Advanced Enzyme Techno IPO review (Apply)

Advanced Enzyme Technologies Ltd (AETL) is the largest Indian enzyme company, engaged in the research and development, manufacturing and marketing of 400+ proprietary products developed from 60 indigenous enzymes. Having more than two decades of fermentation experience in the production of enzymes, AETL ranks among the top 15 global companies in terms of enzyme sales, and have the second highest market share domestically, next only to the world’s largest enzyme company Novozymes.

The company operates in two primary business verticals namely Healthcare & Nutrition (human and animal) and Bio-Processing (food and non-food). By following critical industry trends, it focuses on ensuring that company’s enzyme products are relevant, helping customers to meet the evolving market demands.

AETL is a fully integrated enzyme manufacturing company driven by extensive focus on research and development (“R&D”) of various enzymes, enzyme blends, enzyme products and customized enzyme solutions. It strives to develop creative, cost-effective unique and innovative solutions, thereby enabling its customers to develop superior products and processes. The company has total six units out of which 4 are in India and 2 are in US. Similarly it has 4 R & D Centers out of which 3 are in India and 1 is in US. Its clientele includes names like Cipla, Sanofi, Alkem, Ipca, Emcure etc and has two third revenues from exports. Top 10 customers contribute 42% in top line. It serves more than 700 customers across 50 countries. Most of its products are tailor made and hence gives higher margins. Enzymes market is growing at a CAGR of 6% plus annually and trends are likely to continue.

To part finance its USA counterpart, the company is coming out with a fresh equity issue to the tune of Rs. 50 crore and an offer for sale of 4034470 equity shares by existing stakeholders for listing benefits. Thus the total offer size is around Rs. 405 to Rs. 411 crore based on lower and upper price bands. The company is issuing approximately 5.6 lakh fresh equity shares of Rs. 10 each. The issue is being made via book building route with a price band of Rs. 880-896. Minimum application is to be made for 16 shares and in multiples thereon, thereafter. Issue opens for subscription on 20.07.16 and will close on 22.07.16. Post allotment, shares will be listed on BSE and NSE.  BRLM to the issue are ICICI Securities Ltd and Axis Capital Ltd. Link Intime India Pvt Ltd is the registrar to the issue. 

Since inception in 1989 till March 1994 it issued equity shares at par. In December 1994 it issued further equity at a price of Rs. 50 per share, in March 1996 it issued equity at a price of Rs.30 per share and then again in November 2002 it issued equity in the price range of Rs. 26 and Rs. 50. In March 2007 it issued bonus in the ratio of 1 for and again in March 2010 in the same ratio. In July and November 2012 it issued equity at a price of Rs. 290 per share. Its current paid up equity capital of Rs. 21.77 cr. will stand enhanced to Rs. 22.33 cr. post this issue. 

On performance front, the company has (on consolidated basis) posted turnover of Rs. 220.42 cr, Rs. 239.45 cr. Rs. 223.11 cr. Rs. 293.76 cr. and net profit of Rs. 49.22 cr., Rs. 20.09 cr., Rs. 50.10 cr., Rs  78.44 cr. for FY 13, FY 14, FY 15 and FY 16 respectively. Thus is has posted CAGR of 14.4% for top lines and CAGR of 24.1% for bottom lines for these years despite troubled fiscal 2014.

If we attribute the last earnings on post IPO equity then the asking price is at a P/E of 25 plus. As per RHP there is no listed peer for this company to compare with and this is being the first mover IPO in enzymes which are specialty chemicals for healthcare. Thus one may compare it with pharma sector that commands composite P/E of around 32.

BRLMs to this offer have handled 21 IPOs in last three years out of which 6 IPOs closed below offer price on the debut day.

Conclusion: Being first mover IPO in the enzymes segment, it is catching fancy. Considering its track records and future prospects ahead, investors may consider investment for short to long term rewards.