Accent Microcell coming with IPO to raise upto Rs 78.40 crore

Accent Microcell

• Accent Microcell is coming out with an initial public offering (IPO) of 56,00,000 equity shares of face value of Rs 10 each in a price band Rs 133-140 per equity share.
• The issue will open on December 08, 2023 and will close on December 12, 2023. 
• The shares will be listed on NSE Emerge platform.
• The share is priced 13.30 times of its face value on the lower side and 14.00 times on the higher side.
• Book running lead manager to the issue is Corporate Capital ventures.
• Compliance Officer for the issue is Braham Pal Chhabra.

Profile of the company

The company has carved a niche in the production of high-quality cellulose-based excipients, that meet international quality standards. With its two state of the art manufacturing facilities located at Pirana Road, Ahmedabad and Dahej, SEZ (Bharuch), it has developed a strong global sales model, as it is serving customers across India and in more than 45 countries including USA, Canada, Germany, UK, Japan, China, Australia, Korea, Netherlands, Turkey, Vietnam, Italy, Indonesia, Poland, Egypt, France, Thailand, New Zealand, Brazil, Russia, Mexico, Chile, Zimbawe, Denmark, Greece and many others.

Presently, it majorly manufactures Microcrystalline Cellulose (MCC). MCC is an odourless, fine white powder & a purified form of cellulose, which is derived from refinement of highly purified wood pulp. It is widely used as texturizer, anticaking agent, binder, lubricant, a bulking agent, diluent which finds a wide range of applications in Pharmaceutical, Nutraceutical, Food, Cosmetic and other industries. It manufactures 22 grades of MCC, with particle sizes ranging from 20 microns to 180 microns. The major grades of MCC manufactured and marketed by the company are branded under the name ‘accel’. Besides ‘accel’ it also sells its products under the name ‘acrocell’, ‘maccel’ and ‘Vincel’.

During the production process, the various grades of MCC are distinguished using different drying techniques used by the company. It manufactures products by two drying techniques which are branded under different brand names. In the company MCC, MCC Spheres, SMCC, MCC with CMC are manufactured with spray dried products which are branded as ‘accel’. These products are known for its premium quality due to its physical properties such as direct compression, particle size, density, flow, tableting properties etc. On the other hand MCC, SMCC are manufactured with spin flash dried which is branded as ‘Vincel’.

Proceed is being used for:

• Setting up plant at Navagam Kheda for manufacturing Croscarmellose Sodium (CCS), Sodium Starch Glycolate and Carboxymethylcellulose (CMC).
• General corporate expenses.

Industry overview

India is the largest provider of generic drugs globally and is known for its affordable vaccines and generic medications. The Indian Pharmaceutical industry is currently ranked third in pharmaceutical production by volume after evolving over time into a thriving industry growing at a CAGR of 9.43% since the past nine years. Generic drugs, over-the-counter medications, bulk drugs, vaccines, contract research & manufacturing, biosimilars, and biologics are some of the major segments of the Indian pharma industry. India has themost number of pharmaceutical manufacturing facilities that are in compliance with the US Food and Drug Administration (USFDA) and has 500 API producers that make for around 8% of the worldwide API market.

Market size of India pharmaceuticals industry is expected to reach $65 billion by 2024, and around $130 billion by 2030. According to the government data, the Indian pharmaceutical industry is worth approximately $50 billion with over $25 billion of the value coming from exports. About 20% of the global exports in generic drugs are met by India. India is among the top 12 destinations for biotechnology worldwide and 3rd largest destination for biotechnology in Asia Pacific. In 2022, India’s Biotechnology industry has crossed $80.12 billion, growing 14% from the previous year. The Indian pharmaceutical industry has seen a massive expansion over the last few years and is expected to reach about 13% of the size of the global pharma market while enhancing its quality, affordability and innovation.

In March 2022, under the Strengthening of Pharmaceutical Industry (SPI) Scheme, a total financial outlay of Rs 500 crore for the period FY22 to FY26 were announced. To achieve self-reliance and minimise import dependency in the country's essential bulk drugs, the Department of Pharmaceuticals initiated a PLI scheme to promote domestic manufacturing by setting up greenfield plants with minimum domestic value addition in four separates ‘Target Segments’ with a cumulative outlay of Rs 6,940 crore from FY21 to FY30.

Pros and strengths

Robust quality and service standards: It maintains stringent quality standards in its manufacturing unit to ensure that its products consistently meet customer requirements. It has implemented comprehensive quality control processes for both raw materials and finished goods, aligning with internal and international quality standards. As part of its export operations, it adhere to the quality conditions and processes prescribed under the United States Pharmacopeia (USP), European Pharmacopoeia (EP), British Pharmacopoeia (BP), Japanese Pharmacopoeia (JP) and Indian Pharmacopoeia (IP). To oversee these processes effectively, it has a dedicated Quality Division that conducts necessary standard operating procedures (SOPs) and standard test procedures (STPs) on raw materials and finished products.

Strategically located manufacturing facilities: With a view to strategically expand its operations and ensure its market presence in domestic and international markets, it have set up two state-of-art manufacturing facilities namely Pirana (Unit I) and Dahej, Gujarat (Unit II) which helps it provide timely, efficient and customized delivery of its products in terms with the specific demographic needs. Unit II located in the SEZ is entirely export-oriented unit. By utilizing the Net Proceeds of this Issue, it intends to tap the growing demand in the existing market where the company serves, of CCS, SSG and CMC by establishing of New Facility at Navagam Kheda.

Geographic diversification: The Company is very aggressive in promoting its range of products in domestic & international market through participating in frequent visit to customers, marketing & advertisement at relevant platforms. In future, company will focus to expand its geographical reach in maximum countries by exploring unexplored potential & assured promotional venues. With the help of its premium quality products, it has been able to create a long-standing market presence in India and internationally. It caters to various end users, merchants and exporters. It exports its products to in more than 45 countries including USA, Canada, Germany and Others.

Risks and concerns

Rely on limited number of suppliers: It is dependent on limited number of suppliers for procurement of raw materials required for manufacturing its products. Mainly, the company is engaged in the business of manufacturing MCC of various grades for which wood pulp in the form of wood pulp sheets is used as the primary raw material during its manufacturing process which are majorly imported from Canada, Sweden, Indonesia by its suppliers. Therefore, it is highly dependent on wood pulp sheets and it forms the most. Further, any discontinuation or a failure of these suppliers to adhere to the delivery schedule or failure to deliver the required quality and quantity could hamper its manufacturing schedule.

Dependent on third-party transportation providers: Its success depends on the supply and transport of the finished products from its manufacturing facilities to its customers and distributors, which are subject to various uncertainties and risks. Uncertainties and risks such as transportation strikes, failure to book vessels or delay in supply of pharmaceutical products due to port congestions, vessel / vehicle breakdown could have an adverse effect on its supplies and deliveries to and from its customers and suppliers.

Failure in quality control process: Its products may contain certain quality issues or undetected errors, due to defects in manufacture of products or raw materials which are used in the products. It has implemented quality control processes for its raw materials and finished goods on the basis of internal and international quality standards. Any shortcoming in the raw materials procured by it or in the production of its products due to failure of its quality control procedures, negligence and human error or otherwise, may damage its products and result in deficient products. It is imperative for it to meet the international quality standards set by its international customers and agencies as deviation from the same can cause them to reject its products and can also cause damage to its reputation, market standing and brand value.

Outlook

The company is engaged in the manufacturing business of Pharmaceutical Excipients Range of Product. The company has carved a niche in the production of high-quality cellulose-based excipients, that meet international quality standards. With its two state of the art manufacturing facilities located at Pirana Road, Ahmedabad and Dahej, SEZ (Bharuch). On the concern side, it is dependent on limited number of suppliers for procurement of raw materials required for manufacturing its products. Mainly, the company is engaged in the business of manufacturing MCC of various grades for which wood pulp in the form of wood pulp sheets is used as the primary raw material during its manufacturing process which are majorly imported from Canada, Sweden, Indonesia by its suppliers.

The issue has been offered in a price band of Rs 133-140 per equity share. The aggregate size of the offer is Rs 74.48 crore to Rs 78.40 crore based on lower and upper price band respectively. On performance front, the total revenue has increased by 23.53% from Rs 167.54 crore in the fiscal year ended March 31, 2022 to Rs 206.97 crore in the fiscal year ended March 31, 2023. Net Profit has increased by 120.88% from Rs 5.89 crore in the fiscal year ended March 31, 2022 to profit of Rs 13.01 crore in the fiscal year ended March 31, 2023. Going forward, the company intended to manufacture new range of excipients namely CCS, SSG and CMC and higher grades of MCC at the Proposed Unit. It intends to increase its market share by exploring untapped markets by offering innovative value-added products, as part of its strategy to widen growth prospects.