Fabino Life Sciences coming with an IPO to raise upto Rs 3.24 crore

Fabino Life Sciences

• Fabino Life Sciences is coming out with an initial public offering (IPO) of 9,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 36 per equity share.
  
• The issue will open on December 31, 2021 and will close on January 5, 2022.
  
• The shares will be listed on SME Platform of BSE.
  
• The share is priced 3.60 times higher to its face value of Rs 10.
  
• Book running lead manager to the issue is Aryaman Financial Services.
  
• Compliance Officer for the issue is Jeel Poshiya.
  

Profile of the company

The company is a growing pharmaceutical and other wellness focused consumer products company operating from Delhi and Haryana. The company is engaged in manufacturing, marketing, trading and packing of pharmaceutical and other wellness focused consumer products. The company’s core business is marketing of pharmaceutical formulation & products in domestic market through own distribution network and sales force under own brand name, Getting its Ayurvedic formulations manufactured through loan licensing facilities, packing, labeling etc.

The company’s product range is bifurcated into brands-Fabino and Keepshine. Fabino is the brand under which it markets all of its pharmaceutical products including Tablets, Ointments Syrups etc for various medical treatments in its allopathic and certain herbal range. Keepshine is the Brand under which it markets its Shampoo and Hair Maintenance products. It export wellness and FMCG products like Coffee, Malt powder, Protein powder, Hair shampoo which are marketed by the company. The company emphasizes developing high-quality and affordable products for all sections of society by harnessing the skills of its competent manpower and other resources. It aims at providing the best quality products at affordable rates for good health and well-being for all.

Proceed is being used for:

• Part repayment of loans.
  
• Funding working capital requirements.
  
• General corporate purpose.
  

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. Globally, India ranks 3rd in terms of pharmaceutical production by volume and 14th by value. The domestic pharmaceutical industry includes a network of 3,000 drug companies and ~10,500 manufacturing units. 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. The landscape of the pharmaceutical industry is increasingly competitive and complex, and pharmaceutical companies need targeted information support to develop aggressive business strategies. The solution is Competitive Landscaping Services from Research Optimus. A globally recognized outsourcing research and analytics firm, ROP is able to provide pharmaceutical companies with the solutions required to overcome specific industry challenges via Competitive Intelligence.

India’s drugs and pharmaceuticals exports stood at $24.44 billion in FY21. India is the 12th largest exporter of medical goods in the world. The country’s pharmaceutical sector contributes 6.6% to the total merchandise exports. As of May 2021, India supplied a total of 586.4 lakh COVID-19 vaccines, comprising grants (81.3 lakh), commercial exports (339.7 lakh) and exports under the COVAX platform (165.5 lakh), to 71 countries. Indian drugs are exported to more than 200 countries in the world, with US being the key market. Generic drugs account for 20% of the global export in terms of volume, making the country the largest provider of generic medicines globally. India’s drugs and pharmaceuticals exports stood at $ 3.76 billion between April 2021 and May 2021. The foreign direct investment (FDI) inflow in the Indian drugs and pharmaceuticals sector stood at $ 18.12 billion between April 2000 and June 2021.

Pros and strengths

Wide range of products: The company has diverse product portfolio across various segments to fulfil customer’s requirements. Its offering ranges from Allopathic products to Food and Wellness to Veterinary and Herbal to Multi Vitamins and Covid -19 products. It supplies products on the basis of needs, trends and requirements in the market. It manufactures Protein Powder and Granules and Malt Powder at its manufacturing facility and the rest of its product are manufactured by third party manufacturers on made to order basis as per its instructions or as per the manufacturer. The company packs products and markets approximately 70 + products in the domestic market and has a portfolio of FMCG products for Overseas Markets.

Well established brand: Fabino’s complete product range is represented by brand visibility and loyalty. Over the years the credibility of its brands has been reinforced by new and innovative ideas, be it in quality, manufacturing and marketing or product communication by the company, which has helped it, retain its identity and strong recall in the clutter of a competitive marketplace. Further, all the intellectual properties are owned by its Promoter which includes trademarks associated with its business. The company’s Promoter has registered and holds more than 70 registrations in respect of trademarks under classes 5 and 35 granted by the Registrar of Trademarks under the Trade Marks Act, 1999 in India. These intellectual properties help it to take the brand value forward and it distinguish its business from the competitors. Trademarks and brands are an efficient commercial communication. In the age of social media, well established brand allow business to utilize the internet and social media. Trademark registration also provides legal security to manufacturers and helps drug manufacturers to take legal action against counterfeits. Having trademarks registered helps it in better marketing and branding of goods. It will also help it to create a positive brand image for the company.

Strong marketing capability: The company’s existing distributor relationship protects and enhances the business with terms of supply and pricing of the products, the quality of the products offered etc. The company being a small and medium size organization, rely on personal relationships of its promoter with distributors. It also market its products to various hospitals and medical institutions through its channel partners in different states, which constitute an important channel for the distribution of its products. It has professional medical representatives to Market its product on case to case basis. Its marketing strategies, trained professional representatives and distribution network enable it to increase its market share across key areas and build and develop its brands.

Risks and concerns

Significant raw material requirements: The success of company’s operations depends on its ability to source raw materials at competitive prices. It procures various raw materials required for the manufacturing of its Protein Powder and Malt Powder. Principal raw materials that it uses in its manufacturing process are Soya Flour, Soya Protein, Skimmed Milk Protein, Sugar, among others. It also purchases products which it use directly as input materials, including materials which do not require any processing. It procure these raw materials from various suppliers in the industry. Increase in the competition and / or its competitors having established operations and long-term relationships with suppliers may see it facing challenges to secure adequate supply of raw materials or may increase its overall cost of raw materials.

Largely depends on performance of distributors: Any nonperformance by these distributors may adversely affect company’s business operations, profitability and cash flows. It mainly sells its products directly to distributors/stockiest/super stockiest who in turn take forward the supply chain. Its business hence largely depends on the performance of its distributors, who may be responsible for selling its products to end users at domestic. Currently, it has distributors/stockiest/super stockiest for its Domestic and international markets. It can give no assurance that the performance of such distributors will meet its required specifications or performance parameters. Such distributors are independent third parties over which it does not have control. Additionally, it do not have any non-compete agreement with such distributors and in the event that such distributors enter into agreements with competitors, it may not be able to take any course of action.

High working capital requirements: The company’s business requires significant amount of working capital. Major Portion of its working capital is utilized towards debtors and inventory. Its growing scale and expansion, if any, may result in increase in the quantum of current assets. Its inability to maintain sufficient cash flow, credit facility and other sourcing of funding, in a timely manner, or at all, to meet the requirement of working capital or pay out debts, could adversely affect its financial condition and result of its operations. Further, it has high Debtors which may result in a high risk in case of non-payment by these Debtors. In the event it is not able to recover its dues from its Debtors, it may not be able to maintain its Sales level and thus adversely affecting its financial health. If this situation persists, it may not be able to pay its lenders / creditors and it may be forced to go for Corporate Debt Restructuring (CDR) which may result in adversely affecting its operations and future prospects.

Outlook

Fabino Life Sciences is engaged in the manufacturing, marketing, trading, and packing of pharmaceutical and other wellness-focused consumer products. The company's core business is the marketing of pharmaceutical formulation & products in the domestic market through their own distribution network and sales force under their brand name, getting ayurvedic formulations manufactured through loan licensing facilities, packing, labeling, etc. The company export wellness and FMCG products like coffee, malt powder, protein powder, hair shampoo marketed by them. The company’s Ayurvedic/Herbal business operations are supported by loan licensing facilities which are approved by relevant authorities. It typically enters into Loan License Agreement for periods ranging from one to five years. The company’s Promoter is engaged in the pharmaceutical business for the last 17 years and has a proven background and rich experience in the pharmaceutical industry and has been instrumental in the consistent growth of the company’s performance. On the concern side, the company faces stiff competition from domestic as well as global market. Further, this industry is fragmented with many small and medium sized companies and entities, which manufactures some of these products at various levels, which may adversely affect its business operation and financial condition. Besides, the company does not have its own manufacturing facility for Allopathic Pharma products, and it has to rely on third parties for manufacturing the formulation products, which are marketed by it under its own brand names.

The company is coming out with a maiden IPO of 900000 equity shares of Rs 10 each at a fixed price of Rs 36 per equity share to mobilize Rs 3.24 crore. On the performance front, in fiscal 2021, the company’s total income decreased by Rs 445.77 lakh or 59.30 %, from Rs 751.69 lakh in fiscal 2020 to Rs 305.92 lakh in fiscal 2021. The decrease in the year 2021 was due to decrease in the revenue from operations as compared to last year. The decrease represents a decline in the sale of products. The company’s Profit after Tax decreased by Rs 3.87 lakh or 56.19 %, from Rs 6.89 lakh in fiscal 2020 to Rs 3.02 lakh in fiscal 2021. The company aims to further develop its domestic sales networks in two ways: firstly nurturing existing relationships with clients and secondly by creating new distribution channels in non-penetrated geographies considering various cities. Besides, it intends to increase its touch points and engagement with customers through various digital and technology initiatives.