When GreenSignal Bio Pharma IPO (GSBPL IPO) opens next week, it will be closely watched as the pharma company has no brand recall value in India. The timing of the IPO is intriguing as the markets are facing very high volatility on account of elections in the US and the possibility of Donald Trump becoming the next president. Here are the main points to be considered about the company and the IPO:
IPO details: GreenSignal Bio Pharma IPO will involve sale of 14,579,560 shares through an offer for sale (OFS). The shares will be sold in the price band of INR76 – 80 per share between 9 and 11 November.
History: The Chennai-based company was incorporated in November 2005. Promoted by P Murali, the company is engaged in the production of pharmaceutical vaccines. Commercial production started in the year 2009. As a result, the company has limited operating history.
Two products: GreenSignal Bio Pharma is heavily dependent on two products – BCG Vaccine and BCG – ONCO for Immunotherapy. The latter is used in the treatment of urinary bladder cancer. BCG Vaccine is the major contributor to the company’s revenues and contributed 82.7% of its revenues in FY2016.
Order from UNICEF: The company has entered into a three year long term agreement with UNICEF to supply BCG Vaccines. The company received WHO – Pre-qualification in November 2015 which has made GreenSignal Bio Pharma one of the four companies globally to supply the BCG vaccine to UNICEF. Under the agreement, the company plans to supply 28 lakh (2.8 million) vials to UNICEF during 2016-2018 at prices between USD1.36 and USD1.8 per vial.
Order from Government of India: The company’s order book also includes the Ministry of Health which will purchase 25 lakh vials every year in FY2017 and FY2018 at the rate of INR36.75 per vial and INR39.5 per vial respectively. The Government of India accounted for 46.67% of its revenues for the quarter ended 30 June 2016.
Financial performance: GreenSignal Bio Pharma has witnessed uneven revenues in the last four years. Its revenues increased from INR11.26 crore in FY2012 to INR20.49 crore in FY2016 but the growth has been erratic as top line declined to just INR3.52 crore in FY2013. Similarly, profitability has also been elusive for the company. While GreenSignal Bio Pharma has been profitable in terms of operating profits, FY2016 was the only year of net profits in the last five financial years.
International operations: GreenSignal Bio Pharma’s international operations accounted for 46.2% of its annual revenues in FY2016. This high dependence on international markets is largely due to UNICEF supply deal.
Valuations: As the company was not profitable in the previous years, it is only FY2016 which matters in terms of profitability. In FY2016, its diluted earnings per share (EPS) stood at INR1.45 which means GSBPL IPO is valuing the company at a PE ratio of 55.1 at the upper price band. Its return on net worth (RONW) stood at 11.86% in the latest year.
IPO Central will publish its review of the public offer in the coming days. Meanwhile, don’t forget to check our page on the GSBPL IPO and see what other investors have to say about the upcoming IPO.