GreenSignal Bio Pharma IPO – Should you Subscribe?
Chennai based, the GreenSignal Bio Pharma IPO would open for subscription on 9th November, 2016. GreenSignal Bio Pharma Ltd is engaged in to vaccine manufacturing. Its revenues grown at 16% CAGR in last 5 years. It earned 25.9% profits in FY16. Should you invest in a GreenSignal Bio Pharma IPO? What are the hidden factors an investor should consider if they want to invest in a Green Signal Bio Pharma IPO?
About GreenSignal Bio Pharma Limited
They are one of the four companies worldwide who have been WHO-prequalified to supply the BCG vaccine to UNICEF. They have secured a long term arrangement dated November 23, 2015 with UNICEF to supply the BCG vaccine to UNICEF subject to the purchase orders placed with company company. They also supply the BCG vaccine to the Ministry of Health, India pursuant to the tendering process. They have been successful in obtaining bids for the years 2009-2010, 2010-2011, 2011-12, 2012-13 and 2015-2016. They also supply the BCG vaccine to Indonesia, and Nepal which are countries outside the UNICEF ambit. Company, BCG-ONCO for Immunotherapy drug is distributed throughout India video commercial arrangements in India and they intend to market this immunotherapy drug in overseas jurisdictions as well. Presently, they have made several limited supplies to various countries such Lebanon, Saudi Arabia, Turkey and Switzerland.
Issue details of GreenSignal Bio Pharma IPO
IPO opens: 9-Nov-2016
IPO closes: 11-Nov-2016
Face Value: Rs 10 per share
Issue price band: Rs 76 to 80 per share
Issue size: Rs 116 Crores on upper price band
Market lot: minimum of 175 shares
Minimum investment: Rs 13,300 on lower price band
Global BLRM’s: Indian Overseas Bank
Listing: BSE / NSE
Objects of the GreenSignal Bio Pharma Ltd IPO issue
The Net Proceeds from the Issue will be utilized towards the following objects:
1) Offer for sale – The Selling Shareholders will be entitled to their respective portion of the proceeds of the Offer for Sale. The company will not receive any proceeds from the Offer for Sale.
2) Offer Expenses
Company Financials (reinstated)
The company generated revenue of Rs 112.6 Crores for the year ended Mar-12 and Rs 204.93 Crores for the year ended Mar-16. For 3 months ended Jun-16, revenues are Rs 102.06 Crores.
The company posted a loss of Rs 4.8 Crores for the year ended Mar-12 and profit of Rs 53.1 Crores for the year ended Mar-16. For 3 months ended Jun-16, revenues are Rs 29.31 Crores.
Its restated EPS for FY ending Mar-16 is Rs 1.45 and last 3 years average EPS Rs 0.51.
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Reasons to invest GreenSignal Bio Pharma IPO
Revenue grew at 16% CAGR in last 5 years. However, its revenues dipped in FY2014 compared to FY2013 revenues.
Reasons not to invest in an Green Signal Bio Pharma Ltd IPO
While it posted good margins of 25.9% for FY16, it has incurred losses for 4 out of 5 years. We need to wait and watch for a couple of years for consistent profits.
They have only two products and if company production of the BCG vaccine, which is the major source of company revenue is stalled or stopped or if there is any impediment in its domestic or overseas sales and distribution it will materially adversely affect company business and profits.
Currently, they are producing only two products. BCG Vaccine and BCG – ONCO for Immunotherapy, an immuno therapeutic drug for Urinary Bladder Cancer. Company business, prospects, results of operations and financial condition may be adversely affected if any of these two products in company portfolio do not perform as expected or if competing products become available and gain wider market acceptance.
In India, price is regulated for the BCG vaccine and hence it is imperative for them to solicit markets overseas. Though they are in the process of procuring contracts from various governments and countries, there is a high risk that the eventual business may not materialize and they are not able to procure overseas markets. In the event they are unable to do so, it will materially adversely affect company business.
There is an outstanding litigation involving company, wherein company is involved in a litigation relating to trademark, any adverse decision in said case may affect company. In the past also, had been involved in criminal litigations initiated by the Central Bureau of Investigation.
They have not yet registered company corporate logo and other intellectual property rights. They may be unable to adequately protect company intellectual property.
Furthermore, they may be subject to claims alleging breach of third party intellectual property rights.
The company has a limited operating history that may not provide an adequate basis on which to judge its future prospects and results of operations.
Other risk factors (Internal and external) can be viewed in the draft prospectus from Page no. 13 onwards.
Recommendation / Investment strategy – Green Signal Bio Pharma IPO
On the upper price band of Rs 80 and on FY16 EPS of Rs 1.45, P/E ratio works out to 55x. Similarly, on last 3 years EPS of Rs 0.51, P/E Ratio works out to 156.8x. Means company is asking the upper band of issue price of Rs 80 for a P/E ratio between 55x to 156.8x. There are no listed peers to compare issue price. However, considering the high P/E ratio, we can assume that the issue is over priced.
Company revenues grew at 16% CAGR in last 5 years. It generated profits only from last year onwards. One need to wait and watch for consistent performance from a couple of years on the profit front. The issue price is also overpriced. Personally, I would like to stay away from such high risk 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 plans.
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GreenSignal Bio Pharma IPO – Should you Subscribe