to create awareness and education about this IPO. One should NOT constitute this as investment advice to buy or not to buy. Please consult your investment advisor before you invest in such high risk investment options.
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