Achyut Healthcare BSE SME IPO review (Avoid)

•    AHL is in the business of trading in pharmaceutical products. 
•    It is fully dependent on third party contracts. 
•    Till FY21 it marked minuscule financial performance. 
•    Superb top and bottom line for IPO year raise eyebrows. 
•    There is no harm in ignoring this pricy offer. 

ABOUT COMPANY:
Achyut Healthcare Ltd.(AHL) is engaged in the trading of pharmaceutical products. It is currently trading into 6 to 7 products based on the needs of its customers. The list of pharma products traded includes Cenzure, Arpimune, Azathioprine IP, Everomimus, Mycophenolate Mofetil USP, Mycophenolate Sodium USP, Sirolimus, Tacrolimus USP, Infrared thermometer, Ascorbic Acid Coated Vitamin C, Calcium carbonate oyster, Cellulose acetate Phthalate, Chlorthalidone IP, Cross Carmalose Sod IP/USP, DI Basic Calcium Phosphate IP, DI Ethyl Phthlate, Diltiazem Hydrochloride IP, Easy Coat Fc Titanium Dioxide, Escitalopram IP, Escitalopram Oxalate, Favipiravir among many other products.

As per the statement given on page 87 of the offer document the company is into the growing stage where it is currently having fewer employees and for that reason no such HR Policies are in place right now but will be in place once we expand.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its need for funding of machinery and equipment purchase (Rs. 2.76 cr.) and general corporate purpose (Rs. 0.59 cr.), AHL is coming out with its maiden IPO of 1800000 equity shares of Rs. 10 each at a fixed price of Rs. 20 per share to mobilize Rs. 3.60 cr. The issue opens for subscription on March 17, 2022, and will close on March 22, 2022. Minimum application is to be made for 6000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.70% of the post issue paid-up capital of the company. AHL will be spending Rs. 0.25 cr. for this IPO process. 

The issue is solely lead managed by GYR Capital Advisors Pvt. Ltd., and KFin Technologies Ltd. is the registrar to the issue. Giriraj Stock Broking Pvt. Ltd. is the market maker for this company. 

Having issued initial equity at par, the company further equity at Rs. 20 per share in September 2021 and October 2021. It has also issued bonus shares in the ratio of 9 for 10 in September 2021. The average cost of acquisition of shares by the promoters is Rs. 9.85 and Rs. 10.15 per share. 

Post-IPO, AHL's current paid-up equity capital of Rs. 4.94 cr. will rise to Rs. 6.74 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 13.48 cr. 

FINANCIAL PERFORMANCE: 
On the financial performance front, for the last three fiscals, AHL has posted turnover/net profits of Rs. 0.67 cr. / Rs. - (0.015) cr. (FY19), Rs. 0.35 cr. / Rs. 0.014 cr. (FY20) and Rs. 0.27 cr. / Rs. 0.007 cr. (FY21). For the first half of FY22 ended on September 30, 2021, it has earned a net profit of Rs. 0.13 cr. on a turnover of Rs. 2.73 cr. Quantum jump in the top and bottom lines in the IPO year indicates some window dressing for fancy valuations. 

For the last three fiscals, AHL has reported an average EPS of Rs. 0.24 and an average RoNW of 2.69%. The issue is priced at a P/BV of 1.97 based on its NAV of Rs. 10.17 as of September 30, 2021, and at a P/BV of 1.47 based on its post-IPO NAV of Rs. 13.56. 

If we annualize super earnings of FY22 and attribute it to post IPO fully diluted paid-up equity, then the asking price is at a P/E of 54.05 making it a highly-priced offer. 

COMPARISON WITH LISTED PEERS:
As per offer documents, AHL has shown Earum Pharma, Vaishali Pharma and Chandra Bhagat Pharma as its listed peers. They are currently quoting at a P/E of around 00, 25.02 and 00 (as of March 14, 2022). However, they are not truly comparable on an apple-to-apple basis. 

DIVIDEND POLICY:
The company has not paid any dividend for the reported period in the offer document. It will adopt a prudent dividend policy post listing, based on its financial performance and future prospects. 

MERCHANT BANKER'S TRACK RECORDS: 
The Lead Manager of this IPO started its business in this fiscal (i.e. 2021-22) only and this is the third mandate from its stable. The last two listings have marked listings at a premium ranging from 4.05% to 6.15% on debut day.