Sunday, November 1, 2009

IPO ANALYSIS: ASTEC LIFE SCIENCES LIMITED - AVOID

The agro chemical and pharmaceutical company is planning to raise Rs 61.50 cr through IPO. The company proposes to issue 75, 00,000 of equity shares of Rs 10 each at a premium of Rs 82.00. The issue will open on 29-10-09 and closes on 04-11-09. ALMONDZ GLOBAL SECURITIES LIMITED are the Book Running Lead Manager.

The company is promoted by Ashok Hiremath and Dr.P.L. Tiwari.

The company under the Agrochemical segment, manufactures active ingredients, intermediates and formulations. Active ingredients are sold to crop protection formulators. Intermediates are supplied to technical grade product manufacturers. Formulations are sold in bulk quantities to companies engaged in retail marketing.

Under the Pharmaceutical segment, our Company carries out manufacturing of intermediates which are supplied to Active Pharma Ingredients manufacturers.

Objects of the Issue

1. Expansion of existing manufacturing facilities.
2. Expansion of existing Research and Development facility.
3. Meeting long-term working capital requirements.
4. General Corporate Purposes.

FINANCIALS: 08-09 07-08 06-07 (Rs in lacs)


Total Income 6,120.78 9,388.07 2,750.59


Net Profit after tax 793.52 1,072.78 342.86

RISK FACTORS:

• Scale of operations is very small.
• There is delay in execution of expansion capacity.
• Minimal global presence.
• Expansion project is funded entirely through equity.
• The company faces unresolved litigation, which could pose risks to its operations. Nath Biogene, a former customer, has alleged supply of spurious products by the company; which Astec has disputed.



VALUATION AND RECOMMENDATIONS:

In the price band of Rs 77-82, the offer price discounts the company’s 2008-09 earnings by 12 times, on the expanded equity.

The larger listed peers in the sector — Meghmani Organics and Sabero Organics — are available for less than 6 P/E. AVOID SUBSCRIPTION.

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