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Background

Senores Pharmaceuticals Ltd (SPL) is a relatively new company which was founded by Mr. Swapnil Shah. It is global research driven pharmaceutical company engaged in developing and manufacturing a wide range of pharmaceutical products predominantly for the Regulated Markets of US, Canada and United Kingdom across various therapeutic areas and dosage forms, with a presence in Emerging Markets. It mainly caters to complex, niche and underpenetrated products in generics which caters to mid-market size and develops preferred partnerships to certain customers.

Details of the Issue:

* Total issue of ~Rs. 583 Cr: i) Fresh issue of Rs. 500 cr, ii) OFS worth Rs. 82cr

* Proceeds from the fresh issue to be utilized for the payment of – i) CAPEX requirement of Atlanta facility for the production of sterile injections, ii) total debt repayment of Rs. 93.7 cr, and iii) working capital requirement of Rs. ~103cr

Investment Rationale:

* Regulated markets are being served through its USFDA approved facility in US

* Distinct niche product portfolio built in a short span for Regulated Markets

* Launch of products in the US with New Drug Applications (“NDA”) approval

* Robust R&D capabilities driving differentiated portfolio of products

* Focus on emerging markets to drive the business growth

* Long-term marketing arrangements with pharma companies in the Regulated Markets

Valuation and Recommendation:-

SPL’s financials include the impact of the acquisition of Havix and RPPL, thus, its revenue growth in FY24 is not comparable. However, company has performed well in H1FY25 based on annualized financials. It has delivered ~25% of healthy operating margin in H1FY25. Also, return ratios (i.e. ROE and ROCE) are at decent level of ~15- 16%. The same is expected to improve backed by growth in its acquired businesses and overall reduction in finance cost followed by ~Rs. 94 cr of debt reduction. The issue is valued at 39.6x P/E valuation based on annualized H1FY25 financials which is considered to be fairly valued when compared with industry average. However, we are positive on the company’s future business prospects given the distinctive business model, product pipeline of 51 ANDAs and expected improvement in overall profitability on account of operational efficiencies and finance cost savings. Thus, we recommend SUBSCRIBE to the issue

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SEBI Registration number is INH0000017660