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Supriya Lifescience Limited was incorporated in March 2008 by Satish Waman Wagh. Company is one of the key Indian manufacturers and suppliers of active pharmaceutical ingredients (APIs). Supriya Lifescience Limited focus on research and development along with this company focus is on diverse therapeutic areas and niche products. Company has niche product offerings of 38 APIs focused on diverse therapeutic segments such as antihistamine, analgesic, anaesthetic, vitamin, anti-asthmatic and antiallergic. Company export to 86 countries to 1296 customers including 346 distributors. Companies manufacturing plant located at Maharashtra, which is spread across 23806 sq. mt.

Positives: (a) (a) Backward integration of API business, lead to better margins and reduce dependency on import of raw material, 12 of existing products are backward integrated which contributes 67.1% of revenue. (b) Export contributes to 77.5% of FY2021 revenue, company export to 86 countries like Latin America, Europe, China and Cambodia etc. (c) Company has niche product offerings of 38 APIs focused on diverse therapeutic segments and company has filled have filed 14 active DMFs with USFDA and 8 active CEPs.

Investment concerns: (a) High customer concentration, Top-10 customers contributes to 47% of H1FY22 revenue, any loss of a customer can be a risk. (b) The company already has a high export market share in key APIs, it will be changing for the company to increase its market share further. (c) In the last 3 years, companies’ gross margin and EBITDA margins have increased significantly, it will be difficult for the company to improve margins from these levels.

Outlook & Valuation: Based on FY2021 numbers, the IPO is priced at an EV/EBITDA of 11.2 times and price to earnings of 16.2 times at the upper price band of the IPO. Supriya Lifescience Limited focuses on research & development and having a diversified niche product portfolio of API’s. Companies 77.5% of revenue comes from the Export market, companies’ key market are USA, Europe, China and India. We believe that the company's new manufacturing unit and product launch will be growth drivers for the company in future. Hence, we are assigning a “SUBSCRIBE” recommendation to the Supriya Lifescience Limited IPO.

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