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Innova Captab IPO aims to raise Rs 570 crores. The company is raising Rs 320 crore via fresh issue, while the promoters and other shareholders are raising 250 cr via OFS. Innova Captab is a pharmaceutical company operating in three business segments. It provides contract development and manufacturing services to Indian pharmaceutical companies.

About Innova Captab:

• Innova Captab Limited is an integrated pharmaceutical company in India with a presence across the pharmaceuticals value chain including research and development, manufacturing, drug distribution and marketing and exports.
• Its business encompasses a contract development and manufacturing organization (“CDMO”) business providing research, product development & manufacturing.
• For the three months ended June 30, 2023, it had 133 CDMO customers, in Fiscal 2023 and in the three months ended June 30, 2023, it manufactured a diverse generics product portfolio of over 600 products and market them under its own brands in the Indian market through a developed network of approximately 5,000 distributors and stockists and over 150,000 retail pharmacies and in the three months ended June 30, 2023, it exported branded generic products to 16 countries. It has a dedicated research and development (“R&D”) laboratory and pilot equipment located at its manufacturing facility in Baddi, Himachal Pradesh, which is recognized by Department of Scientific and Industrial Research, Ministry of Science and Technology, Government of India (“DSIR”).
• On a restated consolidated basis, the number of CDMO products it sold was 2,467 in Fiscal 2023 up 131.43% from 1,066 in Fiscal 2021.
• It is expanding its manufacturing capacities constructing a new facility in Jammu with an estimated project cost of Rs 355 Cr.

Financials: Innova Captab IPO

Anchor: Innova Captab IPO

Innova Captab successfully garnered Rs 171 crore from anchor investors, allocating 3,816,963 equity shares at Rs 448 per share. Major institutions who participated in the anchor book were ICICI Prudential MF, Kotak Mahindra MF, Ashoka White Oak MD, SBI Life Insurance, 360 One MF, Bandhan MF, Canara Robeco MF, Aditya Birla Sun Life Insurance, Edelweiss MF, ITPL-Invesco MF etc. The allocation was made to 8 mutual fund schemes belonging to 6 AMCs. The mutual fund allocation in the anchor portion amounted to 44.88% of the total anchor size.

Innova Captab IPO: Salient Points

• The promoters Manoj Kumar Lohariwala and his brother Vinay Kumar Lohariwala stake will get diluted from 67% to 52%
• Domestic formulations market, representing 2-3% of the global pharma market, reported robust growth at a 9% CAGR from fiscal 2018 to fiscal 2023. I is projected to grow 9-10% CAGR from fiscal 2023 to fiscal 2028.
• India contributes ~ 3.5% of global drug exports. Company exports generic products to emerging and semi regulated international markets and are expanding the business to regulated markets like US, Canada etc.
• The company will use the funds raised to prepay company loans, invest in its subsidiary UML, meet the working capital requirements, and fulfill general corporate needs.
• Revenue split:
  • Contract development & manufacturing (CDMO) (73.3% )
  • Domestic branded generics (17.9% )
  • International branded generics (8.71%)
• Innova Captab consolidated revenue grew at a CAGR of 50.2% from FY21 to FY23 and reached Rs. 926 cr. in FY23
• Innova Captab’s EBITDA grew at an equal CAGR of 48.3% with stable margins of ~13.3% in this period.
• CDMO revenue grew at 35.4% CAGR from INR 371 cr. to INR 680 cr over this period.
• The number of CDMO products sold has grown by 131.43% from 1,066 in Fiscal 2021 to 2,467 in Fiscal 2023.
• CDMO segment growth of 14-16% is expected to be driven by strong demand from outsourcing of development and manufacturing of new products by big pharmaceutical companies including both Indian and multinational and global companies.
• Revenue from domestic branded generics business (Started in FY22) jumped ~450% from INR 37.1 cr. inFY22 to INR 166.1 cr. in FY23.
• Revenue from exports too grew at a CAGR of 42.4% from INR 39.7 cr. to INR 80.7 cr. in the same period.
• In Fiscal 2022, among Indian formulation CDMO players considered in the CRISIL Report, it recorded the third highest operating revenue, the second highest operating profit margin, the third highest net profit margin and the second highest return on capital employed.
• Innova Captab acquired Sharon Bio Medicine Ltd., an entity undergoing CIRP under the IBC for a consideration of Rs.195 Cr .
• The acquired company has a revenue of 192 Crs with a mix of 75% exports and 25% domestic for FY23.
• Sharon Bio Medicine Ltd. has two manufacturing facilities located in Dehradun, Uttarakhand and Taloja, Maharashtra.
• Sharon Bio Medicine Ltd. caters to both domestic as well as international markets including Canada,UK, Europe, Australia, Korea, Vietnam etc.
• The company had 239 customers in aggregate in FY21, FY22 and FY23. Out of these , 45.19% customers had business relationship with the Company for more than 5 years. Further it also added 95 customers in total in FY21, FY22 and FY23.
• The new production facility in Jammu with an estimated project cost of INR 355 cr.will be the biggest capex for the company to date and will double the production capacity of capsules and tablets.
• Profit can witness uptrend due to taxation benefits from the new plant which will boost earnings over the years. The company anticipates benefits of GST rebate from the New Central Sector Scheme for Industrial Development of J&K.
• However benefit from Jammu Plant may take some years to show in the results.
• Innova Captab IPO is coming at a PE ratio of 37.3(fy23 earnings) and36.4x (fy24 annualized earnings)
• On flip side it has not provided H1Fy24 results.
• Peers

• I intend to apply in Innova Captab IPO. Valuations are bit streched and not much may be left on the table for investors.
• Other large CDMO players like Glenmark Life sciences have failed to ignite the markets.
• GMP as reported on social media has been around Rs. 100.
• Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . I have in the past cleared some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Do check the data from company’s RHP and exchanges before making any decision. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.