Amwill Healthcare BSE SME IPO review (May apply)

•    The company operates on a third party contract manufacturing of dermatological products on a need based formula.
•    It posted higher margins from FY24 onwards following cost-control and tailor made high-margin products.
•    It has emerged as an establish player in the field with user friendly quality products.
•    Based on its recent financial performance, the issue appears fully priced.
•    Well-informed investors may park funds for the medium to long term.

ABOUT COMPANY:
Amwill Healthcare Ltd. (AHL) is a derma-cosmetic development company, associated with contract manufacturers, distributor and third party product development agencies, which has enabled it in developing capabilities, in manufacturing, packaging and distribution. The core focus of the Company is on development of problem solving dermatological, cosmeceutical and aesthetical products, and therefore to direct all efforts towards product formulation and development, it has outsourced key functions such as manufacturing, prototype development and distribution to third parties, for effective management and execution. 

In line of the aforementioned business strategy, it has presently created a business presence in Karnataka, Andhra Pradesh and Telangana, wherein the company focuses on deepening presence in the regions it operates in, before venturing into new markets, thereby enabling it to establish a customer base in such states. This enables the target customers to identify with its product portfolio and aids understanding of the market segment and the customer demand preference. The product portfolio of AHL is divided into two categories, namely, (i) development and contract manufacturing of generic dermatological solutions; and (ii) developing and formulating solutions to specific dermatological problem. 

Since inception, its focus has been on developing formulations which offer solutions to various dermatological disorders. The Company during the ordinary course of business, seeks advice from various dermatologists and medical professionals, to develop solutions for various dermatological problems. The dermatologists, assists and advises it in identifying the gaps in skincare or cosmetic market, through their experience. The Company based on such suggestions identify a dermatological problem and develops a formulation of a derma-cosmetic suitable for addressing
the designated problem. 

It is associated with contract manufacturers for manufacturing its products, in accordance with the technical and quality specifications prescribed by the Company. Its contract manufacturers have requisite certifications to undertake manufacturing of derma-cosmetic products, in a manner that is compliant with the regulatory guidelines and ensures that the final product meets high-quality standards. It has also executed formal arrangements with majority of the contract manufacturers, which govern various matters such as, specification of manufacturing products, quality standards to be maintained, sales estimates, packaging of products, use and protection of intellectual property, etc. 

AHL’s association with manufacturers enable it to offer diverse solutions to customers, including manufacturing, packaging and compliance with requisite quality standards. In addition to contract manufacturers, it also has informal arrangements with some of the contract developers, who prepare the active ingredients of products using the technical formulations developed in consultation with dermatologists. Third party contract developers play a major role in aiding the development and formulations for generic as well as solution oriented dermatological products. As of September 30, 2024, it had 84 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden book building route combo IPO of 5403600 equity shares to mobilize Rs. 59.98 cr. (at the upper cap). The company has announced the price band of Rs. 105 – Rs. 111 per share of Rs. 10 each. The IPO consists of 4403600 fresh equity shares (worth Rs. 48.88 cr. at the upper cap) and an Offer for Sale of 1000000 shares (wort Rs. 11.10 cr. at the upper cap). The issue opens for subscription on February 05, 2025, and will close on February 07, 2025. The minimum application to be made is for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 27.01% of the post-IPO paid up equity capital of the company. From the net proceeds of the fresh equity issue, it will utilize Rs. 25.00 cr. for working capital, Rs. 5.00 cr. for marketing and brand building activities, and the rest for general corporate purposes. 

The company has allocated not more than 20% for QIBs, not less than 40% for HNIs and not less than 40$ for Retail investors.

The issue is solely lead managed Unistone Capital Pvt. Ltd., and Bigshare Services Pvt. Ltd. Is the registrar to the issue, Globalworth Securities Ltd. is the market maker for the company, as well as the syndicate member. 

After issuing initial equity shares at par value, the company issued bonus shares in the ratio of 311 for 1 in April 2024. The average cost of acquisition of shares by the promoters is Rs. 0.01, Rs. 0.02, Rs. 0.03, and Rs. 0.14 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 15.60 cr. will stand enhanced to Rs. 20.00 cr. (Based on the IPO pricing, the company is looking for a market cap of Rs. 222.04 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 27.62 cr. / Rs. 2.57 cr. (FY22), Rs. 30.28 cr. / Rs. 3.11 cr. (FY23), and Rs. 44.28 cr. / Rs. 12.54 cr. (FY24). For H1 of FY25 ended on September 30, 2024, it earned a net profit of Rs. 6.52 cr. on a total income of Rs. 23.25 cr. Boosted bottom line in pre-IPO fiscal raises eyebrows and concern over its sustainability going forward. 

According to the management, lower bottom lines for FY22 and FY23 is on account of Pandemic impact. The company manufactures tailor made personal care products that earned high margin for them with assured markets. It is a debt free company.  It has emerged as an established personal care pharma company in the southern and eastern region and has plans to go Pan India in coming few years, that will help it to boost its top and bottom lines.

For the last three fiscals, the company has posted an average EPS of 4.96 and an average RoNW of 87.92%. The issue is priced at a P/BV of 7.31 based on its NAV of Rs. 15.18 as of September 30, 2024, and at a P/BV of 3.06 based on its posts-IPO NAV of Rs. 36.27 per share (at the upper cap). 

If we attribute FY25 annualized super earnings to its post-IPO fully diluted paid-up capital, then the asking price is at a P/E of 17.02. Based on FY24 earnings, the issue is at a P/E of 17.70. The issue relatively appears fully priced based on its recent financial performance. 

For the reported periods, the company has posted PAT margins of 9.32% (FY22), 10.32% (FY23), 28.53% (FY24), 28.14% (H1-FY25), and RoCE margins of 204.08%, 83.32%, 94.16%, 36.16%, respectively for the referred periods.

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown Vaishali Pharma, and Trident Lifeline, as their listed peer. They are trading at a P/E of 175.0, and 24.2 (as of February 01, 2025). However, they are not truly comparable on an apple-to-apple basis.  

MERCHANT BANKER’S TRACK RECORD:
This is the 22nd mandate from Unistone Capital in the last three fiscals. Out of the last 10 listings, 1 opened at discount, and the rest listed with premiums ranging from 7.40% to 90% on the date of listings.