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Tarsons Products IPO - Information Note

Tarsons Products IPO - Information Note
by 5paisa Research Team 16/11/2021

Tarsons Products Ltd, is a life sciences company that basically manufactures and markets laboratory products. These lab products are essentially supplied to the laboratories of research organizations, academic institutions, pharmaceutical companies, diagnostic and testing companies as well as contract research organizations or CROs. Tarsons has a wide portfolio of 1,700 SKUs across 300 products.

Tarsons caters to a large addressable market in the life sciences industry. Its manufacturing facilities are state of the art and equipped to handle scale. Currently, Tarsons has 5 manufacturing facilities spread across West Bengal.

In addition, it also has a strong distribution franchise of 141 distributors and its market extends across over 40 countries. Based on the upper end of the price band, Tarsons will have a listing market cap of Rs.3,522 crore.
 

Key terms of the IPO issue of Tarsons Products Ltd
 

Key IPO Details

Particulars

Key IPO Dates

Particulars

Nature of issue

Book Building

Issue Opens on

15-Nov-2021

Face value of share

Rs.2 per share

Issue Closes on

17-Nov-2021

IPO Price Band

Rs.635 - Rs.662

Basis of Allotment date

23-Nov-2021

Market Lot

22 shares

Refund Initiation date

24-Nov-2021

Retail Investment limit

13 Lots (286 shares)

Credit to Demat

25-Nov-2021

Retail limit - Value

Rs.189,332

IPO Listing date

26-Nov-2021

Fresh Issue Size

Rs.150 crore

Pre issue promoter stake

50.78%

Offer for Sale Size

Rs.874 crore

Post issue promoters

47.30%

Total IPO Size

Rs.1,024 crore

Indicative valuation

Rs.3,522 crore

Listing on

BSE, NSE

HNI Quota

15%

QIB Quota

50%

Retail Quota

35%

 

Data Source: IPO Filings
 

Here are some of the key merits of the Tarsons Products Ltd business model


1) A fairly large addressable market and growing at a rapid pace ensures that the market has scope to handle competition.

2) Laboratory costs for most research organizations are core expenses and hence this market is not too cyclical.

3) Its portfolio of 1700 SKUs across 300 products means that the products are mass customized to a large extent and cater to a wide array of lab needs.

4) Strong net margins and a solid asset turnover ratio offer the promise of robust ROE performance in the coming quarters.

5) IPO funds will be used for capacity expansion and for debt repayment, both of which are likely to be value accretive for the company.

 

How is the Tarsons Products IPO structured?


The Tarsons Products IPO will be a combination of offer for sale and fresh issue where 2 promoters and one early investor, Clear Vision Investment Fund, will look to monetize part of their holdings. Here is a gist of the IPO offer.

A) The OFS component will comprise the issue of 1,32,00,000 shares and at the upper end of the price band of Rs.662, the OFS size works out to Rs.873.84 crore.

B) Out of the above 132 lakh shares as part of the OFS, early investor Clear Vision Investment Fund, will sell 125 lakh shares while the promoters Sanjiv Sehgal and Rohan Sehgal will sell total of 7 lakh shares between them.

C) As a result of the above OFS and the expanded capital due to the fresh issue, the promoter stake in the company will reduce post issue from 50.78% to 47.30%. Correspondingly, the public shareholding will move up to 52.70%.

D) The new issue component will entail the sale of 22.66 lakhs shares which at the upper end of the price band of Rs.662, amounts to Rs.150 crore. The fresh issue will be used for repayment of debt and part funding the expansion.
 

Check - Tarsons Products IPO - 7 Things to Know
 

Key Financial parameters of Tarsons Products
 

Financial Parameters

Fiscal 2020-21

Fiscal 2019-20

Fiscal 2018-19

Total Assets

Rs.295.95 cr

Rs.248.71 cr

Rs.211.96 cr

Sales Revenues

Rs.234.29 cr

Rs.180.05 cr

Rs.184.72 cr

Net Profit / (Loss)

Rs.68.87 cr

Rs.40.53 cr

Rs.38.96 cr

Net Profit Margins

29.40%

22.51%

21.09%

Asset Turnover

0.79X

0.72X

0.87X

 

Data Source: Company RHP

There are 3 key inferences that follow from the financials. The sales growth and profit growth have been robust in the last 3 years. Secondly, the net margins have shown consistent improvement while the asset turnover has been around median of 0.8X.

Lastly, the company largely follows an asset light model, so profit boost with scale can be the real icing on the cake.
 

Investment Perspective for Tarsons Products Ltd


The IPO is a combination of an OFS and a fresh issue. Here are some takeaways.

a) The current market valuation of Rs.3,522cr and net profits of Rs.69cr imply a P/E ratio of around 50 times. That looks reasonable for the niche positioning.

b) However, if you factor consistent growth in profits and the prospects for expansion of ROE, the valuation does look attractive from a forward perspective.

c) Tarsons has built deep relationships with clients in India and abroad and that is the key in this type of business with limited entry barriers.

The company looks well positioned but the pricing may not leave too much on the table. Investors can look at Tarsons from a longer term perspective, although supply chain issues are likely to impact this business in the coming quarters. It will be higher on the risk scale.

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Tarsons Products IPO - Subscription Day 2

Tarsons Products IPO - Subscription Day 2
by 5paisa Research Team 16/11/2021

The Rs.1,023.47 crore IPO of Tarsons Products, consisting of a fresh issue of Rs.150 crore and an offer for sale (OFS) of Rs.873.47 crore, saw decent response on Day-1 of the IPO.

As per the combined bid details put out by the BSE at the close of Day-2, Tarsons Products IPO was subscribed 3.58X overall, with good demand coming from the retail segment followed by the HNI segment and the QIB segment with all the segment getting more than fully subscribed. The issue closes on 17th November.

As of close of 16th November, out of the 108.44 lakh shares on offer in the IPO, Tarsons Products saw bids for 388.08 lakh shares. This implies an overall subscription of 3.58X. The granular break-up of subscriptions was dominated by the retail investors followed by HNIs and QIBs in that order.

However, the QIB bids and NII bids are expected to gather momentum on the last day, as is the general trend in the IPO market.
 

Tarsons Products IPO Subscription Day-2
 

Category

Subscription Status

Qualified Institutional Buyers (QIB)

1.30 Times

Non Institutional Investors (NII)

3.98 Times

Retail Individuals

4.74 Times

Employees

1.08 Times

Overall

3.58 times

 

QIB Portion

Let us first talk about the pre-IPO anchor placement. On 12th November, Tarsons Products did an anchor placement of 46,21,757 shares at the upper end of the price band of Rs.662 to 32 anchor investors raising Rs.305.96 crore.

The list of QIB investors included a number of marquee global names like GIC Singapore, Monetary Authority of Singapore, First Sentier Investors, Theleme India Fund, Macquarie and Abu Dhabi Investment Authority (ADIA). Domestic anchor investors included Birla Mutual Fund, Sundaram MF, ICICI Pru MF, Kotak MF, L&T MF, Mirae MF, Reliance General Insurance; among others.

Check - Tarsons Products IPO - Subscription Day 1

The QIB portion (net of anchor allocation as explained above) has a quota of 30.81 lakh shares of which it has got bids for 40.00 lakh shares on Day-2, implying a subscription ratio of 1.30X for QIBs at the close of Day-2. QIB bids typically get bunched on the last day but the heavy demand for the anchor placement forebodes well for the Tarsons Products IPO subscription overall.

HNI / NII Portion

The HNI portion got subscribed 3.98X (getting applications for 92.02 lakh shares against the quota of 23.11 lakh shares). This is a relatively good response on Day-2 because this segment normally sees the maximum response bunched on the last day. Bulk of the funded applications and corporate applications, come in on the last day of the IPO.

Retail Individuals

The retail portion was subscribed an impressive 4.74X at the end of Day-2, showing decent retail appetite. It must be noted that retail allocation is 35% in this IPO. For retail investors; out of the 53.92 lakh shares on offer, valid bids were received for 255.42 lakh shares, which included bids for 196.00 lakh shares at the cut-off price. The IPO is priced in the band of (Rs.635-Rs.662) and will close for subscription on 17th November 2021.

Also Read:-

Tarsons Products IPO - 7 Things to Know

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Grey Market Premium of Paytm IPO

Grey Market Premium of Paytm IPO
by 5paisa Research Team 16/11/2021

The Rs.18.300 crore IPO of One97 Communications (Paytm) consisted of a fresh issue of Rs.8,300 crore and an offer for sale of Rs.10,000 crore. The issue had been priced in the band of Rs.2,080 to Rs.2,150 per share and the price has been discovered at Rs.2,150. The issue had closed for subscription on 10-Nov and the basis of allotment had been finalized on 15-Nov.

Shareholders are expected to get their refunds on 16-Nov and their demat credits by 17-Nov and the stock is likely to list on Thursday 18th November. Ahead of listing, one of the key parameters for evaluating the potential listing is the GMP or the grey market price.

A word of caution here. The GMP is not an official price point, just a popular informal price point. However, in most cases, it has proved to be a good informal gauge of demand and supply for the IPO. Hence it does give a broad idea of how the listing is likely to be and how the post-listing performance would be.

While the GMP is just an informal approximation, it has been generally seen to be a good mirror of the real story. More than the actual price, it is the GMP trend over time that really gives the insights about the stock being upgraded or downgraded.

One of the key factors that impacts the GMP in most cases, is the extent of oversubscription. Now, Paytm IPO was oversubscribed just about 1.89 times overall. On a granular basis, it was the QIB segment that led the way with 2.79X subscription while HNIs were just 0.24X and Retail was 1.66X. That has led to the GMP premiums tapering in the last few days since the start of November.

As per updates coming in on Tuesday, 16-Nov, the One97 Communications (Paytm) IPO is commanding a premium of just about Rs.30 over the issue price in the grey market. The GMP has retraced sharply from a high of Rs.150 on 07 November to Rs.70 on 09 November and down to just Rs.30 in the last 2 days, indicating a listing close to the issue price.

Check - Paytm IPO - Subscription Day 3

The current GMP of Rs.30 for One97 Communications (Paytm) translates into a mere 1.40% premium over the discovered price of Rs.2,150. It also hints at a listing price of approximately Rs.2,180 when the stock lists on Thursday 18-Nov.

Of course, subsequent price performance will depend on HNI selling as well as institutional interest in the stock, but prima facie it does indicate a tepid listing for One97 Communications (Paytm).

Also Read:-

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Upcoming IPOs in November 2021

PayTm IPO - 7 Things to Know

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e-Mudhra Files DRHP with SEBI for IPO

e-Mudhra Files DRHP with SEBI for IPO
by 5paisa Research Team 16/11/2021

If you have ever used digital signature certificates for transacting of any of the routine businesses, you would be familiar with e-Mudhra.

A digital signature is a computer embedded code that is downloaded on to your PC or laptop and can be used to digitally sign documents since the digital signature is equivalent to an actual signature for all legal purposes.

The largest player in the issue of digital signature certificates in India is e-Mudhra. Currently, in India, e-Mudhra is the largest licensed certifying authority for the issue of digital signatures and has over one-third of the Indian digital signature market.

To further expand its digital signature franchise and to give partial exit to early investors and promoters, e-Mudhra is now planning a public issue.

The proposed initial public offer will be a combination of a fresh issue and an offer for sale. The fresh issue will be to the tune of Rs.200 crore while e-Mudhra will offer 85,10,638 shares under the OFS.

Some of the promoters and early investors offering shares in the OFS include Venkatraman Srinivasan 32.89 lakh shares, Taarav Pte Ltd 31.91 lakh shares, Kaushik Srinivasan, 5.11 lakh shares, Arvind Srinivasan 8.82 lakhs shares and others 1.33 lakh shares.

E-Mudhra is also planning to raise Rs.39 crore via pre-IPO placement, in which case the issue size will be reduced accordingly.

Out of the fresh funds raised by the company in the IPO, it will deploy Rs.46 crore for equipment purchase and data centre costs, Rs40 crore for working capital and Rs.35 crore for debt repayment. It will also allocate Rs.15 crore each for product development and to invest in E-Mudhra Inc.

E-Mudhra has a 38% market share as of the end of FY21 and has till date issued more than 5 crore digital certificates since its inception.

Digital certificates are mandatory for filing income tax returns, ROC filings, foreign trade, filing of tenders, railway documentation, banking documentation etc. All directors of any organization are mandatorily required to only sign documents digitally.

For FY21, E-Mudhra had reported revenues of Rs.131.59 crore and net profits of Rs.25.35 crore. Its profits promise to grow substantially if you go by the Rs.92 crore revenue and Rs.20 crore profit reported for the first half of FY22. The issue will be lead managed by IIFL Securities and Yes Securities.

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MSCI Additions and Deletions From 30-Nov

MSCI Additions and Deletions From 30-Nov
by 5paisa Research Team 16/11/2021

Morgan Stanley Capital International (MSCI), the largest provider of country specific indices to global portfolio managers, has announced a few interesting shifts in the MSCI Global Standard India Index. Here are the 7 stocks that are being added to the MSCI index effective from 30-Nov close and the 2 stocks that are going to be removed.
 

Stocks to be added:


1) Godrej Properties
2) IRCTC
3) Mindtree Ltd
4) Mphasis Ltd
5) SRF Ltd
6) Tata Power
7) Zomato Ltd


Stocks to be removed:


1) Rural Electrification Corporation 
2) IPCA Laboratories

The 7 stocks that are being added to the MSCI Global Standard India Index will result in net inflows of around $1.45 billion.

However, if you factor in the outflows due to the removal of REC and IPCA, then the net inflows from global fund managers would be to the extent of $1.25 billion. That is substantial flows that is expected as part of the rebalancing.


How exactly do these flows come about?


Some of the biggest participants in the Indian markets are global passive funds. Now, passive funds do not take view on specific stocks or sectors but on markets as a whole. They do it through representative indices.

One of the most popular benchmarks for these passive investors to allocate money to various countries is via these country specific indices offered by MSCI. It is estimated that  90% of the global fund managers allocated based on MSCI.

Passive funds broadly comprise of global index funds and global exchange traded funds or ETFs. These index funds and ETFs prefer the MSCI indices since they are created using a fine-tuned methodology considering liquidity at a micro and macro level.

This ensures that they are able to allocate large sums of money to such markets by just riding on these indices. The only consideration for such investors is the tracking error, which is monitored by MSCI.

It is not just about the MSCI inclusion. It is estimated that an MSCI inclusion normally is followed by inclusion in the FTSE world index too.

That would lead to further flows of capital. In addition, a slew of brokers, traders and investors also trade on these stocks ahead of the shift creating more liquidity in these counters.

Also Read:-

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NSE Likely to Get Clearance from SEBI for Big Ticket IPO

NSE Likely to Get Clearance from SEBI for Big Ticket IPO
by 5paisa Research Team 16/11/2021

Nearly 5 years after the discussion of the NSE IPO began, it looks all set to see the light of day. It is reported that SEBI may finally give approval to NSE to go ahead and file for its IPO.

While the IPO size is yet to be ascertained, NSE is expected to command a valuation of more than Rs. 2 trillion. Currently, BSE and the MCX are the two exchanges that are already listed on the bourses.

The initial IPO plan of NSE was launched in the year 2016, just a couple of months before Mr. Ajay Tyagi assumed office as SEBI chairman.

However, subsequently, the data breach issue assumed serious proportions after which SEBI had asked NSE to withdraw their offer documents till the time the entire data breach issue was fully resolved. It was only in May 2019 that SEBI framed charges against senior NSE officials over the data breach.

SEBI has reportedly sought legal opinion on the subject and the opinion appears to be in favour of allowing NSE to go ahead with the IPO plans even though the case is still sub-judice. Since there is no stay order given by any court on the public issue, the legal opinion is in favour of allowing NSE to go ahead with the IPO plans.

SEBI had imposed a total penalty of Rs.1,000 crore on NSE, including disgorgement of losses caused to other traders and brokers due to the preferential treatment to a handful of brokers. The said order has been challenged by the NSE at the Securities Appellate Tribunal.

However, the reason there was no stay on the public issue was that NSE had not applied for the IPO. Now it remains to be seen, what is the response, although an approval is expected.

While the BSE was valued at a PE of 30-35 times, NSE is expected to get a much higher P/E in the range of 80-100 times considering its dominance in the futures and options space.

For the year ending Mar-21, NSE saw operating revenue grow by 60% at Rs.5,625 crore, while its net profits were up nearly 90% at Rs.3,574 crore. However, this profit figure may be misleading as a big chunk came from the sale of stake in the CAMS IPO last year.

NSE has marquee investors that includes domestic banks, institutions and global portfolio investors. Many have been waiting for the public issue for a partial exit from their holdings and monetizing part of their holdings. The actual IPO may still be some time away, the first challenge is getting the IPO approval.

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