Zenith Drugs is set to make its mark in the stock market with an Initial Public Offering (IPO) that includes a fresh issue of 51,48,800 shares amounting to INR 40.68 crores. The company has strategic plans for the utilization of net proceeds, covering crucial aspects such as new unit machinery, block upgrades, working capital, and general corporate purposes.
Zenith Drugs’ IPO presents a unique opportunity for investors seeking exposure to the pharmaceutical sector, emphasizing affordable healthcare and global growth prospects. The company’s commitment to quality, strategic investments, and financial performance positions it as an attractive investment option in the market. The IPO subscription period is set from February 19 to February 22, 2024, with an expected listing date on Tuesday, February 27, 2024, on NSE SME.
Based in Indore, Zenith Drugs specializes in providing high-quality and affordable medicines with a focus on generics. The company stands out for its commitment to excellence, emphasizing technology, service, and global growth to establish itself as a premier pharmaceutical entity.
Maintaining WHO-GMP compliance and holding ISO 9001:2015 certification, Zenith Drugs ensures the production of diverse formulations, including ORS powder, liquid orals, ointments, and capsules. This reflects the company’s dedication to providing efficient, safe, and affordable healthcare solutions.
Zenith Drugs has expanded its facility twice to meet the growing demand for its products, enhancing production capacity and introducing new formulations. With strategic investments, the company aims for continuous improvement to address evolving healthcare needs.
Key Financial Highlights:
Steady revenue growth from ₹7,340.17 lakhs in 2021 to ₹11,451.91 lakhs in 2023.
Equity nearly doubled from ₹895.27 lakhs in 2021 to ₹1,725.87 lakhs in 2023.
Profit after tax increased from ₹302.92 lakhs in 2021 to ₹515.33 lakhs in 2023.
RoNW remained high at 29.88% in 2023, indicating operational efficiency.
Diluted EPS significantly increased from ₹75.73 in 2021 to ₹128.82 in 2023.
Total assets more than doubled, reflecting significant investment in growth.
NAV per equity share nearly doubled from ₹7.46 in 2021 to ₹14.37 in 2023.
Zenith Drugs demonstrates a competitive edge with a high RoNW of 29.88% and an EPS of ₹4.29, showcasing profitability and operational efficiency compared to peers. Despite not disclosing its P/E ratio, the company presents a promising investment opportunity.
IPO objectives and utilization of funds:
- Purchase of Machinery & Equipment for Setting up New Unit: Deployment of INR 1,074.82 lakhs for plant, machinery, and equipment to expand the factory.
- Existing Manufacturing Block Upgradation: Investment of INR 210.59 lakhs in additional equipment to enhance quality and capacity.
- Meeting Working Capital Requirements: Utilization of INR 1,200 lakhs to meet the projected working capital requirement of INR 4,532.73 lakhs for FY 2023-2024.
- General Corporate Purposes: Deployment of balance funds towards general corporate goals, including strategic initiatives, partnerships, joint ventures, branding, marketing, and new client referral fees.
Investor considerations and risks:
- Pending legal proceedings pose uncertainty with potential adverse impacts on operations and financial health.
- Strict global regulations in the pharmaceutical industry may impact business operations.
- Dependency on Active Pharmaceutical Ingredients (API) suppliers poses challenges in meeting increased demand or replacing suppliers without long-term contracts.
