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Oxygen stocks witnessing a strong rally?

Oxygen Stocks
by Nikita Bhoota 30/04/2021

As India is witnessing a strong wave of coronavirus pandemic, the demand for medical oxygen has been rising. The Centre, on April 18, banned the supply of oxygen for industrial purposes, except in nine specified industries and termed it an “essential public health commodity”.

The country has also ramped up the production of the gas from 19 April onwards, Indian Railways started transporting Liquid Medical Oxygen and Oxygen Cylinders across the country. Green corridors have been established to facilitate the fast movement of dedicated Oxygen Express trains.

With Indian COVID-19 patients struggling to find medical oxygen in the middle of a second deadly wave of coronavirus infections, shares in companies that produce the gas — or simply have it in their names are seeing a strong rally. Here, are some stocks that have witnessed a huge rally in the short run. However, at the same time from 19th March 2021 to 19th April 2021 Nifty50 plummeted 2.6%

Company

19-03-2018

19-03-2021

19-04-2021

1 month Return

3 years CAGR

Bhagawati Oxygen Ltd.

31.25

14.6

18.04

23.6%

-22.4%

Bombay Oxygen Investments Ltd.

11,000

10,060

24,574.85

144.3%

-2.9%

Gagan Gases Ltd.

7.9

5.75

8.84

53.7%

-10.0%

Linde India Ltd.

458.6

1,718.45

1,895.95

10.3%

55.3%

National Oxygen Ltd.

28.05

35.35

61.95

75.2%

8.0%

Everest Kanto Cylinder Ltd.

45.95

72.3

92.25

27.6%

16.3%

Source: Ace Equity
*3 year CAGR return is before second wave of covid19 i.e. March 2018- to March 2021
*1-month return is during spike in Covid19 cases i.e. March 2021- April 2021

Stocks that are not in the medical oxygen and equipment business but still have rallied are:

1. Bombay Oxygen:
Bombay Oxygen ended its gas operations in 2019 and is now a non-bank lender, according to its latest annual report. Formerly known as Bombay Oxygen Corp Ltd, it is now Bombay Oxygen Investments Ltd.

  • The company has a Mcap of Rs 350.19cr.
  • Company has a low return on equity of -2.52% for last 3 years.
  • Compounded Sales for past 5years is -32%
  • Company is almost debt free.

Ratios as on March 20 are as follows

  • ROCE: -11%
  • Debtors Days:71


2. Gagan Gases Ltd:
Gagan Gases Ltd is a distributor of fuel gas commonly known as LPG have also climbed 53.7 per cent in the past one month - despite not having any significant news whereas, before second wave of Covid19, the stock registered -10% CAGR.

  • The company has a Mcap of Rs 4 cr.
  • Company has a low return on equity of 8.57% for last 3 years.
  • Compounded Sales and profit growth for past 5years was -4% and -15% respectively.


On the contrary, Stocks related to the medical oxygen and equipment business that have rallied are
 

3. National Oxygen:
National Oxygen Limited is an India-based company, which is engaged in manufacturing industrial gases, such as Oxygen and Nitrogen.

  • The company has a Mcap of Rs 30cr.
  • The company has delivered a poor sales growth of 9.32% over past five years.
  • Compounded profit growth for past 5years was 13%

Ratios as on March 20 are as follows

  • ROCE: 9.85%
  • Debtors Days: 40


4. Bhagawati Oxygen:
Bhagawati Oxygen is engaged in the business of manufacturing and engineering company with core focus on industrial gas manufacturing, technology, system and equipments.

  • The company has a Mcap of Rs 4 cr.
  • The company has delivered a poor sales growth of -23.83% over past five years.
  • Company has a low return on equity of -1.85% for last 3 years.
  • Company has high debtors of 369.87 days as on March 20.


5. Linde India Ltd:
Linde India Limited, formerly BOC India Limited, is engaged in the gases business. The stock rallied 10.3% in the past one month whereas, before second wave of Covid19, the stock registered 55.3% CAGR.

  • The company has a Mcap of Rs 15,943cr.
  • The company has delivered a poor sales growth of -1.25% over past five years.
  • Company has a low return on equity of 5.65% for last 3 years.
  • Debtor days stands at 101.03 days as on March 20
  • Company is almost debt free.
  • Company has delivered good profit growth of 52.75% CAGR over last 5 years


6. Everest Kanto Cylinder Ltd:
Everest Kanto Cylinder is India’s largest player in high pressure gas cylinders with market share of around 50 per cent. The company has around 150-strong client base from diverse verticals including automobile OEMs/after-market, city gas distribution, industrials, cylinder cascades, medical sector, firefighting equipment and defence – including Tata Motors, Bajaj Auto, Hyundai, Toyota, BOC India, Praxair, Mahanagar Gas, Adani Gas.

Given the acute shortage of oxygen cylinders amid rising Covid-19 cases in India, the company is expected to see surge in demand in its medical equipment segment.

  • The company has a Mcap of Rs 1,500cr.
  • The company has delivered a poor sales growth of 10.00% over past five years.
  • Company has a low return on equity of 5.76% for last 3 years.

Ratios as on March 20 are as follows

  • ROCE: 7%
  • Debtors Days: 57

Conclusion:
The rising demand for oxygen cylinders and medical equipment’s on account of the Covid19 pandemic resulted in huge demand for certain stocks. However, market experts are of the opinion that the rally to be short-lived as the rally is more influenced by short-term liquidity than backed by solid fundamentals. Therefore, we recommend investors to check the fundamentals of the company before taking any buy or sell decision in the stock market.

Similar video - Oxygen Rally in Stock Market:

 

Disclaimer: The above details is compiled from information available on public platforms. These are not buy or sell recommendations.

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5 Stocks to BUY during Coronavirus (COVID 19) pandemic

5 Stocks to buy during COVID-19
by Nikita Bhoota 20/05/2021

The Indian economy has performed relatively better than expected in 2HFY2021. The efforts taken by the GoI in the FY22 Budget marked the clear path for driving growth whilst compromising on fiscal prudence in order to drag the economy out of the Covid led slide. However, the current Covid second wave has re-imposed fresh partial lockdowns, limiting the economic activities.  As some economic & health indicators are already pointing towards downward revision in the GDP forecast, investing in the covid resilient sectors would be an ideal strategy to tide the second wave of Covid. We believe, sectors like Healthcare, Pharma, Diagnostic & selected FMCG will continue to thrive during the FY22.

Recommended Stocks CMP (Rs) Target (Rs) Upside
JB Chemicals & Pharmaceuticals (JBCP) 1,372 1,680 22.40%
Thyrocare Tech 1,027 1,250 21.70%
Cipla 904.00 1,050.00 16.20%
Dabur 538 620 15.20%
Apollo Hospitals 3,230 3,550 9.90%

Source: 5paisa Research, * price as on 19th May ,2021.

Investment Rationale:
Cipla:
Cipla is one of the largest Indian pharma companies. It is a major player in the domestic formulations market, which contributes ~39% of its total revenue. Cipla makes drugs to treat cardiovascular disease, arthritis, diabetes, weight control, depression and many other health conditions. We are positive on the stock due to strong build-out expected in the US business led by the inhalation portfolio, where we believe respiratory products alone can add incremental sales of USD230-250mn (40-45%) to the US business by FY25E and drive 12% cc Cagr (18% incl. Revlimid) in US sales over FY21-23E.  Sustained traction in chronic therapies will drive 7.5% Cagr in India sales over FY21-23E, despite the higher base.  We believe US respiratory launches, synergies from the One-India strategy and further cost optimization would drive a sustainable increase in return ratios over the medium term. The stock trades at 24.3x FY23E EPS.

JB Chemicals & Pharmaceuticals (JBCP) 
JBCP is a 40-year old pharma company with several well established brands in the domestic market and wide geographical presence in the both regulated and semi-regulated markets. While JBCP has created strong brands in the cardiac & gastro segments in India, focus ahead will be to diversify into diabetes, nephrology, paediatrics and respiratory. Expansion into these therapies will not entail an additional sales force, as mgmt. is re-aligning the GTM strategy for its rep team, by combining existing divisions. JBCP also intends leveraging its relationships with 0.3m doctors, to drive penetration in new therapies. Mgmt. is targeting 12-14% growth in its India PCPM over medium term, driven by 6-8 annual launches & increasing contribution from chronic therapies. Incremental R&D investments and BD opportunities will help JBCP augment its product portfolio and drive better growth in its branded generics businesses. Two new product launches are also planned in Russia in FY22, while JBCP intends to ramp-up its US ANDA filings to 4-6 from 1-2 pa, going forward. Although JBCP will look to complement its organic growth through acquisitions, management stated that 50% of the incremental capital allocation will be dedicated to the India business, where it will look to acquire brands/mid-size companies and, possibly, enter into inlicensing deals with MNC companies for the cardio-diabetes.

Apollo Hospitals
Apollo Hospitals is an integrated healthcare provider, with services ranging from hospitals, retail pharmacies, health insurance, clinics etc. The company is a pioneer in corporate hospitals and forms the largest hospital chain & organized retail pharmacy chain in India. Apollo’s overall hospital occupancies improved to 63% in 3Q from 56% in 2Q. While non-Covid occupancy stood at 60% in 3Q, it was already at 67% in Dec-20. Mgmt. indicated that occupancies should reach pre-Covid levels of 68-70% by 1Q/2QFY22, led by pick-up in international patients, domestic travel and improving surgical volumes. Healthcare services margins improved QoQ, from 11.5% to 18.5%, led by higher ARPOB and increase in surgical volumes. Mgmt. targets expanding margins for mature hospitals to 23-24% (current 20- 21%) and for new hospitals to 15% (current 13-14%) over the next 12-18 months, led by international patients and high-end surgeries. Kolkata hospital expected to contribute Rs800-850mn Ebitda in FY22ii (vs. nil in FY21). Pharmacy margins are also expected to improve, to 7% in FY22E from 6.5% in 3Q. Of the Rs11.7bn QIP proceeds, Rs4.1bn will be utilized for acquisition of 50% stake in Kolkata hospital and Rs1.5bn each for Apollo 24/7 and the diagnostics business Apollo aims to achieve preventive healthcare revenue of Rs10bn in the next 3 years, from Rs2.5bn currently. It also aims to scale diagnostics revenues to Rs5bn from Rs1.6bnpa, by deepening presence in South/East market.

Dabur:
Dabur India is one of the largest FMCG companies in India, with interest in health care, personal care and food products. Building on its legacy of quality and experience of over 100 years, Dabur has a number of powerful brands like Dabur Amla, Dabur Chyawanprash, Vatika, Hajmola, Real, etc. The company primarily operates in four segments i.e. consumer care, international business, foods and retail. Its international business spans across Southeast Asia, MENA and USA, and contributes around 30% to its total revenue. Covid tailwinds resulted in acceleration in the healthcare portfolio, the momentum has sustained at a high level for the third consecutive quarter in categories such as honey, chyawanprash, OTC and ethicals. Growth is likely to settle at a lower, but robust level in this portfolio. Dabur is ticking the right boxes in terms of riding the healthcare momentum and has accordingly stepped up ad-spends intensity. Recovery in hair care, juices and international has further sweetened the performance. The management highlighted that input cost inflation has inched up to 5- 6% in categories such as honey, amla, herbs and spices and the company would look to pass it on to consumers. Also, management indicated that ad-spend intensity would remain high to support brand investments and new launches. Dabur aspires to increase its ad-spends as a percentage of sales to ~11.5-12%, similar to HUL.

Thyrocare Tech:
Thyrocare is the largest B2B diagnostics player in India primarily serving smaller standalone labs, hospitals, nursing homes and doctors. Thyrocare operates a Centralised Processing Laboratory (CPL) at Navi Mumbai, which is supported by 11 Regional Processing Laboratories (RPLs). B2B segment accounts 80-85% of Thyrocare’s pathology revenue, while Thyrocare has also created a strong brand for itself through ‘Aarogyam’ test profiles in the wellness segment.  Thyrocare’s strong B2B model and industry leadership in wellness testing allows it to process high volumes of routine tests which, along with lower sample acquisition costs, drive significant operational efficiencies and 40% margins for Thyrocare. While its revenue growth had slowed during FY17- 20, mgmt. is striving to drive improved accessibility for the brand by doubling company’s network of branded collection centers to ~1,000 TSPs by the end of CY21. While network expansion will contribute significantly to company’s growth from FY23E, it will also help Thyrocare to expand its customer base, improve TAT and further optimize logistics costs. Thyrocare trades at 30-50% discount to its B2C peers owing to higher pricing pressures in B2B/wellness segment, Thyrocare’s unparalleled focus on operating efficiencies enables it to offset such pricing impact.  We expect 12% revenue Cagr for Thyrocare over FY21-23E.

We are glad to announce that our recommended Portfolio has performed well wherein almost all the stocks in the portfolio have achieved the desired targets and have given strong returns throughout the last year. Check our performance of COVID-19 portfolio that was suggested in 2020

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Shyam Metalics and Energy Ltd IPO Information Note

Shyam Metalics IPO
by Nikita Bhoota 14/06/2021

This document summarizes a few key points related to the issue and should not be treated as a comprehensive summary. Investors are requested to refer the Red Herring Prospectus for further details regarding the issue, the issuer company and the risk factors before taking any investment decision. Please note that investment in securities is subject to risks including loss of principal amount and past performance is not indicative of future performance. Nothing herein constitutes an offer of securities for sale in any jurisdiction where it is unlawful to do so. This document is not intended to be an advertisement and does not constitute an invitation or form any part of any issue for sale or solicitation of an offer to subscribe for or purchase any securities and neither this document nor anything contained herein shall form the basis for any contract or commitment whatsoever.


Shyam Metalics IPO Details

Issue Opens - June 14, 2021

Issue Closes - June 16, 2021

Price Band - ₹ 303-306#

Face Value - ₹10

#Issue Size - ₹909 cr#

Bid Lot - 45 Equity Shares

Issue Type - 100% Book building

Post money Market cap of 7,805Cr - at upper price band; #at upper price band 

Share Reservation

Net Issue (%)

Promoter and Promoter Group

100.0

Public

0.0

Source: RHP

 

Company Background

Shyam Metalics and Energy Limited is a leading integrated metal producing company based in India (Source: CRISIL Report) with a focus on long steel products and ferro alloys. The company is amongst the largest producers of ferro alloys in terms of installed capacity in India, as of February 2021 (Source: CRISIL Report). It has the ability to sell intermediate and final products across the steel value chain. As of March 31, 2020, it is one of the leading players in terms of pellet capacity and the fourth largest player in the sponge iron industry in terms of sponge iron capacity in India (Source: CRISIL Report).

 

Object of the Offer

The IPO offer comprises a fresh issue and an offer for sale. Out of fresh Issue of ₹657cr, ₹470cr is proposed to be utilized towards repayment/prepayment of certain debt availed by the company and its subsidiaries.

 

Financials 

(Cr., unless specified)

FY18

FY19

FY20

9MFY21

Revenue from Operations

3,834

4,606

4,363

3,933

EBITDA

715

957

634

717

EBITDA Margin (%)

18.9

20.6

14.5

18.2

Diluted EPS ()

18.2

25.9

14.6

19.5

ROE (%)

22.89

24.27

12.04

13.89*

Gross Debt to Total Equity (x)

0.30

0.29

0.47

0.27

Source: RHP, *not annualized 

For additional information and risk factors please refer to the Red Herring Prospectus. Please note that this document is for information purpose only

Also Read: Upcoming IPOs in 2021

Key Points

Diversified product mix with strong focus on value added products

The company products primarily comprise of (i) long steel products, which range from intermediate products, such as, iron pellets, sponge iron and billets and final products, such as, TMT, customized billets, structural products and wire rods; and (ii) ferro alloys with a specific focus on high margin products, such as, specialized ferro alloys for special steel applications. The company also undertakes conversion of hot rolled coils to pipes, chrome ore to ferro chrome and manganese ore to silico manganese for an Indian steel conglomerate. The forward and backward integration of manufacturing plants has resulted in multiple points of sale across the steel value chain and provided with flexibility to sell intermediate products as well as use them for captive consumption, depending on the demand. This has resulted in a diversified product mix, which has reduced dependency on a particular product and de-risked revenue streams.

Strong financial performance and credit ratings

The company focuses on continuous efficiency improvements, improved productivity and cost rationalization has enabled it to deliver consistent and strong financial and operational performance. The company has a relatively better financial strength as compared to other companies operating in the long and intermediary steel sector. Revenue from operations increased at a CAGR of 6.56% from ₹3,843 cr in FY2018 to ₹4,363 cr in FY2020. Further, since the commencement of operations in FY 2005, the company has delivered a positive EBITDA in each of the Fiscals. As of March 31, 2020, the gearing ratio was one of the lowest amongst the competitors. In FY 2020, the interest coverage ratio was one of the highest amongst competitors (Source: CRISIL Report). The company has also obtained strong credit ratings. In particular, the company and its subsidiary, Shyam SEL and Power Limited, has received CRISIL A1+, CRISIL AA-/ Stable, and CRISIL A1+ rating from CRISIL for their short-term (bank facilities) rating, long-term (bank facilities) rating and commercial paper, respectively. In addition, the company and its subsidiary, Shyam SEL and Power Limited, has received CARE A1+, CARE AA-/ Stable, and CARE A1+ rating from CARE for their short term (bank facilities) rating, long-term (bank facilities) rating and commercial paper, respectively.

Experienced Promoters, Board and senior management team

The company is led by individual Promoters, Mahabir Prasad Agarwal, Brij Bhushan Agarwal and Sanjay Kumar Agarwal, who have several decades of experience in the steel and ferro alloys industry, and have been instrumental in the growth of the company. The company also has an experienced Board of Directors who has extensive knowledge and understanding of the metal industry and has the expertise and vision to scale up business. The chairman, Mahabir Prasad Agarwal, is responsible for strategic planning and overall administration of the company. The vice chairman and managing director, Brij Bhushan Agarwal, is responsible for implementing future growth strategies. The joint managing director, Sanjay Kumar Agarwal, is responsible for the entire production process at the manufacturing plants. The whole-time director Deepak Kumar Agarwal is responsible for the finance functions.

Key Risk

  • Loss of any of suppliers or a failure by suppliers to deliver some of primary raw materials such as iron ore, iron ore fines, coal, chrome ore and manganese ore may have an adverse impact on the company’s ability to continue its manufacturing process without interruption and its ability to manufacture and deliver the products to the customers without any delay.
  • The success of the company depends on stable and reliable logistics and transportation infrastructure. Disruption of logistics and transportation services could impair the ability of suppliers to deliver raw materials or the company’s ability to deliver products to its customers which may adversely affect operations.
  • The demand and pricing in the steel industry is volatile and are sensitive to the cyclical nature of the industries it serves. A decrease in steel prices may have a material adverse effect on the business, results of operations, prospects and financial condition.

* For complete list of risk factors kindly refer to the Shyam Metalics Red Herring Prospectus.

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Sona Comstar (Sona BLW Precision Forgings Ltd) IPO Information Note

Sona Comstar IPO
by Nikita Bhoota 14/06/2021

Sona Comstar IPO Details

Issue Opens - June 14, 2021

Issue Closes - June 16, 2021

Price Band - ₹ 285-291

Face Value - ₹10

Issue Size - ~₹5,550 cr (at upper price band)

Bid Lot - 51 Equity Shares

Issue Type - 100% Book building

Share Reservation

Net Issue (%)

Promoter and Promoter Group

100.0

Public

0.0

Source: RHP

 

Company Background

The company is one of India’s leading automotive technology companies that is involved in designing, manufacturing and supplying highly engineered, mission critical automotive systems and components such as differential assemblies, differential gears, conventional and micro-hybrid starter motors, BSG systems, EV traction motors (BLDC and PMSM) and motor control units to automotive OEMs across US, Europe, India and China, for both electrified and non-electrified powertrain segments.

 

Object of the Offer

The offer comprises a fresh issue and an offer for sale. Out of fresh Issue of Rs300cr, Rs241cr is proposed to be utilized towards repayment and prepayment of identified borrowings availed by the company.

 

Financials 

Particulars (Rs Cr)

FY19

FY20

FY21

Revenue from Operations

1,427.70

1,220.10

1,566.30

EBITDA

412.2

325.4

441

EBITDA Margin (%)

29.9

26.70

28.20

ROCE(%)

40.3

29

34.8

ROE (%)

35.6

35.2

36.4

Net Debt to Equity (x)

0.84

0.17

0.26

Source: RHP, 5paisa Research

For additional information and risk factors please refer to the Red Herring Prospectus. Please note that this document is for information purpose only

Key Points

One of the leading manufacturers and suppliers to global EV markets

For calendar year 2020, Battery Electric Vehicle (BEV) sales as a percentage of total global vehicle sales stood at 3.3%, according to the Ricardo Report. The company derived 13.8% (Rs205.7cr) of the company’s total income from the BEV market for FY21. As a percentage of the total sale of goods, income from sale of goods to the BEV market has grown from 1.3% in FY19 to 13.8% in FY21. For FY21, Rs1,115.8cr representing approximately 74.9% of total income from sale of goods was derived from sale of goods to BEV, hybrid/ micro-hybrid and power source neutral products. The company has been supplying differential gears in the global EV market since April 2016 and differential assemblies since 2018, and according to the Ricardo Report, their global market share of BEV differential assemblies in calendar year 2020 was 8.7%. They also design and manufacture traction motors and motor control units for electric vehicles, with PMSM motors for EV and hybrid PVs and BLDC motors for electric two-wheelers and electric three-wheelers. 

Strong financial and development and technological capabilities in both hardware and software development.

 The company has developed strong in-house capabilities to deliver evolving green technologies for future mobility, with an aggregate expenditure on R&D of Rs156.4cr during FY2019-21. Company’s R&D expenditure amounted to Rs24.4cr, Rs40.5cr and Rs91.5cr during FY2019, FY2020 and FY2021, respectively and constituted 1.7%, 3.3% and 5.8% as a percentage of revenue from operations, respectively. In comparison, average spend of the top ten listed auto component players was 0.9% over FY2018-20, according to CRISIL Report. As at March 31, 2021, the company had 186 on-roll employees engaged in R&D activities, representing approximately 15.4% of their total on-roll manpower, with 16 software engineers focused on R&D. Moreover, R&D capabilities are further strengthened by their digital simulations, testing and validation facilities located at their three R&D centers in India (Gurugram, Chennai and MM Nagar), which are approved by the GoI’s Department of Scientific and Industrial Research. They are equipped with modern facilities including, design software and an electric & endurance testing laboratory. The company’s R&D capabilities are further supported by the intellectual property rights that they have in connection with their business. The company holds assignment of license rights in relation to eight patents in USA. It has been granted one patent in USA, one patent in China and one patent in the United Kingdom and await 21 patent approvals in India.

Strong business development with customer centric approach:

As at March 31, 2021, the company has been awarded 58 programs from 27 customers across the product portfolio, from customers in India and overseas, where the start of production was either during FY21 or a period subsequent to FY21. The company has long-standing relationships of 15 years and more with 13 of their top 20 customers. Some of their key OEM customers include a Global OEM of EVs, a North American OEM of PVs and CVs, Ampere Vehicles, an Indian OEM of PVs, CVs and EVs, Ashok Leyland, CNH, Daimler, Escorts, Escorts Kubota, Geely, Jaguar Land Rover, John Deere, Mahindra and Mahindra, Mahindra Electric, Maruti Suzuki, Renault Nissan, Revolt Intellicorp, TAFE, Volvo Cars and Volvo Eicher. They also serve selected leading Tier 1 automotive system suppliers such as Carraro, Dana, Jing-Jin Electric, Linamar and Maschio. The company participates in a lengthy and rigorous vendor selection process with their customers, which can take up to two to three years from the date of issue of a request for quote, to qualify and secure business for development of a program.

Key Risk

  • The business is dependent on the performance of the automotive sector globally, including the key markets such as US, Europe, India and China. Any adverse changes in the conditions affecting these markets can adversely impact their business, results of operations and financial condition. 
  • Inability to protect any of their intellectual property, including misappropriation, infringement or passing off of their intellectual property rights or failure to obtain their patents or failure to keep their technical knowledge confidential could have impact on their business and in turn on results of operation or financial condition and cash flows. 
  • The business largely depends upon top ten customers and the loss of such customers or a significant reduction in purchases by such customers will have a significantly adverse impact on their business. The discontinuation or loss of business with respect to, or a lack of commercial success of, a particular vehicle model for which they are a significant supplier could adversely affect their business and results of operations.

* For complete list of risk factors kindly refer to the Sona Comstar Red Herring Prospectus.

About 5paisa:- 5paisa is an online discount stock broker that is a member of NSE, BSE, MCX and MCX-SX. Since its inception in 2016, 5paisa has always promoted the idea of self-investment and has ensured that 100% operations are executed digitally with minimal to no human interventions. 

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Dodla Dairy Limited IPO information note

Dodla Dairy IPO note
by Nikita Bhoota 15/06/2021

Dodla Dairy IPO Details

Issue Opens - June 16, 2021

Issue Closes - June 18, 2021

Price Band - ₹ 421-428

Face Value - ₹10

Issue Size - ~₹520 cr (at upper price band)

Bid Lot - 35 Equity Shares

Issue Type - 100% Book building

 

Company Background

Dodla Dairy Limited was incorporated in 1995 and is an integrated dairy company in entire South India. Company is engaged in the procurement, processing, distribution, and marketing of milk and other dairy products. Company processes, sells milk (including standardized, toned, and double toned milk), and produces dairy products such as curd, butter, ghee, ice cream, flavored milk etc. Operations of DDL in India are primarily across the five Indian states of Andhra Pradesh, Telangana, Karnataka, Tamil Nadu and Maharashtra and overseas operations are based in Uganda and Kenya. Its Indian operations are undertaken under the brands “Dodla Dairy”, “Dodla” and “KC+”. Its overseas operations are undertaken under its brands “Dodla Dairy”, “Dairy Top” and “Dodla +”. Amongst private dairy players with a significant presence in the southern region of India, the company is the third highest in terms of milk procurement per day (Source: CRISIL Report) with an average procurement of 1.02 million litres of raw milk per day (MLPD) as of December 31, 2020 and second highest in terms of market presence across all of India amongst private dairy players with a significant presence in the southern region of India (Source: CRISIL Report)

 

Object of the Offer

The Offer for Sale(~Rs470cr)

The proceeds of the Offer for Sale shall be received by the Selling Shareholders after deducting their proportion of Offer expenses and relevant taxes thereon. The Company will not receive any proceeds from the Offer for Sale and the proceeds received from the Offer for Sale will not form part of the Net Proceeds.

The Fresh Issue (~Rs50 crore)

  • Repayment and/ or pre-payment, in full or part, of certain borrowings availed by our Company: Rs32.2cr
  • Funding capital expenditure requirements of our Company: Rs7.1cr; and
  • General corporate purposes.

Also Read: Upcoming IPOs in 2021

Financials of Dodla Dairy

Particulars (Rs Cr)

FY18

FY19

FY20

9MFY21

Revenue from Operations

1,590

1,692

2,139

1,413

EBITDA

119

142

147

210

PAT

57

63

50

116

    Source: RHP

 

Competitive Strengths

Consumer focused dairy company with a diverse range of products under the “Dodla Dairy” and “Dodla” brands:

DDL has developed one of the leading brands in the dairy products industry in south India with strong consumer recognition, particularly in the States of Andhra Pradesh, Karnataka, Tamil Nadu and Telangana. Its Indian operations are undertaken under its brands “Dodla Dairy” (for milk and perishable products such as curd, flavoured milk) and “Dodla” (for VAPs such as ghee, butter, paneer, butter milk and ice creams). It primarily derived all its revenue in Fiscal 2020 and nine months period ended December 31, 2020, from sale of milk and dairy based VAPs in the branded consumer market. It is the third largest private milk company in south India in terms of procurement and second highest in terms of market presence across all of India amongst private dairy players with a significant presence in the southern region of India. It offers a diverse portfolio of dairy based VAPs targeted at various consumer segments and this enables it to cater to the changing preferences of its retail customers. It sells fresh milk, ghee, butter, curd, paneer, gulab jamun, doodh peda, basundhi and junnu, which is targeted at consumption at home and UHT milk, flavoured milk, ice - cream and beverages such as buttermilk under its brand, primarily for direct consumption. The strength of its brands helps in many aspects of its business, including expanding to new markets, entering into agreements with distributors and retailers and building relationships with its customers, investors and lenders.

Focused engagement and long term relationship with dairy farmers:

DDL’s farmer-friendly policies and continuous engagement with them with welfare programs have strengthened its relationships with farmers which in turn have strengthened its raw milk procurement process. It offers a variety of initiatives for the farmers from whom it procures raw milk. As part of its diversified procurement network, it relies on third party suppliers and farmers. In order to ensure transparency, it tests the quality and quantity of the raw milk collected from the farmers with electronic milk analyzers. The Company pays the farmers once every 10 to 15 days with the money being sent directly to the bank accounts of 77.00% of its farmers as of March 31, 2021 and pay the remaining 23.00% of its farmers by way of direct cash payments, which motivates them to engage with it more frequently. It has consistently improved its direct procurement from farmers from 2018 from 0.50 MLPD to 1.03 MLPD as of March 31, 2021. It has also diversified into an ingredient input providing company by supplying upfront cattle feed under the “Orga “ brand, manufactured by its Subsidiary Orgafeed Private Limited, directly to its farmers through its procurement network which is adjusted against the value of the raw milk supplied to it by such farmers. DDL’s continuous engagement with farmers and its knowledge in the dairy industry combined with welfare programs for the farmers have enabled it to have a strong procurement network in the regions in which it operates and thus helped to contain the cost of raw milk and ensure supply of quality raw milk.

Financial Growth and operational efficiencies:

DDL has delivered consistent growth over the last three financial years both in terms of financial and operational metrics. Its revenue from operations increased at a CAGR of 15.98% over Fiscal 2018 to Fiscal 2020 and amounted to Rs. 21,393.73 million in Fiscal 2020. Additionally, its sales (sale of goods) increased from Rs. 15,891.60 million in Fiscal 2018 to Rs.21,361.64 million in Fiscal 2020. Despite cumulative capital expenditure of Rs.2,644.86 million over the past three years, towards inter alia, commissioning a new processing plant at Rajahmundry in Andhra Pradesh, acquisition of the processing plants at Batlagundu and Vedasandur in Tamil Nadu from KC Dairy Products Private Limited, acquisition of the cattle feed and mixing plant by Orgafeed Private Limited at Kadapa in Andhra Pradesh and establishment of new VLCCs, Its return on equity and return on capital employed for Fiscal 2020 were at 11.50% and 17.01%, respectively which is due to the successful integration of the acquisitions with its operations. Further, its receivable days were 1.23 days and 0.66 days as on March 31, 2020 and December 31, 2020 respectively with its trade receivables amounting to Rs.72.03 million and Rs.33.92 million as on March 31, 2020 and December 31, 2020 respectively.

Experienced Board and senior management team:

DDL is led by an experienced Board of Directors, who have extensive knowledge and understanding of the dairy business and has the expertise and vision to organically and inorganically scale up its business. Its Board, led by its Chairman Dodla Sesha Reddy, has led Company through sustained period of growth and has also taken initiatives to improve processes and efficiencies, implementation of enterprise resource planning system in the year 2000 and replication of India business model in Uganda and Kenya which led to its overseas operations turning profitable. The knowledge and experience of its senior and middle-level management team in the dairy business provides it with a significant competitive advantage as it seeks to grow its business. Its core managerial team has an average dairy industry experience of more than 20 years and most of them have been associated with the Company since its formative years.

For complete list of competitive Strengths kindly refer to the Red Herring Prospectus.

Key Risk Factors:

  • Operations are dependent on the supply of large amounts of raw milk, and inability to procure adequate amounts of raw milk from farmers and third party suppliers, at competitive prices, may have an adverse effect on the business, results of operations and financial condition.
  • The coronavirus disease (COVID-19) has had an adverse effect on DDL’s business and operations and the extent to which it may continue to do so in the future, is uncertain and cannot be predicted.
  • The supply of raw milk is subject to seasonal factors, and does not necessarily match the seasonal change in demand for its products. Consequently, inability to accurately forecast demand for products, may have an adverse effect on its business, results of operations and financial condition.

For complete list of risk factors kindly refer to the Red Herring Prospectus.

See detail video on Dodla Daity Ltd IPO : 

About 5paisa:- 5paisa is an online discount stock broker that is a member of NSE, BSE, MCX and MCX-SX. Since its inception in 2016, 5paisa has always promoted the idea of self-investment and has ensured that 100% operations are executed digitally with minimal to no human interventions. 

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Krishna Institute of Medical Science Ltd IPO Information Note

Krishna Institute of medical science
by Nikita Bhoota 15/06/2021

Krishna Institute of Medical Science IPO Details

Issue Opens - June 16, 2021

Issue Closes - June 18, 2021

Price Band - ₹ 815-825

Face Value - ₹10

Issue Size - ~₹2,144 cr (at upper price band)

Bid Lot - 18 Equity Shares

Issue Type - 100% Book building

% Shareholding

Pre-offer

Promoter Group

46.81

Public

53.19

Total

100%

 

 

 

 

 

 

Source: RHP

 

Company Background

Krishna Institute of Medical Science Ltd. (KIMS) provides multi-disciplinary integrated healthcare services, with a focus on primary, secondary & tertiary care in Tier 2-3 cities and primary, secondary, tertiary and quaternary healthcare in Tier 1 cities. The company operates 9 multi-specialty hospitals under the “KIMS Hospitals” brand, with an aggregate bed capacity of 3,064, including over 2,500 operational beds as of March 31, 2021, which is 2.2 times more beds than the second largest provider in AP and Telangana.

For additional information and risk factors please refer to the Red Herring Prospectus. Please note that this document is for information purpose only.

The company offers a comprehensive range of healthcare services across over 25 specialties and super specialties, including cardiac sciences, oncology, neurosciences, gastric sciences, orthopaedics, organ transplantation, renal sciences and mother & child care.

 

Object of the Offer

The IPO offer comprises of a fresh issue and an offer for sale. Out of the fresh issue component of Rs.200cr., Rs.150cr. is proposed to be utilized towards repayment/prepayment of certain debt availed by the company and its subsidiaries and the balance amount is attributable to general corporate purposes.

Read Now: Upcoming IPOs in 2021

Financials 

Particulars (Rs Cr)

FY19

FY20

FY21

Revenue from Operations

918

1,123

1,330

Adj. EBITDA

174

251

381

Adj. EBITDA Margin (%)

18.8

22.2

28.4

PAT

-49

115

205

ROE (%)

-8.8

19.9

23.3

Adj. Net Debt to Equity (x)

0.49

0.46

0.25

Source: RHP

Competitive Strengths:

Track record of strong operational and financial performance

The company has grown from a single, approximately 200-bed hospital at Nellore (AP) in year 2000 to a leading multi-disciplinary integrated private healthcare service provider with nine multi-specialty hospitals and over 3,000 beds today. The company has consistently delivered strong operational and financial performance through strong patient volumes, cost efficiency and diversified revenue streams across medical specialties. The company has achieved healthy profitability in both Tier 1 and Tier 2-3 markets by identifying markets with significant under-served healthcare demand and delivering quality healthcare services at affordable prices, which in turn drives patient volumes. Their hospitals in Tier 1 markets provide higher margin services such as organ transplants, oncology and neuro-critical care, resulting in higher average revenue per operating bed (ARPOB) and EBITDA. The company’s multispecialty healthcare platform has resulted in diversified revenue streams, with no single specialty accounting for more than 25% of the total income in any of the last three years. As of March 31, 2021, the debt-to-EBITDA ratio was 0.71x and the gearing ratio was 0.31x. The company has achieved strong free cash flow levels, in terms of the cash flows from operations relative to the capital expenditures. The company is one of only three hospitals in India that are rated AA by CRISIL

Well positioned to consolidate in India’s large, unorganized yet rapidly growing and underserved affordable healthcare market

The healthcare industry in India is poised for growth. The Indian healthcare delivery industry is expected to grow at a 17-18% CAGR (2020 - 2024E) and reach ₹7.07 trillion by 2024, according to the CRISIL Report. In Fiscal Year 2020, 68% of hospital treatments, in terms of the treatment value, were carried out in private hospitals, and the number is expected to reach 72% in Fiscal Year 2024, according to the CRISIL Report.

There is a significant and growing need for quality and affordable healthcare services across the country, particularly in AP and Telangana where the company’s hospital network is concentrated. AP and Telangana ranked among the top three in terms of overall health index score, according to the CRISIL Report. AP is also a leading state in terms of doctors per person in 2018 and has been attracting doctors and patients seeking treatments, according to CRISIL report. Health insurance penetration in India stood at only 37% as of March 31, 2018, while AP and Telangana also stand as one of the underpenetrated states in terms of health insurance, with a penetration rate of 4% and 12%, respectively, in Fiscal Year 2020. The government backed schemes in AP and Telangana will also help to set the stage for future growth.

Disciplined approach to acquisitions resulting in successful inorganic growth

The company has a successful history of sourcing, executing and integrating acquisitions. It has a disciplined and low-leverage approach to acquisitions that has enabled them to maintain their affordable pricing model, as they have grown in both tier I and II-III markets. Since Fiscal Year 2017, the company has expanded their hospital network primarily through acquisitions of other hospitals. In Fiscal Year 2017, they have acquired hospital in Ongole (AP), a 350-bed multispecialty hospital founded by local doctors, through a slump sale by Ongole Arogya Hospitals Private Limited. The company further expanded its hospital network to add KIMS Vizag, a 434-bed multispecialty hospital in April 2018 by entering into a service agreement. In addition, it acquired a 250-bed hospital in Anantapur (AP) in October 2018 and a 200-bed hospital in Kurnool (AP) in April 2019, which solidified their presence in southern AP and adjoining areas of Karnataka.

 

Key Risk Factor:

  • The company is highly dependent on their healthcare professionals, including doctors that are engaged on a consultancy basis.
  • Their revenues are highly dependent on the hospitals in Hyderabad (Telangana). There is also significant dependence on certain specialties for a majority of the revenues.
  • Any adverse impact on the title or ownership rights of the owner or breach of the terms or nonrenewal of the license agreement may lead to disruptions and affect the business operations of the company.

* For complete list of risk factors kindly refer to the Sona Comstar Red Herring Prospectus.

See Detail video of Krishna Institute of Medical Sciences :

About 5paisa:- 5paisa is an online discount stock broker that is a member of NSE, BSE, MCX and MCX-SX. Since its inception in 2016, 5paisa has always promoted the idea of self-investment and has ensured that 100% operations are executed digitally with minimal to no human interventions. 

Our all-in-one Demat account makes investment hassle free for everyone, be it an individual newly venturing into the investment market or a pro investor. Headquartered in Mumbai, 5paisa.com - a subsidiary of IIFL Holdings Ltd (formerly India Infoline Limited), is the first Indian public listed fintech company.

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