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Shelter Pharma

• Shelter Pharma is coming out with an initial public offering (IPO) of 38,16,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 42 per equity share.
• The issue will open for subscription on August 10, 2023 and will close on August 14, 2023.
• The shares will be listed on BSE SME.
• The share is priced 4.20 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Gretex Corporate Services.
• Compliance Officer for the issue is Yashesh Vijaykumar Shah. 

Profile of the company

Shelter Pharma Limited originally named as Shelter Pharmacy, it was converted to Shelter Pharma Limited on October 12, 2007 under Part IX of The Companies Act, 1956. The company is being promoted by Mr Mustaqim Nisarahmed Sabugar and Mr Shakil Nisarahmed Sabugar. Promoters have nurtured and strengthened the business over the years. The business was slowly expanded from local presence in Himmatnagar to well spread presence in the state of Gujarat. Shelter remained a family enterprise before incorporation of the Company with a consolidated position in Gujarat. Introduction of new generation of promoters, set up of new companies around 2007 brought new ideas and aspirations to the business. Shelter has embarked on a major restructuring drive in line with redefined goals. The company has reworked its organizational structure, product portfolio, distribution network, pricing, packaging and internal processes. It has also invested substantially in strengthening infrastructure with fresh fund infusion to improve its manufacturing capacity in Himmatnagar. Shelter sources required raw material from nearby villages. Its raw material is sourced directly from farmers. Company has long established relationships with farmers, giving it an assured supply of herbs and plants. Shelter focuses on rural/semi urban market as its clientele to offer high quality price competitive remedies to villages.

The company primarily focuses in manufacturing herbal products with well-built presence in Human Pharma as well as Veterinary space. Shelter started with a few products about decades back. However, over a period of time, it has added products to its portfolio through its in-house R&D efforts backed by sound knowledge of Ayurveda. Shelter is present in most of non-critical segment of Human as well as Veterinary Pharma through its well spread portfolio. It enjoys a good product acceptance and market share in the state of Gujarat. In the Human pharma segment, Shelter has product portfolio of OTC products as well Ethical pharma products. Similarly, Shelter has OTC and Ethical presence in Veterinary segment. Shelter has a respectable track record of efficacy of its products. All the products are priced very competitively considering Shelter’s target market.

Proceed is being used for: 

• Working capital requirements
• General corporate purposes

Industry overview

India climbed to the 63rd rank among 190 countries in the World Bank’s ‘Ease of Doing Business’ rankings in 2020. As of 2021, the Indian healthcare sector is one of India’s largest employers as it employs a total of 4.7 million people. The sector has generated 2.7 million additional jobs in India between 2017-22 -- over 500,000 new jobs per year. The Asian Research and Training Institute for skill Transfer (ARTIST) announced plans to create round one million skilled healthcare providers 2022.

The Indian healthcare sector is expected to record a three-fold rise, growing at a CAGR of 22% between 2016-22 to reach $372 billion in 2022 from $110 billion in 2016. As of November 24, 2022, more than 219.88 crore COVID19 vaccine doses have been administered across the country. By FY22, Indian healthcare infrastructure is expected to reach $349.1 billion.  

India’s healthcare sector is extremely diversified and is full of opportunities in every segment, which includes providers, payers, and medical technology. With the increase in the competition, businesses are looking to explore the latest dynamics and trends which will have a positive impact on their business. The hospital industry in India is forecast to increase to Rs 8.6 trillion ($132.84 billion) by FY22 from Rs 4 trillion ($61.79 billion) in FY17 at a CAGR of 16-17%. India is a land full of opportunities for players in the medical devices industry. The country has also become one of the leading destinations for high-end diagnostic services with tremendous capital investment for advanced diagnostic facilities, thus catering to a greater proportion of the population.

Pros and strengths

Scalable business model: It has a scalable business model as its business model is customer-centric and order driven, and requires optimum utilization of its existing resources, assuring quality supply and achieving consequent economies of scale. The business scale generation is basically due to the development of new markets and products in both domestic and international markets by exploring customer needs, marketing expertise and consistent product quality.

Wide and diverse range of product offerings: Shelter primarily focuses on herbal products with well-built presence in Human Pharma as well as Veterinary. The company has a very strong establishment and clientele in Gujarat market, especially in rural & semi urban areas, along with recent foray in a few other states. Shelter has vast product portfolio to cater to wide spectrum of health industry.

Marketing & branding efforts: Shelter is moving aggressively to tap these opportunities with geographical expansion backed by intense marketing & branding efforts. The expansion will be supported by sales & distribution network being set up by the company in new regions. Simultaneously, the company is making speedy growth in its stronghold of Gujarat market through brave and redefined distribution and marketing strategies. Shelter is taking other initiatives to buttress its growth. Shelter has initiated efforts to explore Export market. Shelter’s 5 products with very high potential are approved in Middle East market by MOH. This approval will open a big market of Middle East as well as Africa for the company as the associate that is working closely with Shelter since getting approvals for Middle East has also got established distribution network in Africa. 

Risks and concerns

Highly competitive business: The Indian Pharma industry has historically been dominated by major entities that had an aggregate market share of the market, as the industry presents significant entry barriers. These market entry barriers include the development of an extensive distribution network through long-term relationships with dealers, the ability to set up tinting machines with dealers, as well as significant marketing costs and the establishment of a distinct brand to gain product acceptance. It competes on the basis of the strength of its differentiated products, distribution network, brand recognition, and ability to populate tinting machines. As a result, to remain competitive in its markets, it must continuously strive to manufacture differentiated products, expand its distribution network, enhance its brand and improve its operating efficiencies. 

Dependent on third party transportation: The Company uses third party transportation for delivery of its products. Though its business has not experienced any disruptions due to transportation strikes in the past, any future transportation strikes may have an adverse effect on its business. These transportation facilities may not be adequate to support its existing and future operations. Further, such goods may be lost or damaged in transit for various reasons including occurrence of accidents or natural disasters. There may also be delay in delivery of products which may also affect its business and results of operation negatively. An increase in the freight costs or unavailability of freight for transportation of its raw materials may have an adverse effect on its business and results of operations.

Changes in customer preferences: Any change in the customer preference can render its old stock obsolete, as changes in customer preference are generally beyond its control. Some or all of its products may become less attractive in light of changing customer preferences or better products by competitors and it may be unable to adapt to such changes in a timely manner. However, it constantly focus on research and development and to develop new products to cater the customer needs, any change in customer preferences that decreases demand could affect its business, financial condition, results of operations and prospects.

Outlook

Incorporated in 2007, Shelter Pharma primarily focuses in manufacturing herbal products with well-built presence in Human Pharma as well as Veterinary space. The business was slowly expanded from local presence in Himmatnagar to well spread presence in the state of Gujarat. On the concern side, the company uses third party transportation for delivery of its products. Though its business has not experienced any disruptions due to transportation strikes in the past, any future transportation strikes may have an adverse effect on its business. There may also be delay in delivery of products which may also affect its business and results of operation negatively.

The company is coming out with an IPO of 38,16,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 42 per equity share to mobilize Rs 16.03 crore. On performance front, the company’s total revenue increased by 20.28% to Rs 3,615.51 lakh for the financial year 2022-23 from Rs 3,005.83 Lakh for the financial year 2021-22. Profit after tax increased by 214.82% to Rs 578.33 lakh for the financial year 2022-23 from Rs 183.70 lakh for the financial year 2021-22. Going forward, it intends to increase sales volume through diversification of services offered and spread in geographical outreach. It is focused on increasing the number of clients and by leveraging its market skill to service its clients. Its strategy is to increase the number of clients by building new relationships and then leverage those client relationships into offering in a whole suite of services.