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Sunrest Lifescience 

• Sunrest Lifescience is coming out with an initial public offering (IPO) of 12,91,200 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 84 per equity share.
• The issue will open for subscription on November 7, 2023 and will close on November 9, 2023.
• The shares will be listed on NSE Emerge Platform.
• The share is priced 8.40 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Mark Corporate Advisors.
• Compliance Officer for the issue is Nishi B Shah.

Profile of the company

The company is engaged in the marketing of OTC generic pharmaceutical products in the domestic market. The company offer range of pharmaceutical products manufactured by third party manufacturers. The company operates in different States of India such as Maharashtra, Gujarat, Madhya Pradesh, Orissa and Rajasthan. The company have presence in these States through Trade Mark registered products and/or products under registration. It deals in Capsules, Tablets, Syrup, Ointment, Gel, Mouth Wash, Solution, Suspension, Dry Powders and Toothpaste. 

Its product portfolio comprises of vide range of drugs like Anti-Bacterial, Anti Diarrheal, AntiFungal, Anti Malerial, Anti Diabetic, Dental Cure, Anti Protozol, Anti Histamine, Anti-Hypertensive drugs, Cosmetic, Anti Parasitic, Multivitamin, Multimineral, Nutraceutical and Anti-inflammatory. The company has 18 Registered Trademarks for 32 products. The products of the Company are sold to Stockists and Super Stockists & in turn it is available at Chemist shops, Dispensaries, Hospitals etc. Its business operations are supported by one of its Group Company and various third-party manufacturers. It typically works on third-party manufacturing basis or at times purchase order basis with manufacturer of pharma products, depending upon customer’s requirement.

Proceed is being used for:

• Meeting working capital requirements.
• General corporate purpose.
• Meeting public issue expenses.

Industry overview

The Indian pharmaceutical industry ranks third globally in pharmaceutical production by volume and is known for its generic medicines and low-cost vaccines. The sector contributed to around 1.32% of the Gross Value Added (at 2011-12 constant prices) of the Indian Economy in 2020-21. The total annual turnover of Pharmaceuticals in the fiscal year 2021-22 was Rs 3,44,125 crore. Major segments of Indian Pharmaceutical Industry include generic drugs, OTC medicines, bulk drugs, vaccines, contract research & manufacturing, biosimilars and biologics. India is a global leader in the supply of DPT, BCG, and Measles vaccines. India is one of the biggest suppliers of low-cost vaccines in the world. India accounts for 60 percent of global vaccine production, contributing 40 to 70 percent of the WHO demand for Diphtheria, Tetanus and Pertussis (DPT) and Bacillus Calmette-Guerin (BCG) vaccines, and 90 percent of the WHO demand for the measles vaccine. There are 500 API manufacturers contributing about 8% in the global API Industry.

Indian pharmaceutical industry plays significant role globally, supplying affordable and low cost generic drugs to millions of people across the globe. The sector offers lower cost without compromising on quality as is reflected by the fact India has the highest number of United States Food and Drug Administration (USFDA) approved pharmaceutical plants outside the US and also a significant number of World Health Organization (WHO) Good Manufacturing Practices (GMP)-compliant plants as well as plants approved by regulatory authority of other countries.

Pharmaceutical sector has emerged as a favourite destination for the foreign investors and is one of the top ten attractive sectors for foreign investment in India. The Government has put in place an investor-friendly Foreign Direct Investment (FDI) policy to promote investment in the Sector. 100% foreign investment is allowed under automatic route in Medical Devices. In pharmaceuticals, up to 100% FDI in Greenfield projects and up to 74% FDI in brownfield projects is allowed under the automatic route. Foreign investment beyond 74% in brownfield projects requires Government approval.

Pros and strengths

Wide range of Products: It deals in Capsules, Tablets, Liquid Ointment, Gel, Ice Gel, Mouthwash, Paste, Solution, Suspension, Dry powders and Tooth-Paste. Its product portfolio comprises of vide range of drugs like Anti-Bacterial, Anti Diarrheal, Anti-Fungal, Anti Malerial, Anti Diabetic, Dental Cure, Proton Pump Inhibitor, Anti Protozol, Anti Histamine, Anti-Hypertensive drugs, Anti Lipidemic Drug, Anti Parasitic, Multivitamin, Multimineral Nyteraceutical and Non-steriodal anti-inflammatory. 

Efficient marketing team: Marketing team works on a commission basis which means it brings order and once the orders get executed the commission is paid to the team. Requirements are shared and when enquiries are received it is expected to be supplied within 30 days.

Experienced Promoters and Management Team: It is led by a group of individuals, having a strong background and extensive experience in the excipient and pharmaceutical industry. Its promoters and directors are the founding members and are actively involved in the strategic decision making of the company, pertaining to corporate and administrative affairs, financial operations, expansion activities, business development and management of overall business. It has an experienced and professional management team with good management and execution capabilities and considerable experience in the pharmaceutical industry. 

Risks and concerns

Rely on third parties for manufacturing of products: It relies on third party for manufacturing of its products. It typically works on third-party manufacturing basis or at times purchase order basis with manufacturer of pharma products, depending upon customer’s requirement, any decline in the quality of medicines manufactured or delay in delivery of products by such parties or rise in job work charges may adversely affect its operations.

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.

Working capital requirement: Its business requires significant working capital, part of which would be met through additional borrowings in the future. In many cases, significant amount of working capital are required to finance the procurement of products before payments are received from customers. Its working capital requirements may increase, under certain conditions, where payment terms do not include advance payments or include delayed payments from customers. Additionally, its working capital requirements have increased in recent years due to the general growth of its business and competition from other players. All these factors may result, or have resulted, in increases in its working capital needs. 

Outlook

The company is engaged in the business of marketing and distribution of pharmaceutical products in the domestic market. The company offers wide range of pharmaceutical formulations and products manufactured by third party manufacturers. The company is engaged in the marketing of OTC generic pharmaceutical products in the domestic market through Super Stockist or Stockist. On the concern side, it competes with organized and as well as unorganized players in the industry with better financial position, market share, product ranges, human and other resources. It has a number of competitors who manufacture and trade products, which are similar to it. Even with a diversified product portfolio, quality approach it may have to face competitive pressures.

The company is coming out with an IPO of 12,91,200 equity shares of Rs 10 each at a fixed price of Rs 84 per share to mobilize Rs 10.85 crore. On performance front, the revenue from operations for the FY 2022-23 was Rs 2464.20 lakh as compared to Rs 2688.75 lakh during the FY 2021-22 showing a decrease of 8.35%. However, profit after tax was Rs 204.32 Lakh in the FY 2022-23 as compared to Rs 77.71 lakh in FY 2021-22 showing increase of 162.93%. Meanwhile, the business of the company is customer oriented and always strives to maintain good relationship with the distributors. Leveraging its market skills and relationships is a continuous process in its organization and the skills that it imparts in its people give importance to customers. It aims to do this by leveraging its marketing skills and relationships and further enhancing customer satisfaction.