Akum Drugs & Pharmaceuticals Limited IPO: Get Date, Price, Review and Details

Introduction:

It is pharmaceutical contract development and manufacturing organization (“CDMO”) offering a comprehensive range of pharmaceutical products and services in India and overseas.

Some of the other services include:

• Formulations R&D
• Preparation and filings of regulatory dossiers
• Other testing services.
• Manufacturing and sale of branded pharmaceutical formulations and APIs.

IPO Details:

Objects of Issue:

• Repayment/ prepayment of indebtedness of the company & its subsidiaries
• Funding incremental working capital requirements
• Pursuing inorganic growth through acquisitions
• General Corporate Purposes

Key Strengths:

• Diverse client base: Revenue from top 10 customers contributed to 39% of the revenues.
• Large and rapidly growing R&D capabilities across our product portfolio: As of 31^st March, 2024 the company operates 4 dedicated R&D units with 406 scientists
• Strategic presence across the pharmaceutical value chain: Its operations are not limited to CDMO, but is also a marketer of formulations & manufacturer of API’s
• Experienced and entrepreneurial management team with a proven track record.

Risks:

• Our manufacturing and R&D centers are concentrated in Uttarakhand: 9/12 Manufacturing and 2/4 R&D centers in Uttarakhand alone. Any natural catastrophes, political turmoil, etc would affect the business operations.
• Despite sufficient infra and human resources in R&D the company’s spends on R&D has largely been constant. Further the capacity utilization also stands at just ~40%.
• The company topline, bottom-line, and margins have been highly fluctuating. <Paste the financial data)
• Operates in a highly competitive market scenario due to which their bargaining power reduces.

Financial Snapshot:

Conclusion:

The listed peers namely Torrent Pharma, Alkem Labs, Eris Lifesciences are having RoE of 20.1%,10.7%, and 16.9% respectively but Akum stands at just 0.11%.

The Debt to Equity of Akum is 0.69 whereas for Torrent – 0.57, Alkem labs – 0.12 and Eris Life Sciences – 1.06 as of FY 2023. Since the EPS of the company is negative, company’s valuations based on Price to Earnings may not reflect the true picture.

Since, the company aims to clear its debt entirely from the issue proceeds leading to improvement in the margins.

Additionally, the entire Indian Pharma CDMO sector is expected to grow at a CAGR of 14.3% from FY24 to FY28 and with implementation of Bio Secure Act in the US the India CDMO players are poised to grow.

Based on the above financials, growth potential we would suggest our investors to subscribe to this IPO for long term.