Walpar Nutritions coming with an IPO to raise up to Rs 6.60 crore

Walpar Nutritions

• Walpar Nutritions is coming out with an initial public offering (IPO) of 12,00,000 Equity Shares of face value of Rs 10 each for cash at a fixed price of Rs 55 per equity share.  
• The issue will open on June 30, 2021 and will close on July 5, 2021.
• The shares will be listed on the Emerge platform of NSE.
• The share is priced 5.50 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Beeline Broking.
• Compliance Officer for the issue is Palakben Mahesh Joshi.

Profile of the company

It is manufacturing company with wide range of Nutraceutical, Ayurvedic, Cosmeceuticals, Sexual Wellness and Food supplement products. The company develops, manufactures and commercializes Herbo-Nutraceutical products including sales, marketing, quality assurance, distribution, compliance and regulatory aspects under Nutraceuticals. It is also engage in trading of raw material used in manufacturing Nutraceutical products.

The company has product approvals under the license issued by FSSAI (Food Safety and Standards Authority of India) and AYUSH (Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homeopathy) department for manufacturing of Tablets, Capsules, Oral Liquids and Ointments and also for analysis of Chemical, Instrumental & Microbiology. It is holding WHO, HACCP, HALAL, Kosher and ISO 9001:2015 certificate issued by Independent agencies. It has also applied for patents of its three products. It has developed more than 100 formulations and 1000 brands for third party for domestic market under different segments like Orthopaedics, Gynaecology, Paediatrics, Cardiac, Diabetic, Dermatology, Pain Management, Antibiotics, Neuro, Critical Care, Gastro-Intestinal and Sports nutrition.WALPAR manufactures innovative products comprising of Tablets, Capsules, Liquid Orals, Ointments, Creams, Lotions, Gels and Sachet, powders and effervescent tablets.

The company manufacturing unit is located at 4-9, and 21 at Shyam Estate, Santej, Ta: Kalol, Gandhinagar. At present it is having its installed capacity of manufacturing of approximately 30 lakh tablets per month, 12.50 lakh capsules per month, 1.50 lakh oral liquids of (ranging from 15 ML to 200 ML) per month, and 2.00 Lakhs Sachets of (ranging from 1 gm to 10 gms) per month.

Proceed is being used for:

• Investment in subsidiary.
• Meeting incremental working capital requirements.
• General corporate purpose.
• Meeting public issue expenses.

Industry overview

India is the largest provider of generic drugs globally. Indian pharmaceutical sector supplies over 50% of global demand for various vaccines, 40% of generic demand in the US and 25% of all medicine in the UK. India enjoys an important position in the global pharmaceuticals sector. The country also has a large pool of scientists and engineers with a potential to steer the industry ahead to greater heights. Presently, over 80% of the antiretroviral drugs used globally to combat AIDS (Acquired Immune Deficiency Syndrome) are supplied by Indian pharmaceutical firms. Indian pharmaceutical sector is expected to grow to $100 billion, while medical device market is expected to grow $25 billion by 2025. Pharmaceuticals export from India stood at $16.3 billion in FY20. Pharmaceutical export includes bulk drugs, intermediates, drug formulations, biologicals, Ayush and herbal products and surgical. As of October 2020, India exported pharmaceuticals worth $13.87 billion in FY21. Pharmaceutical exports from India stood at $16.28 billion in FY20 and $2.07 billion in October 2020.

The Union Cabinet has given its nod for the amendment of existing Foreign Direct Investment (FDI) policy in the pharmaceutical sector in order to allow FDI up to 100% under the automatic route for manufacturing of medical devices subject to certain conditions. The drugs and pharmaceuticals sector attracted cumulative FDI inflow worth $16.54 billion between April 2000 and June 2020 according to the data released by Department for Promotion of Industry and Internal Trade (DPIIT). ‘Pharma Vision 2020’ by the Government’s Department of Pharmaceuticals aims to make India a major hub for end to-end drug discovery. The sector received cumulative Foreign Direct Investment (FDI) worth $16.54 billion between April 2000 and June 2020. Under Union Budget 2020-21, allocation to the Ministry of Health and Family Welfare stands at Rs. 65,012 crore ($9.30 billion), whereas, Rs. 6,429 crore ($919 million) has been allocated to health insurance scheme, Ayushman Bharat - Pradhan Mantri Jan Arogya Yojana (AB-PMJAY). In November 2019, the cabinet approved the extension/renewal of extant Pharmaceuticals Purchase Policy (PPP) with the same terms and conditions, while adding one additional product, namely Alcoholic Hand Disinfectant (AHD), to the existing list of 103 medicines till the final closure/strategic disinvestment of pharma CPSUs.

Pros and strengths

Understanding consumer preferences and product development: The company’s ability to understand consumer preferences and its focus on initiatives to develop product attributes that are most valued by consumers is one of its key strengths. It has an extensive understanding of the functional supplements market in India, and especially by leveraging on its wide distribution network; it try to understand changing consumer trends and preferences in terms of products types, pricing and packaging. It has strong existing client relationships which generates multiple repeat orders. Its existing relationship with its clients represents a competitive advantage in increasing its business and gaining new clients.

Strong formulations and development capabilities: It has strong in-house formulations and development expertise, which has allowed it to develop a differentiated portfolio of Nutraceutical products that, gives it a competitive advantage in the markets that it cover. Formulation development encompasses a very wide range of activities such as development of dosage forms like oral solids, oral liquids and semi solids. This also includes delivery patterns of the drug to ensure patient compliance.

Quality assurance: Quality plays one of the most vital role in the success of any organization. It is focused on providing high quality products and services. It constantly strive to improve its industrial processes at every step in the production chain –from the milling and mixing of raw materials to its packaging methods and how it uses technological additives to maintain the nutritional value and enhance the flavor and appearance of its products. Its focus on quality is evidenced by the quality certifications and accreditations that its facility has obtained from various local and international accreditation agencies.

Risks and concerns

Depends on few numbers of customers for sales:  As per the company’s books of Accounts, its top ten customers contributes almost 35.11%, 39.66%, 38.87%, 62.30%, 60.01% of its total sales for the period ended December 31, 2020, December 3, 2020 and for the year ended March 31, 2020, 2019 and 2018 respectively. Any decline in its quality standards, growing competition and any change in the demand, may adversely affect its ability to retain them. It cannot assure that it shall generate the same quantum of business, or any business at all, and the loss of business from one or more of them may adversely affect its revenues and results of operations. However, the composition and revenue generated from these customers might change as it continue to add new customers in the normal course of business.

Depends on third party suppliers for raw material: The company uses third party transportation for delivery of its products. However, customers located nearby Ahmedabad to whom it supplied its products through its own transport vehicle. Though its business has not experienced any disruptions due to transportation strikes in the past, any future transportation strikes may have an adverse effect on its business. These transportation facilities may not be adequate to support its existing and future operations. In addition such goods may be lost or damaged in transit for various reasons including occurrence of accidents or natural disasters. There may also be delay in delivery of products which may also affect its business and results of operation negatively. An increase in the freight costs or unavailability of freight for transportation of its raw materials may have an adverse effect on its business and results of operations.

Face competition: The company’s products face competition from products commercialized or under development by competitors in all of its product portfolios. It compete with local companies, multi-national corporations and companies from the rest of world. If its competitors gain significant market share at its expense, its business, results of operations and financial condition could be adversely affected. Many of its competitors may have greater financial, manufacturing, research and development, marketing and other resources, more experience in obtaining regulatory approvals, greater geographic reach, broader product ranges and stronger sales forces.

Outlook

Incorporated in 2009, Walpar Nutritions manufactures different types of Nutraceutical, Ayurvedic, Cosmeceuticals, Sexual Wellness, and food supplement products. It has developed 100+ formulations and 1000 brands under different segments i.e. Orthopaedics, Cardiac, Diabetic, Dermatology, Pain Management, Antibiotics, Gynaecology, Neuro, Gastro-Intestinal, and sports nutrition. It further manufactures tablets, capsules, Ointments, creams, lotions, gels and sachet, powders, liquid orals, etc.  The company is also engage in trading of raw material used in manufacturing Nutraceutical products. Such raw material is basically also raw material which is used in manufacturing of its own products. Trading of such Nutraceutical raw material also contributes in its top topline. It has a qualified and professional management team with significant experience in all operational aspects of its business. On the concern side, the company operate in an industry characterized by extensive patent litigation. Patent litigation can result in significant damages being awarded and injunctions that could prevent the sale of certain products or require it to pay significant royalties in order to continue to sell such products. Its business is working capital intensive primarily on account of high credit period given to customers. A significant portion of its working capital is utilized towards trade receivable.

The company is coming out with a maiden IPO of 12,00,000 equity shares of Rs 10 each at a fixed price of Rs 55 per equity share to mobilize Rs 6.60 crore. On the performance front, the total revenue from operations for the FY 2019-20 was Rs 1,671.27 lakh as compared to Rs 1282.27 lakh during the FY 2018-19 showing an increase of 30.34%. Income from Operations increased mainly on account launch of new products and increase in sales volume of Products of the company. Profit after Tax (PAT) increased from Rs 6.88 lakh in the FY 2018-19 to Rs 12.18 lakh in FY 2019-20 showing increase of 77.03%. Nutraceuticals market in India is expected to gain prolific growth in the years to come and it is the target segment of company. It intends to capitalize on this changing market sentiment by focusing on improving the market share of its products by expanding its distribution network and increasing production volumes. It aims to widen its geographical reach and leverage its brand name by strengthening and investing in its e-commerce distribution model. The company shall also explore franchising opportunities in manufacturing & distribution for increasing the brand’s footprint across Asia & the Middle East, EUROPE, USA going forward.