Windlas Biotech IPO-Fundamental Analysis

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Windlas Biotech IPO-Fundamental Analysis

Key Financial Highlights of Windlas Biotech IPO

  • The financial performance of the Issuer is fair but has not shown a consistent track record over the last three fiscals. The total revenue for FY21 has increased by 30% to Rs 430.7 crore from Rs 331.34 crore for FY20. Despite a growth in the topline of the company, profitability margins have not grown at that pace. The Issuer posted PAT of Rs 15.57 crore in FY21 from Rs 16.21 crore in FY20. EBITDA margins were 12.66% and 10.25% for FY21 and FY20 respectively.  Net margins of the Issuer were 3.62% (FY21) and 4.89% in FY20.
  • It is to be noted that the company has undertaken divestment (in FY19) and reacquisition (FY20) of its subsidiary, Windlas Healthcare, and thus the company has few adjustments in its financials like impairment of goodwill, gain/loss in joint venture and associate company. These accounting adjustments might have affected the net margins of the Issuer.
  • The issuer had an average return on net worth of 18% for the last three fiscals. Debt to equity is 0.26x as on 31st Mar 2021.
  • With EPS of 8.7 per share, the issue is priced 52x calculated at the upper price band of Rs 460 per share. The Issue appears to be aggressively priced as compared to its profitability and growth (CAGR of 38% in topline and around 50% in margins). P/BV is 4.21x at NAV of Rs 109.36 as on 31st March 2021
  • Valuation parameters

Valuation Parameters (fig as on 31st March 2021) EPS P/E NAV P/BV Average sector P/E
8.70 52.87 109.36 4.21

Conclusion

Pharmaceutical companies are increasingly outsourcing the development and manufacturing of new products, and as a result, the domestic formulations CDMO market has grown at a higher rate of approximately 13% compared to the growth rate of approximately 8.6% of the domestic formulations market (in terms of consumption) in the past five years. This increasing use of outsourcing by pharmaceutical companies for the launch of new products is resulting in higher growth in the CDMO market.

Windlas Biotech has a CDMO portfolio with significant revenues from the high growth chronic segment and high margin injectable segment. The Issuer would benefit from the consolidation trend in the CDMO industry. The company also plans to invest Rs 50 crore in injectable business from the IPO proceeds. It should be further noted that Contract manufacturing is also characterized by high fragmentation and competition, with a large number of organized and unorganized players. The company’s track record of maintaining strong financial performance is yet to be seen. It may take some time for the company to see a good growth momentum. 

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About CA Priyanka Choudhary Jain 122 Articles
Chartered Accountant & an experienced credit analyst. She has worked with CRISIL as a Senior Credit Analyst on rating assignments including business & financial analysis in Corporates as well as the Public Finance Sector. Please mail your queries, feedback, and any suggestions to her on info.financepost@gmail.com

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