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Sun Pharma Ltd – A shining quarterly performance

Sun Pharma quarterly results
30/07/2021

Sun Pharma net profits turned around to Rs.1,860 crore from net loss of Rs.-1,320 crore on lower exceptional loss provisions on Taro Pharma lawsuits. Meanwhile, Sun reported 28.13% growth in sales at Rs.9,719 crore. The growth was driven by core pharma growth, low base in Jun20 and higher sales of COVID products. 

 

Sun pharma FY22 Q1 Results

Rs in Crore

Jun-21

Jun-20

YOY

Mar-21

QOQ

Total Income (Rs cr)

₹ 9,718.74

₹ 7,585.25

28.13%

₹ 8,522.98

14.03%

Operating Profit (Rs cr)

₹ 2,317.86

₹ 1,347.59

72.00%

₹ 1,494.95

55.05%

Net Profit (Rs cr)

₹ 1,859.92

₹ -1,319.84

N.A.

₹ 992.55

87.39%

Diluted EPS (Rs)

₹ 6.00

₹ -6.90

 

₹ 3.70

 

OPM

23.85%

17.77%

 

17.54%

 

Net Margins

19.14%

-17.40%

 

11.65%

 


India sales at Sun Pharma were up 39% at Rs.3,384 crore. Among other markets, the US formulations grew at 35%, Emerging Markets at 25% and reset of the world at 35%. R&D investments at Rs.593 crore were 6.1% of sales. As part of the debt reduction program, Sun has cut $765 million of debt in the last 5 quarters with $185 million cut in Jun-21 quarter. Sun launched at total of 13 products in the Indian market during the quarter.

Also Check: Dr. Reddy Labs and Torrent Pharma - Quarterly Results

EBITDA was up 59% at Rs.2,772 crore was up 59% yoy. Taro posted sales of $147 million and net profits of $41 million, showing solid growth in top line and bottom line. The reason for the turnaround in net profits from loss last year was the lower exceptional losses for the Department of Justice order against Taro Pharma. In the Jun-21 quarter, Sun provided just Rs.631 crore against Rs.3,633 crore in the Jun-20 quarter. Net margins at 19.14% were higher 750 bps on sequential basis.

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Rolex Rings IPO Subscription Day-3

Rolex Rings IPO Subscription
30/07/2021

The Rs.731 crore Rolex Rings IPO, consisting of Rs.56 crore fresh issue and Rs.675 crore OFS, got a phenomenal response on Day-3. As per the combined bid details put out by the BSE, Rolex Rings IPO was subscribed 130.43X overall, with the bulk of the demand coming from HNIs followed by QIBs. Retail flows only built marginally on the last day.

At close on 30 July, out of 56.86 lakh shares on offer in the IPO, Rolex Rings saw applications for 7,415.77 lakh shares. This implies an overall subscription of 130.44X. The granular break-up was tilted in favour of the HNI applicants followed by the QIBs.

Rolex Rings IPO Subscription Status

Category Subscription Status
Qualified Institutional (QIB) 143.58 Times
Non-Institutional (NII) 360.11 Times
Retail Individual 24.49 Times
Total 130.44 Times

 

The QIB portion saw a phenomenal response on Day-3 of the IPO. As of the close of bidding, out of the 16.24 lakh residual shares on offer for QIBs after removing the anchor portion, Rolex Rings saw QIB applications for 2,332.35 lakh shares, implying a subscription of 143.58X.

The HNI portion got subscribed 360.11X (getting applications for 4,387.39 lakh shares against the quota of 12.18 lakh shares). The IPO saw a deluge of corporate applications and funding applications on the last day, boosting the final tally of subscriptions.

The retail portion was already subscribed 15.88 times on Day-2 and built up to 24.49X on the last day. Normally, the retail appetite tends to be pronounced on the first 2 days with HNIs and QIBs lining up on the last day. Among retail investors; out of the 28.43 lakh shares on offer, valid bids were received for 696.02 lakh shares, of which bids for 547.36 lakh shares were at the cut-off price. The IPO is priced in the band of (Rs.880-Rs.900) and the final price discovery is now likely to happen at the upper end of the band.
 

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Bandhan Bank Q1 Profit Slumps 32% as Provisions Climb, NPAs Soar

31/07/2021

Bandhan Bank’s net profit for the first quarter through June 2021 dropped 32%, dragged down by a 62%jump in provisions to cover for potential non-performing assets

The private-sector bank posted a net profit of Rs 373.1 crore for the April-June period compared with Rs 549.8 crore a year earlier.

Net interest income—the difference between interest earned and paid—rose 16.7% to Rs 2,114.1 crore while the net interest margin expanded to 8.5% from 8.2% a year earlier.

The bank’s provisions to cover for potential NPAs jumped to Rs 1,375 crore from Rs 849 crore in the corresponding period of the last financial year.

 

Other key details:


1. Operating profit for Q1 grew 18% from a year earlier to Rs 1,871 crore.

2. Total advances grew 8.1% to Rs 80,356.9 crore;total deposits increased 27.6% to Rs 77,335.5 crore.

3. Gross NPAs as on June 30 were Rs 6,440.4 crore while net NPAs came in at Rs 2,457.9 crore.

4. Gross NPA ratio jumped to 8.2% from just 1.4% a year earlier; net NPAs rose to 3.3% from 0.5%.

5. The bank’s capital adequacy ratio is at 24.8%, above the minimum norm of 15%.

 

Management Commentary: 


Chandra Shekhar Ghosh, Managing Director and CEO of Bandhan Bank, said the lender delivered the “best-ever quarter” in terms of operational performance in spite of the challenging environment due to the second wave of the Covid-19 pandemic.

“Collections continue to improve with Covid restrictions getting relaxed. Typically, the second half of the financial year is always better for the bank in terms of growth and collections. With easing of Covid second wave and upcoming festive season, we are confident of achieving better performance going forward,” he said.

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Devyani International - IPO Note

Devyani International - IPO Note
31/07/2021

Devyani International may not be known as a company but its brands are ragingly popular among Indian households, especially among the Indian youth, Devyani is the largest franchisee of Yum Brands in India and operates a massive chain of quick-service restaurants (QSR) in India. It operates under the brands of KFC (Kentucky Fried Chicken), Pizza Hut and Taco Bell. In addition, Devyani is the master franchise for Costa Coffee in India. It operates 696 outlets across 166 cities and towns in India.

Devyani International IPO is of Rs.1,838 crore consisting of Rs.440 crore by way of new issue and Rs.1,398 crore by way of offer for sale (OFS).

Key terms of the IPO issue of Devyani International

 

Key IPO Details

Particulars

Key IPO Dates

Particulars

Nature of issue

Book Building

Issue Opens on

04-Aug-2021

Face value of share

Rs.1 per share

Issue Closes on

06-Aug-2021

IPO Price Band

Rs.86 - Rs.90

Basis of Allotment date

11- Aug -2021

Market Lot

165 shares

Refund Initiation date

12- Aug -2021

Retail Investment limit

13 Lots (2,145 shares)

Credit to Demat

13- Aug -2021

Retail limit - Value

Rs.193,050

IPO Listing date

16- Aug -2021

Fresh Issue Size

Rs.440 crore

Pre issue promoter stake

75.79%

Offer for Sale Size

Rs.1,398 crore

Post issue promoters

67.99%

Total IPO Size

Rs.1,838 crore

Indicative valuation

Rs.10,823 crore

Listing on

BSE, NSE

HNI Quota

15%

QIB Quota

75%

Retail Quota

10%

Data Source: IPO Filings

The business spread of Devyani can be classified as under.
•    Core brands of KFC, Pizza Hut and Costa Coffee in India
•    Stores operated globally especially in Nepal and Nigeria
•    Miscellaneous operating brands like “Vaango” and “Food Street”.

A quick look at the financials of Devyani International 

Like in the case of many QSR restaurants, the company has been making losses, although its losses have substantially narrowed in FY21, compared to FY20. The table below captures the gist of the financials of Devyani International.

Financial Parameter

Fiscal 2020-21

Fiscal 2019-20

Fiscal 2018-19

Net Worth

Rs.113.77 cr

Rs.(189.10) cr

Rs.(70.24 cr

Revenues

Rs.1,135 cr

Rs.1,516 cr

Rs.1,311 cr

EBITDA

Rs.226.93 cr

Rs.255.48 cr

Rs.278.96 cr

Net Loss

Rs.(62.99) cr

Rs.(121.42) cr

Rs.(94.14) cr

Data Source: Company RHP


For the latest fiscal year FY21, the revenues from the core brands and the international brands accounted for 94% of total revenues. Devyani currently operates 284 KFC stores, 317 Pizza Hut stores and 44 Costa Coffee stores across India. Stores have expanded at over 13% annually with the number of stores increasing from 469 stores to 621 stores over the last 2 years.


In the FY21, the same store growth (SSG) did suffer a temporary reverse but that was largely on account of the lockdowns imposed due to COVID-19. All the 3 core brands had very strong gross margins. For example, as of FY21, KFC had a gross margin of 68%, Pizza Hut 74% and Costa Coffee 79%. For FY 21, the core brands contributed 84% of revenues compared to 74% in FY19, showing sharper brand penetration.

Investment Perspective for Devyani International

QSR is a front-ended business which is capital hungry in the early years and only recovers later as the brand penetrates deeper. The key is SSG, which took a hit in FY21 purely due to the pandemic and the consequent shutdowns. Here are some parameters that would help you take a decision on investing in the IPO of Devyani International.

a)    Over the last 3 fiscal years, KFC has had average daily sales of over Rs.100,000 per day while Pizza Hut and Costa Coffee have jointly contributed half of that. The average transaction size over the last 3 years has gone up across all the 3 core brands.

b)    All three are established global brands. For example, KFC runs 25,000 stores globally across 140 countries while Pizza Hut runs 17,650 restaurants worldwide. Even Costa Coffee runs 3,400 outlets globally.

c)    Devyani outlets have a strong presence across key consumption centers of India like Delhi, NCR, Bengaluru, Kolkata, Mumbai and Hyderabad. Cross brand synergies are huge since they target the same median segment. 

d)    For the QSR business, the delivery business is always more economical and profit-making than the dine-in business. In FY21, the share of delivery was 71% compared to 51% in FY20. That trend is expected to stabilize. 

e)    Out of the fresh funds raised, Rs.324 crore will be used to defray debt, which is normally valued accretive for QSR companies.

 

Also Check: List of Upcoming IPOs in August 2021

 

In a nutshell, most of the QSR brands in India like Westlife (McDonalds) and Burger King are also making losses while Jubilant (Domino’s) is the only listed profit making QSR entity. It is hard to apply traditional P/E parameters but considering its brand, reach and SSG driven model, this is a good way to participate in the burgeoning QSR story in India.

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Krsnaa Diagnostics - IPO Note

Krsnaa Diagnostics - IPO Note
31/07/2021

Krsnaa runs a chain of diagnostic centres offering a wide array of diagnostic services including imaging, radiology, routine clinical laboratory tests, pathology analysis and tele radiology services. These services are offered on a B2B model and is offered to the private and public hospitals, medical colleges / institutions as well as community health centres. 
On a pan-India basis, Krsnaa Diagnostics operates over 1,800 diagnostic centres and in the full calendar year 2020 alone, it had serviced a total of 53 lakh patients for various diagnostic needs. Now, Krsnaa Diagnostic is coming out with a public issue of Rs.1,213 crore consisting of fresh issue of Rs.400 crore and an offer for sale (OFS) of Rs.813 crore. 

Key terms of the IPO issue of Krsnaa Diagnostics
 

Key IPO Details

Particulars

Key IPO Dates

Particulars

Nature of issue

Book Building

Issue Opens on

04-Aug-2021

Face value of share

Rs.5 per share

Issue Closes on

06-Aug-2021

IPO Price Band

Rs.933 - Rs.954

Basis of Allotment date

11-Aug-2021

Market Lot

15 shares

Refund Initiation date

12-Aug-2021

Retail Investment limit

13 Lots (195 shares)

Credit to Demat

13-Aug-2021

Retail limit - Value

Rs.186,030

IPO Listing date

17-Aug-2021

Fresh Issue Size

Rs.400 crore

Pre issue promoter stake

74.63%

Offer for Sale Size

Rs.813.33 crore

Post issue promoters

N.A.

Total IPO Size

Rs.1,213.33 crore

Indicative valuation

Rs.3,810 crore

Listing on

BSE, NSE

HNI Quota

15%

QIB Quota

75%

Retail Quota

10%

Data Source: IPO Filings

Some of the advantages in the business model of Krsnaa can be summarized as under.
•    Comprehensive range of services offered under one roof with B2B tilt
•    Health consciousness is growing in India, especially preventive medical check-ups
•    Offers quality value proposition at reasonable pricing
•    Valuations likely to benefit from the recent COVID aftermath
•    Strong market footprint with deep links to medical service originators


A quick look at the financials of Krsnaa Diagnostics

A quick glance at the financials of Krsnaa Diagnostics would tell you that the company has managed a turnaround in financial bottom line which has also resulted in its net worth going into positive. The company has also expanded its capital base by raising more capital during the year.
 

Financial Parameter

Fiscal 2020-21

Fiscal 2019-20

Fiscal 2018-19

Net Worth

Rs.231.87 cr

Rs.(196.98) cr

Rs.(84.92) cr

Revenues

Rs.396.46 cr

Rs.258.43 cr

Rs.209.24 cr

Net Profit / loss

Rs.184.93 cr

Rs.(111.95) cr

Rs.(58.06) cr

Data Source: Company RHP

If one were to just look at the financials, the growth is apparent. Clearly, the company has benefited from the substantially higher health consciousness in the aftermath of COVID. The revenues have almost doubled in the last 2 years, so between pre-COVID to post-COVID, the sales stand at twice the original figure. This has offered economies of scale to the company which resulted in a sharp turnaround from losses to profits in the latest fiscal year.

The public issue is intended for two main purposes. The fresh issue component will be used to finance the establishment of diagnostic centres in the states of Punjab, Himachal Pradesh, Maharashtra and Karnataka. In addition, part of the fresh funds will also be used to repay loans in the books so as to make the company less levered and improving solvency metrics.

Investment Perspective for Krsnaa Diagnostics

The company has just turned around in the current quarter, so the financial bottom line sustenance needs to give more positive indications. Meanwhile, there are some merits that the company brings to the table..

a)    The business model is scalable and in the current context where health consciousness is at a high post-COVID, this business is only likely to boom in the coming years. That holds a vast market for the company and a huge opportunity.

b)    The company plans to reduce the debt via the proceeds of the issue and that normally values accretive for such service intensive businesses. Also, the network expansion planned by the company is likely to be revenue accretive.

c)    The Krsnaa Diagnostics IPO price discounts the latest year earnings at around 21X, which is lower than the peer group. However, the company must show evidence of sustaining profits in the coming years. That could hold the key.

 

Also Check: List of Upcoming IPOs in August 2021

 

Investors can look at the company as a play on the fast growing diagnostics space, although it does not have a sustained profit track record to justify valuations. Investors with a slightly higher risk appetite can consider investing in this issue.

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Windlas Biotech - IPO Note

31/07/2021

Windlas Biotech is a key player in the CDMO (contract development & manufacturing organization), is a specialized activity wherein a pharma company offers the niche service of additional manufacturing capacity or even specialized research services to pharma companies in India and across the globe. To avoid the costs of additional capacity, most pharma companies are now increasingly looking at such specialized CDMO companies to which they can outsource such manufacturing activities on a contract basis. It is in this space that Windlas operates in India.

CDMO is a new business where sales have been growing rapidly and it also enjoys high operating margins. Some of the major players in the CDMO space include Divi’s Laboratories, Laurus Labs, PI Industries, Jubilant Life, Neuland Labs and Suven Pharma. In terms of market cap, however, only Hikal and Neuland would be comparable with Windlas as the others have much higher levels of market cap.

Key terms of the IPO issue of Windlas Biotech
 

Key IPO Details

Particulars

Key IPO Dates

Particulars

Nature of issue

Book Building

Issue Opens on

14-Aug-2021

Face value of share

Rs.5 per share

Issue Closes on

16-Aug-2021

IPO Price Band

Rs.448 - Rs.460

Basis of Allotment date

11-Aug-2021

Market Lot

30 shares

Refund Initiation date

12-Aug-2021

Retail Investment limit

14 Lots (420 shares)

Credit to Demat

13-Aug-2021

Retail limit - Value

Rs.193,200

IPO Listing date

17-Aug-2021

Fresh Issue Size

Rs.165 crore

Pre issue promoter stake

78.00%

Offer for Sale Size

Rs.236.54 crore

Post issue promoters

65.16%

Total IPO Size

Rs.401.54 crore

Indicative valuation

Rs.1,240 crore

Listing on

BSE, NSE

HNI Quota

15%

QIB Quota

50%

Retail Quota

35%

Data Source: IPO Filings

Here is what you need to know about the Windlas Biotech IPO

•    Operating margins in this business range from 20% to 45% but this business has been hit by a spike in material costs of late in line with supply chain constraints.

•    Most CDMO companies have expanded their capacity by 5-6 times in the last 5 years and CDMO companies have a high ratio of Capex to cash flows from operations.

•    Being capital intensive in nature, CDMO needs a high asset turnover ratio to maintain ROCE buoyant. Windlas has maintained asset turnover consistently at above 1.

A quick look at the Financials of Windlas Biotech

The company has been consistently profit making over the last 3 years with an asset turnover ratio in excess of 1. However, the ROE has been consistently below 10%, which is much lower than the median ROE of CDMO businesses in India. Hopefully, once the debt is repaid partially through the IPO, the ROE should improve.
 

Financial Parameter

Fiscal 2020-21

Fiscal 2019-20

Fiscal 2018-19

Net Worth

Rs.199.12 cr

Rs.209.66 cr

Rs.193.59 cr

Revenues

Rs.427.60 cr

Rs.328.85 cr

Rs.307.27 cr

Net Profit

Rs.15.83 cr

Rs.16.21 cr

Rs.63.82 cr

Net Margins

3.70%

4.93%

20.77%

Data Source: RHP

The company will be using the proceeds of the fresh issue for expansion of its Dehradun plan and also to repay debt in its books. The high profits in FY 19 contain an exceptional gain of Rs50cr from booking gains on the loss of control of the subsidiary company. Hence the profits of the last 2 years are more of sustainable nature.

Also read: 5 Things to know before applying for an Windlas Biotech IPO

Investment Perspective for Windlas Biotech

The company does bring some advantages to the table. Firstly, it is a consistently profit making company and has been in business for 20 years now. It operates in the Chronic therapeutic segment, which is a high growth space. It also has a major exposure to complex generics, apart from its traditional CDMO operations. Here are some key factors to note.

a)    Windlas is already contract manufacturing for some of the leading names like Pfizer, Sanofi India, Cadila Healthcare and Emcure. It already has an installed capacity to manufacture 707 crore tablets/capsules, 5.5 core pouches and 6.1 crore liquid bottles.

b)    Being a capital intensive business, the company will be using part of the fresh funds to expand its capacity in Dehradun-IV. This is a business which requires a consistently high ratio of capex to operating cash flows year after year, which compress net margins.

c)    The company is in a space which is extremely competitive with companies with larger balance sheets already in the fray. However, CDMO is about established relationships that normally tend to last over time. 

The risk for Windlas is the aggressive nature of competition in the CDMO business. Here it is all about relationships and about execution. With a likely post-issue market cap of Rs.1,240 crore, Windlass is much smaller than other players in the CDMO business. Valuations are steep in the range of 65-70 times. Investors will have to take a long term approach to make macro gains in the business.

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