Claris Lifesciences Ltd IPO : Analysis

by khalid on 27/11/2010 · 0 comments

Claris Lifesciences Ltd is entering into primary market with an Initial Public Offer (IPO) of 8848921 Equity Shares of Rs 10 each. The IPO is opening on 24th Nov 2010 and the shares will be available for subscription up to 2nd Dec 2010 after extension of date, earlier it was 26th Nov 2010. The premium of the issue will be decided through a 100% Book Building Process. The price band for the issue has been fixed as Rs 278-293/share. But now it has been revised to Rs 228-235/share. Claris Lifesciences is one of the largest sterile injectables pharmaceutical companies in India with a market presence in 76 countries worldwide. The company’s products range across various therapeutic segments, including anaesthesia, critical care, anti-infectives, renal care, infusion therapy, enteral & parenteral nutrition and oncology. The customer base primarily includes government and private hospitals, aid agencies, and nursing homes.

The objects of the IPO are to setting up of a new plant compri. a PVC bag line, setting up of a new manu. line for propofol, construction of a facility for R & D, prepayment of an identified term loan and general corporate purposes .

The company has five manufacturing facilities, located in Ahmedabad. Certain of these facilities have been approved by foreign regulatory authorities including the USFDA, MHRA (UK), TGA (Australia), NAM (Finland), GCC FDCA (Gulf Co-operation Council including Saudi Arabia, U.A.E. and other countries in the Middle East), ANVISA (Brazil) and INVIMA (Colombia).

Company Financials:-
(Rs in Crores)

For the year ended 31-Mar-09For the year ended 31-Mar-08For the year ended 31-Mar-07For the year ended 31-Mar-06
Total Income75940.176390.062381.640267.4
Profit After Tax (PAT)13038.010839.58327.24669.3

Risk Factors:-
1. The Food Inspector filed a criminal case against the Company for an offense alleged to be committed under the Prevention of Food Adulteration Act.
2. The company is involved in certain legal proceedings and claims. This matter is currently pending and has been outstanding since a year.
3. The business is dependent on approvals from both Indian and foreign governmental authorities and health regulatory bodies.
4. Exchange rate fluctuations may adversely affect the business.

Positive Factors:-
1. IPO grade 3 by FITCH. So its an ‘Average Fundamentals’ and not bad.
2. Price band reduced to Rs 228-235/share from Rs 278-293/share. and it looks attractive now.

Valuation and Recommendation :-
Claris Lifesciences Ltd operates in ever green sunrise pharma sector. At Rs 228-235/share, the company is demanding a valuation around 11 times on its FY10 earnings, which is attractive. The shares in the pharma segment commands an average PE of 20. However there are concerns about its past business history and how it conducted the business. The corporate governance is not at the desired level. This may drag down the valuation to some extent. Now after announcement of new price band the issue looks attractive. ‘APPLY’ for subscription to get a listing gain.

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