Influx Health NSE SME IPO review (May apply)

•    The company operates as CDMO for healthcare products with its three units.
•    It marked steady progress in its top lines for the reported periods.
•    The sudden boost in its bottom lines for FY24 and FY25 raise eyebrows and concern over its sustainability going forward as it is operating in a highly competitive and fragmented segment.
•    Based on its recent financial data, the issue appears fully priced.
•    Well-informed/cash surplus investors may park moderate funds for medium term.

ABOUT COMPANY:
Influx Healthtech Ltd. (IHL) is a Mumbai-based, healthcare focused company specialising in contract manufacturing. Since its inception in 2020, the company has established itself as a reliable Contract Development and Manufacturing Organization (CDMO), offering specialized services to a wide range of clients across various industries. The company operates manufacturing facilities located in Thane, Maharashtra, covering a total area of approximately 9,676 square feet, 13,000 square feet, and 14,000 square feet, respectively. These facilities are certified to international quality standards, including GMP (Good Manufacturing Practice), HACCP (Hazard Analysis & Critical Control Points), ISO 22000, and Halal certifications, ensuring adherence to the highest standards of safety, quality and regulatory compliance. 

Equipped with advanced machinery, a dedicated quality control department, and a skilled workforce, its facilities are designed to meet diverse customer needs efficiently and effectively. The Company operates a comprehensive business model designed to support Nutraceutical and Cosmetics companies through all stages of product development and manufacturing. The primary aim of IHL is to offer end-to-end services encompassing product development, production, and regulatory support, enabling clients to focus on their core competencies such as formulation, discovery and commercialization. A key component of its business model is the provision of development services including formulation development by creating stable and effective formulations, process development by establishing efficient and scalable manufacturing processes and analytical development by developing testing methods to ensure product quality, safety, and efficacy.

The company has an in-house department dedicated to formulation development, quality control, and product stability studies. This department evaluates existing products and their dosages, develops new formulations, and introduces variations in existing products. The department conducts process validations, analytical method validations, and cleaning validations as per standard operating procedures. Upon completion of these processes, new formulations are commercially launched. The company offers products for various segments, they are Dietary/Nutritional 3018, Cosmetics 371, Ayurvedic/Herbal 103, Veterinary Feeds 71, and Homecare 7.

The company is actively focused on expanding its portfolio of innovative health and wellness products. Its product lines, including tablets, capsules, powders, syrups, soft Gelatin, and various nutraceutical offerings such as nutritional gummies and vegan protein bars, reflect its dedication to bringing cutting-edge, science-backed health solutions to consumers. As of March 31, 2025, it served 424 existing and 147 new customers during the fiscal. As of the date of this offer document it had 163 employees on its payroll and additional 78 contract workers in various departments.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 6100800 equity shares of Rs. 10 each to mobilize Rs. 58.57 cr. at the upper cap. It has announced a price band of Rs. 91 – Rs. 96 per share. The issue constitutes 5000400 fresh equity shares worth Rs. 48.00 cr. at the upper cap and an Offer for Sale (OFS) of 1100400 equity shares worth Rs. 10.56 cr. at the upper cap. The issue opens for subscription on June 18, 2025, and will close on June 20, 2025. The minimum number of shares to be applied is for 1200 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.35% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, it will utilize Rs. 22.49 cr. capex on setting up of new manufacturing facility for nutraceutical division, Rs. 11.49 cr. for capex on setting up new manufacturing facility for veterinary food division, Rs. 2.76 cr. for purchase of machinery for homecare and cosmetic division, and the rest for general corporate purposes. 

The IPO is solely lead managed by Rarever Financial Advisors Pvt. Ltd., and Maashitla Securities Pvt.  Ltd., is the registrar to the issue. R K Stockholding Pvt.  Ltd., is the market maker.

The company has issued initial equity shares at par value, and has also issued bonus shares in the ratio of 725 for 1, in July 2024. The average cost of acquisition of shares by the promoters is Rs. 0.01, and Rs. 2.48 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 18.15 cr. will stand enhanced to Rs. 23.15 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 222.24 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 76.06 cr. / Rs. 7.20 cr. (FY23), Rs. 100.02 cr. / Rs. 11.13 cr. (FY24), Rs. 104.99 cr. / Rs. 13.37 cr. (FY25). While it posted growth in its top lines, boosted bottom lines from FY24 onwards raises eyebrows and concern over its sustainability going forward, as it is operating in a highly competitive and fragmented segment.

For the last three fiscals, the company has reported an average EPS of Rs. 6.83 and an average RoNW of 45.07%. The issue is priced at a P/BV of 4.82 based on its NAV of Rs. 19.91 as of March 31, 2025, and at a P/BV of 2.64 based on its post-IPO NAV of 36.35 per share (at the upper cap).

If we attribute FY25 super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 16.64. Based on FY24 earnings, the P/E stands at 19.96. The issue relatively appears fully priced.

For the reported periods, the company has posted PAT margins of 9.46% (FY23), 11.13% (FY24), 12.75%, (FY25), and RoCE margins of 78.60%, 65.58%, 49.17%, respectively for the referred periods.  

DIVIDEND POLICY:
The company has not declared any dividends since incorporation. It will adopt a prudent dividend policy post listing, based on its financial performance and future prospects. 

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown Sudarshan Pharma, Quest Laboratories, as their listed peer. They are trading at a P/E of 40.0, and 11.1 (as of June 13, 2025). However, they are not truly comparable on an apple-to-apple basis. This compare appears to be an eyewash.

MERCHANT BANKER’S TRACK RECORD:
This is the 1st mandate from Rarever Financial Advisor in the ongoing fiscal.  Thus, it has no past track records for any mandate.