Advanced Enzyme Technologies Limited IPO (AETL IPO) will open for subscription on 20 July 2016. Retail investors are not offered any discount in the IPO but employees will get a discount of INR86 per share on the price band of INR880 – 896 per share.
Here are the 10 things to know about this IPO and the company:
- Established in 1989, Advanced Enzyme Technologies is a fully integrated company operating into research, development, manufacturing and marketing of enzyme products. The company has a portfolio of 400 proprietary products developed from 60 indigenous enzymes.
- Globally, AETL ranks among the top 15 companies in sales rankings. In the domestic market, it is second only to global leader Novozymes. Competitors include players like Biocon, Novozymes (Denmark), DSM Nutritional Products, DuPont Danisco, Amano Enzymes (Japan), AB Enzymes (UK), and BASF. The enzyme industry is highly concentrated because manufacturing of enzymes, enzyme products and enzyme solutions requires specialized knowledge of enzyme fermentation and also the diverse end-user industries in which these products and solutions are utilized.
- Promoters and investors – Advanced Enzyme is promoted by Vasant Laxminarayan Rathi and Chandrakant Laxminarayan Rathi. Promoter Group holds 63.11% equity stake in the company while Kotak Private Equity (PE) owns nearly 4.75%.
- Profitable growth – AETL has consistently made profits and paid dividends since 1997. As indicated in the table below, the company’s top line has grown at a compounded average growth rate (CAGR) of 14.4% in the last four years. Profit after tax (PAT) CAGR in the last four years – 23.9%.
|Advanced Enzyme’s consolidated financial performance (in INR crore)|
|Profit after tax||33.3||49.2||20.1||50.1||78.4|
- Diversified client base – Top 10 customers accounted for 41.4% of its consolidated revenues in FY2016. Main customers include Sanofi India, Cipla, Ipca Laboratories, Alkem Laboratories, and Emcure Pharmaceuticals.
- Business segments/verticals – Healthcare & Nutrition (87.6% of total revenues in FY 2016) and Bio-Processing (12.4% of total revenues in FY2016).
- Geographical presence – Advanced Enzyme got 54.94% of its revenue from USA, 36.44% from India, 3.84% from Europe, 3.63% from Rest of Asia, and 1.15% from other geographies in FY2016.
- IPO Funds – AETL IPO will mobilize around INR41.1 billion (INR411.5 crore) at the upper end of the price band. The company will get INR500 million (INR50 crore) from the IPO and the rest will go to existing investors including Kotak Private Equity.
- Valuation – Upper end pricing of the IPO values Advanced Enzyme at 24.9 times its consolidated earnings per share (EPS) of INR36.03 in FY2016. At INR880 per share, the PE ratio drops to 24.4. Advanced Enzyme has no listed peers. The company has no listed peer in India while global enzymes leader Novozymes trades at a PE ratio of 35.5.
- Debt – On a consolidated basis, Advanced Enzyme’s leverage is declining. From INR1.39 billion (INR139.3 crore) in FY2012, Advanced Enzyme’s long term borrowings have declined every year and reduced to INR387.5 million (INR38.7 crore) in FY2016. As a result, its interest expense has fallen in each of the last four years.
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