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Positives: (a) Good track record of regulatory compliance, company has not received any warning letter since 2015. (b) Leading manufacturer of selected specialized APIs for chronic therapeutic areas like CVS, CNS, diabetes, and pain management. (c) 16 of the 20 largest generic companies globally were customers, maintains a strong relationship with leading global generic companies.

Investment concerns: a) Dependence on Repetitive orders- approximately 69% of their customers were repeat customers. (b) Company will be increasing its capacity by 25% in FY2022 and underutilization will impact the return ratio. (c) Company will require new working capital for the growth as company having a high working capital cycle of 238 days.

Outlook & Valuation: Based on FY-2021 PE of 22x and EV/EBITDA of 12.9x at the upper price band of the IPO price, valuations are slightly better than the peer companies. Similarly, the company has one of the best ROCE of 32.7%. Company has a healthy balance sheet and will be Net Debt free after the IPO. We expect the upcoming expansion plan in Ankleshwar & Dahej will be the next growth driver for the company. We are assigning a “Subscribe” recommendation to the issue.

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