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Adeshwar Meditex

• Adeshwar Meditex has come out with an initial public offering (IPO) of 39,00,000 Equity Shares of face value of Rs 10 each for cash at a fixed price of Rs 25 per equity share.

• The issue has opened on June 15, 2021 and will close on June 18, 2021.

• The shares will be listed on SME Platform of BSE.

• The share is priced 2.50 times higher to its face value of Rs 10.

• Book running lead manager to the issue is Aryaman Financial Services.

• Compliance Officer for the issue is Anushree Tekriwal.

Profile of the company

Adeshwar Meditex is an Indian company, engaged in the manufacturing of surgical dressings and external preparations products of Wound care & Wound management including sterile surgical wound dressing, tulle dressing, medical disposable, adhesive bandages, absorbent gauze, plaster, disinfectants, medical kits etc. The company is an ISO 13485:2016 certified Company. It has manufacturing facility situated at Deewan Industrial Estate, Palghar District. Its state-of-the-art manufacturing plant follows WHO-GMP, CE, ISO guidelines and it is backed by an advanced production facility, which is fitted with latest machinery and well organized and arranged sterilization facilities.

It endeavors to maintain safety in its premises by adhering to key safety norms. Its manufacturing facility also has sophisticated facilities for quality testing, research & development, storage and packaging. It has an in-house R&D facility for on-site process improvement and for bettering its present products offered as well as products under innovation and testing laboratory which ensures that its products are certified and any major defects in the products are identified on real time basis and rectified before the final dispatch. It has dedicated teams actively involved in R&D and QC/ QA Lab activities. These functions have impeccably streamlined and thus assure swift production and post-production processes and enable it to support its growth strategy by developing new products and processes which enhance its product range. The focus of its R&D has been to strive for continuous process improvements which will cater to the requirements of global patients from the point of view of effectiveness and safety besides achieving manufacturing cost efficiencies.

Proceed is being used for:

• Part repayment of loans.

• Funding working capital requirements.

• General corporate purpose.

Industry overview

The medical tapes & bandages market in India is estimated to grow at a CAGR of over 5% during the forecast period. India is one of the fastest-growing economies globally and thus contributes considerably to the medical tapes and bandages market. The prevalence of diabetes has been significant in the country. People suffering from diabetes tend to develop a diabetic foot ulcer, an open sore or wound, which need medical tapes and bandages to reduce its effect or when getting treated. According to the International Diabetes Federation, in 2017, 73 million people in India were found to have diabetes. These numbers are further estimated to reach nearly 134.4 million in 2045. California Podiatric Medical Association estimates that around 15% of the people having diabetes are likely to develop diabetic wounds. Therefore, the increasing prevalence of diabetes in the country increases the number of people with a diabetic wound that ultimately surges the demand of medical tapes and bandages for their treatment. The market is segmented on the basis of product and application. On the basis of product, the market is segmented into two main categories which include medical tapes and medical bandages.

First Aid is used by everybody for multiple times for management of wounds, sprains, cuts etc. First aid kits are important part of travelling as well as they are also used at home settings. There are many commercial first aid kits available in market for management of abrasion, burns, cuts, minor wounds etc. First aid kits commonly consist of items such as, antiseptic creams, bandage, cotton pad, sutures, and various types of over-the-counter medicines for management of cold, fever, motion sickness, pain, runny nose etc. The First Aid Kit market is expected to grow in the forecast period owing to factors such as, increasing number of road accidents, rising numbers of injuries associated with sports, rising demand for first aid kits at homecare settings, office settings and increasing cases of burn across the globe. Moreover, increasing healthcare expenditure is also expected to fuel market growth during forecast period. Whereas, dearth of skilled professionals, medication errors are expected to restrain market growth during forecast period.

Pros and strengths

Wide Range of products: The company is engaged in the manufacturing of surgical dressings and external preparations products of Wound care & Wound management including sterile surgical wound dressing, tulle dressing, medical disposable, adhesive bandages, absorbent gauze, plaster, disinfectants, medical kits etc. These products are widely used in hospitals, home care and at the offices. It supplies first-aid kits to the car manufacturers like Bajaj Auto, depending on their specific requirements. It also manufactures absorbent cotton gauzes and PPE kits which are supplied to different organizations. The company's diversified portfolio enables it to achieve significant scale of production and help increase its market penetration. Its approach of presenting a large portfolio of products for diversified customer applications has helped it enhance its growth and will continue to increase its brand loyalty among customers.

Well established client relationship: The company has positioned ourselves as a multi-product and multi market player ensuring that its products include a diverse mix of sterile surgical wound dressing products and medical disposables. With its long standing operations and quality products, it has built a strong customer base and established an unyielding marketing setup. Its products are very well accepted by the medical fraternity and are supplied all over India to Central and State Government Health Departments, Corporate Hospitals, Institutions, Nursing Homes and Retailing Chemists. Its extensive sales and distribution network allows it to reach a wide range of consumers and ensures effective penetration of its products and marketing campaigns. Its extensive distribution network enables it to serve its customers and markets in an efficient and timely manner.

Scalable business model: The company’s Business model is customer centric and order driven, and requires optimum utilization of its existing facilities, assuring quality supply of raw materials and achieving consequent economies of scale. The business scale generation is basically due to development of new markets both domestic and international by exploring marketing expertise and by maintaining the consistent quality output. This business model has proved successful and scalable for the company.

Risks and concerns

Rely on third parties for contract labour and manpower: The company relies on third parties for contract labour and manpower required for the manufacture of products, as well as for performance of certain functions and services carried out at its manufacturing and office premises including waste management and facility management functions. The company had hired vehicles from Director for transportation of the goods and depending on the requirement of the vehicles, it also rely on third party transporters for logistics support. Its reliance on third parties may affect its timelines for making delivery to its customers.

Significant raw material requirements: The success of company’s operations depends on its ability to source raw materials at competitive prices. It procures various raw materials required for the manufacturing of its Gauzes, bandages, ointments and first-aid kits. Principal raw materials that it uses in its manufacturing process are Cotton wool, grey fabrics, bandage cloth and cotton gauze among others. It also purchases products which it uses directly as input materials, including materials which do not require any processing. It procures these raw materials from various suppliers in the industry and in case of certain customers; it buys raw materials from the vendors approved by customers. Increase in the competition and / or its competitors having established operations and long-term relationships with suppliers may see it facing challenges to secure adequate supply of raw materials or may increase its overall cost of raw materials.

Faces stiff competition: The company faces stiff competition from domestic as well as global market. Further, this industry is fragmented with many small and medium sized companies and entities, which manufactures some of these products at various levels, which may adversely affect its business operation and financial condition. The basis of competition includes introduction of other manufacturers manufacturing products in direct competition with its products, market for the products and type of product such as new products, product range, price etc. Furthermore, it may not be able to differentiate its products from those of its competitors; to successfully develop or introduce new products on a timely basis or at all that are less costly than those of its competitors; or to offer customers payment and other commercial terms as favourable as those offered by its competitors.

Outlook

Incorporated in 2007, Adeshwar Meditex is engaged in manufacturing surgical dressings and external preparations products i.e. sterile surgical wound dressing, tulle dressing, adhesive bandages, medical disposable, absorbent gauze, disinfectants, plaster, medical kits, etc. The firm caters to both the domestic as well as international markets. The company has a state-of-the-art manufacturing facility in Palghar district. The modernized manufacturing unit is equipped with advanced machinery and sterilization facilities along with an in-house R&D unit. It has positioned itself as a multi-product and multi market player ensuring that its products include a diverse mix of sterile surgical wound dressing products and medical disposables. It is a quality and research driven company with continuous efforts focused on quality checks, analysis and developing latest process improvements and production cost efficiencies. On the concern side, the company’s business requires significant amount of working capital. Major Portion of its working capital is utilized towards debtors and inventory. It has been sanctioned working capital of loans from banks and Financial Institutions approximately amounting to Rs 1,650 lakh from the existing bankers. Any significant interruption in manufacturing at its facilities could have a material adverse effect on its business, results of operations and financial condition. Its manufacturing facilities are concentrated in a single region and all of the products are manufactured at one location.

The company is coming out with an IPO of 39,00,000 equity shares of Rs 10 each at a fixed price of Rs 25 per equity share to mobilize Rs 9.75 crore. On the performance front, in fiscal 2020, the company’s total income increased by Rs 165.33 lakh or 3.02%, from Rs 5,473.93 lakh in fiscal 2019 to Rs 5,639.26 lakhs in fiscal 2020. The increase in the year 2020 was due to increase in the revenue from operations as compared to last year. The increase represents the steady growth of the sales and operations of its manufacturing unit. It’s Profit after Tax decreased by Rs 23.61 lakh or 10.49%, from Rs 225.10 lakh in fiscal 2019 to Rs 201.49 lakh in fiscal 2020. The company aims to further develop its domestic sales networks in two ways: firstly nurturing existing relationships with clients and secondly by creating new distribution channels in non-penetrated geographies considering various cities. It seeks to leverage its R&D capabilities to expand further into international markets, where its strategy is primarily to become the preferred supplier. Hence, the company is focusing on increasing growth in the export markets.