Eris LifeSciences IPO – Should you invest ?
Gujarat based Eris LifeSciences IPO would open for subscription on 16th June, 2017. Eris LifeSciences Ltd would develop, manufacture and commercialize branded pharmaceutical products in select therapeutic areas. Its revenues grew at 17% CAGR in last 5 years. It earned amazing profits of 32% in FY17. What are the positive factors in Eris LifeSciences IPO? Are there any hidden factors in Eris LifeSciences Ltd IPO? In this article, I would provide some interesting insights and do Eris LifeSciences IPO Review.
About Eris LifeSciences Ltd
They develop, manufacture and commercialize branded pharmaceutical products in select therapeutic areas within the chronic and acute categories of the IPM, such as: cardiovascular; anti-diabetics; vitamins; gastroenterology; and anti-infectives. Its focus has been on developing products in the chronic and acute category which are linked to lifestyle related disorders. The chronic category of the IPM contributed 65.6% of its revenues in Fiscal 2017. they were ranked 20th out of 377 domestic and multinational companies present in the chronic category of the IPM, in terms of revenues for Fiscal 2017. They are the fastest growing company, in the chronic category, among the top 25 companies in terms of revenues, with revenue growth at CAGR of 28.9%, bettheyen Fiscals 2013 and 2017. They generated 34.4% of its revenues from the acute category of the IPM in Fiscal 2017.
Issue details of Eris LifeSciences IPO
- IPO opens: 16-Jun-2017
- IPO closes: 20-Jun-2017
- Face Value: Rs 1 per share
- Issue price band: Rs 600 to Rs 603 per share
- Issue size: Rs 1,723 Crores
- Market lot: 24 shares and in multiples of 24 shares there-of.
- Minimum investment: Rs 14,400 on lower price band
- Leading Managers: Axis Capital
- Listing: BSE / NSE
- Download Eris LifeSciences IPO DRHP Prospectus at this link.
Objects of the Eris LifeSciences Ltd IPO issue
1) To achieve the benefits of listing the Equity Shares on the Stock Exchanges
2) For the sale of up to 2.88 Crores Equity Shares by the Selling Shareholders.
Company Financials (reinstated-consolidated)
- The company generated revenue of Rs 394 Crores for the year ended Mar-13 and Rs 744 Crores for the year ended Mar-17.
- The company posted a profit of Rs 58 Crores for the year ended Mar-13 and profit of Rs 242 Crores for the year ended Mar-17.
- Its restated basic EPS for FY ending Mar-17 is Rs 17.6 and last 3 years EPS was Rs 13.12.
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What are Eris LifeSciences Key Strenghts?
Here are Eris LifeSciences strengths.
- Focus on branded prescription based pharmaceutical products catering to lifestyle related disorders.
- One of the fastest growing companies in certain high growth therapeutic areas with a portfolio of complementary products.
- Portfolio of high volume and leading brands.
- Focus on metro cities and class 1 towns in India which have higher incidence of lifestyle disorders and concentration of specialists and super specialists.
- Multi-faceted product selection and engagement model leading to growth in prescription for our products.
- Strong sales, marketing and distribution capabilities.
What are its Key Strategies?
Company is focusing on few key strategies.
- Consolidate its position in therapeutic areas in which it has significant presence.
- Target and enhance its presence in large and high-growth therapeutic areas.
- Explore in-licensing and co-development opportunities to leverage its sales, marketing and distribution and manufacturing infrastructure.
- Target future patent expiries in India.
- Enhance its product line and expand its capabilities through strategic acquisitions.
What are the acquisitions of the company?
Company has acquired several companies in the past.
- Acquisition of Trademarks from Amay Pharma and acquisition of Aprica Healthcare Private Limited.
- Acquisition of Kinedex Healthcare Private Limited.
- Tie-up with Pharmanza Herbal Private Limited.
Reasons to invest in Eris LifeSciences IPO
- Strong revenue growth in last few years. Company revenues grew at 17% CAGR in last 5 years.
- Profits of the company are in increasing trend. It earned profits of 22% of FY16 and 32% for FY17.
Reasons not to invest in a Eris LifeSciences Ltd IPO
- There are outstanding proceedings involving its Company, and certain of its Subsidiaries, Promoters and its Directors and any adverse outcome in any of these proceedings may have an adverse effect on its business, results of operations and financial condition.
- Criminal proceedings have been initiated against its Promoters and any conviction as a result of such proceedings may affect its business, reputation and results of operations.
- Any disruption in production at, or shutdown of, its manufacturing facility could adversely affect its business, results of operations and financial condition.
- Its efforts at integrating acquired businesses may not yield timely or effective results, which may affect its financial condition and results of operations.
- They rely on certain third party manufacturers for manufacturing some of its products. In the event the manufacturing facilities of its third party manufacturers cease to be available to us at terms acceptable to us, or they experience problems with, or interruptions at such facilities, its business, results of operations and financial condition may be adversely affected.
- They have received letters from the Medical Council of India and certain state medical councils in connection with anonymous complaints, which allege that they have provided benefits to several doctors. In the event any of the allegations are found to be true and in violation of applicable regulations and statutes, its reputation, business and results of operations may be adversely affected.
- Any shortfall in the supply of its raw materials or an increase in its raw material costs, or other input costs, may adversely affect the pricing and supply of its products and have an adverse effect on its business, results of operations and financial condition they rely on its marketing representatives and distributors for the sale and distribution of its products.
- A decrease in the number of its marketing representatives or termination of its sales arrangements may adversely affect its business, results of operations and financial condition.
- Other risk factors (Internal and external) can be viewed in the draft prospectus.
Recommendation / Investment strategy – Eris LifeSciences IPO
- On the upper price band of Rs 603 and on consolidated FY17 EPS of Rs 17.61, P/E ratio works out to 34x. Even based on last 3 years consolidated EPS of Rs 13.12, P/E ratio works out to 46x. Means, company is asking higher price band of Rs 603 in the P/E ratio of 34x to 46x. Its peers Glaxo Smithkline is trading at P/E ratio of 61.5 (Highest) and Pfizer at 23x (Lowest) and industry average P/E ratio is 37x. Means Eris LifeSciences IPO Price of Rs 603 (upper price band) at P/E ratio of 34x to 46x is reasonally priced.
- Company revenues grew at 17% CAGR in last 5 years. Its profits are in increasing mode. It earned strong profits of 35% for FY17. Eris LifeSciences IPO price is reasonably priced. Considering all these positive factors, I would recommend investors to invest in this IPO.
Disclaimer: I 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. Please consult your investment advisor before you invest in such high risk investment options.
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Eris LifeSciences IPO – Should you invest or not
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