Hamps Bio coming with IPO to raise Rs 6.22 crore

Hamps Bio

• Hamps Bio is coming out with an initial public offering (IPO) of 12,20,000 equity of face value of Rs 10 each for cash at a fixed price of Rs 51 per equity share.
• The issue will open on December 13, 2024 and will close on December 17, 2024.
• The shares will be listed on SME Platform of BSE.
• The share is priced 5.10 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Marwadi Chandarana Intermediaries Brokers.
• Compliance Officer for the issue is Komal Jain.

Profile of the company

Hamps Bio is engaged in the ethical marketing and distribution of pharmaceutical formulation products (Pharma) across wide range of dosage including tablets, syrups, capsules, injectables, oil, gel and powder used as medicine and nutrition supplements as well as the manufacturing of freeze dried and frozen products (FDFP or FMCG Division) such as fruits, vegetables, herbs and flowers. It is recognized in the pharmaceutical industry under its own brand name “Hamps” and in freeze-dried and frozen food segment through its own brand “FzyEzy”. It sells its products through more than 50 distributor’s network as on October 31, 2024 and E-commerce platform, including Amazon.com, Amazon.ca, Amazon.eu, Flipkart, Jio Mart, Etc. It sells its pharma products primarily in 8 States and Union territories and its FDFP products primarily in 6 countries and 22 States and Union territories. 

In the year 2007, the company commenced its operating as an ethical pharmaceutical marketing firm, with the network of its distributors in the Gujarat region for distribution of pharmaceutical formulation products across therapeutic area’s as well as consumer health care product. Further, it procures products with various contract manufacturers who has WHO GMP approved manufacturing plant facility. Such contract manufacturer produces pharmaceutical products on its behalf based on compositions given by it and subsequently it markets those products under its own brand “HAMPS”. The company ensures thorough due diligence of its contract manufacturers before placing orders. For the period ended October 31, 2024, it has procured products with 16 contract manufacturers. Its product range in form of dosage includes tablets, syrups, capsules, injectables and powder which are used as nutrition supplement, injections, pediatric care, tooth paste, mouth wash, antiacid/ PPI, painkiller/ anti-inflammatory, hematantic/ calcium supplement and anti-biotic/ anti-bacterial/ anti-fungal. Its product mainly targets to Orthopedic, Physician, Gynecologist, Surgeon, Dermatologist, etc.

Further, the company launched its FMCG division in year 2017, a decade after the company's inception, focusing in freeze dried and frozen products. It manufactures its FDFP products at the manufacturing unit located in Gujarat. The company operates under both B2B and B2C business model. The company manufactures FDFP product on contract manufacturing arrangement with its customers as well as it sells under its brand “FzyEzy”. The company’s FDFP products primarily consist of fruits, vegetables, herbs, and flowers, processed using freeze-drying technology, also referred to as lyophilization or sublimation technology.

Proceed is being used for:

• Purchase of plant & machinery for FMCG division
• Enhancing the visibility and awareness of its brand
• General corporate purposes

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. Market size of India pharmaceuticals industry is expected to reach $65 billion by 2024, and $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 crossed $80.12 billion, growing 14% from the previous year. During FY18 to FY23, the Indian pharmaceutical industry logged a compound annual growth rate (CAGR) of 6-8%, primarily driven by an 8% increase in exports and a 6% rise in the domestic market.

The pharmaceutical industry in India is a significant part of the nation's foreign trade and offers lucrative potential for investors. Millions of people around the world receive affordable and inexpensive generic medications from India, which also runs a sizable number of plants that adhere to Good Manufacturing Practices (GMP) standards set by the World Health Organization (WHO) and the United States Food and Drug Administration (USFDA). Among nations that produce pharmaceuticals, India has long held the top spot. Medicine spending in India is projected to grow 9-12% over the next five years, leading India to become one of the top 10 countries in terms of medicine spending. Going forward, better growth in domestic sales would also depend on the ability of companies to align their product portfolio towards chronic therapies for diseases such as such as cardiovascular, anti-diabetes, anti-depressants and anti-cancers, which are on the rise.

Meanwhile, the FMCG sector in India expanded due to consumer-driven growth and higher product prices, especially for essential goods. FMCG sector provides employment to around 3 million people accounting for approximately 5% of the total factory employment in India. FMCG sales in the country were expected to grow 7-9% by revenues in 2022-23. FMCG market reached $167 billion as of 2023. Total revenue of FMCG market is expected to grow at a CAGR of 27.9% through 2021-27, reaching nearly $615.87 billion. In 2022, urban segment contributed 65% whereas rural India contributed more than 35% to the overall annual FMCG sales. Good harvest, government spending expected to aid rural demand recovery in FY24. India has a large base of young consumers who form most of the workforce, and due to time constraints, barely get time for cooking. Online portals are expected to play a key role for companies trying to enter the hinterlands. The Internet has contributed in a big way, facilitating a cheaper and more convenient mode to increase a company’s reach. The number of internet users in India is likely to reach 1 billion by 2025. It is estimated that 40% of all FMCG consumption in India will be made online by 2020. E-commerce share of total FMCG sales is expected to increase by 11% by 2030. It is estimated that India will gain $15 billion a year by implementing GST.

Pros and strengths

Distribution network with expansive E-Retailing presence: The company’s growth in its business operations have been made possible by its wide sales and distribution network with whom it enjoys long-standing relationships. For pharma products, as on October 31, 2024 it has network of more than 50 distributors having presence in Gujarat, Maharashtra, Rajasthan and Madhya Pradesh. Moreover, it markets its FDFP products directly by participating in trade fairs, exhibition. Further, its FDFP products have presence on various online platforms of E-commerce models such as Amazon, Flipkart and JioMart for its FMCG segment only. E-commerce platforms often include features such as online catalogs, shopping carts, payment gateways, and secure checkout processes to facilitate transactions. Such strong distribution and E-retail help it to reach wide range of customers and increased its brand recognition.

Wide and diversified range of products: The company caters to various customers’ need across Pharma and FMCG. Its product range has gradually increased over the past several years. New product categories have been introduced. Currently, its product portfolio includes Anti-biotic, Analgesic, Anti oxydent, Calcium, Cardiac-Diabetic, Injectable, IV, Freeze dried Fruits, Freeze dried Vegetables, Freeze dried herbs, etc. It has 39 registered Trademarks for its products. Its comprehensive range of products enables itself to capitalize on growth opportunities and demand in its industry. It trusts that maintaining a variety of products in its business provides it with an opportunity to cater to diverse needs of different customer segment. Its FDFP products are used across different end industries.

Brand identity: The company’s brands viz. “Hamps” and “FZYEZY” are well known in its respective product categories. Its brands are well received by its customers. Its qualitative and customer demand satisfying products help it to achieve brand recall among its consumers which strengthens its brand equity. With the passion of its promoters, dedication of its team, development of products, customer loyalty, growing trend in e-commerce and continued government support it aims to expand its operations in international markets and become a popular brand among customers worldwide.

Risks and concerns

Significant revenue of FMCG segment comes from limited customers: The company has more than 120 customers in its FMCG segment. The company has garnered 21.13%, 25.05% and 16.86% of its revenue under FMCG segment from top 10 customers in FY24, FY23 and FY22, respectively. Any failure to retain these customers or to remain suppliers to these customers and/or negotiate and execute contracts on terms that are commercially viable, with these select customers, could adversely affect its business, financial condition and results of operations. In addition, any defaults or delays in payments by a major customer or the insolvency or financial distress by a major customer may have an adverse effect on business, financial condition and results of operations.

Geographical constrain: A significant portion of its revenue from operations is derived from its services offered to customer locations in Gujarat. For the period ended October 31, 2024, for Fiscals 2024, 2023 and 2022, its revenue generated from operations in Gujarat were Rs 293.54 lakh, Rs 425.41 lakh, Rs 394.72 lakh, and Rs 381.39 lakh, respectively, which represented 68.80%, 65.70%, 70.76%, and 71.41% of its revenue from operations for such periods. Any decrease in revenue from Gujarat, including due to increased competition or supply, or reduction in demand, may have an adverse effect on its business, cash flows, results of operation and financial condition. Further, any significant disruption, including due to social, political or economic factors or natural calamities or civil disruptions, impacting these geographical regions may adversely affect its business. Additionally, changes in the policies of the state or local governments of these regions may require it to change its business strategy. The company cannot assure that it will be able to address its reliance on these few geographical regions, in the future.

Dependent on few suppliers for material requirements of its Freeze dried and Frozen Products business: For the period ended October 31, 2024 and for the year ended March 31, 2024, 2023 and 2022, its top 10 suppliers contributed around 43.77%, 14.85%, 9.50% and 7.78% respectively of its total purchases. The company is, to a major extent, dependent on external suppliers for its raw materials requirements like fruits, vegetables, etc.; it does not have any long-term supply agreements or commitments in relation to the same used in its manufacturing process. Although it has long term relationship with its suppliers, it does not have a formal written agreement with any of them. It gets longer credit periods based on its relationship with the suppliers established over a period of time primarily because of continuity of orders placed with them, size of the order and timely payments made to suppliers.

Outlook

Hamps Bio is engaged in the marketing and distribution of pharmaceutical products like tablets, syrups, capsules, injectables, oil, and nutritional supplements. The company distributes its products through a network of over 50 distributors and e-commerce platforms, including Amazon (US, Canada, EU), Flipkart, and Jio Mart. Their pharma products are sold in 8 states and union territories, while Freeze-dried and Frozen products reach 6 countries and 22 states and union territories. On the concern side, the company derives a significant part of revenue from its top 10 customers and it does not have long term contracts with these customers. If one or more of such customers choose not to source their requirements from it, its business, financial condition and results of operations may be adversely affected. Moreover, the company’s existing manufacturing facility for freeze dried and frozen products is concentrated in a single region i.e., Ankelshwar, Gujarat and the inability to operate and grow its business in this particular region may have an adverse effect on its business, financial condition, results of operations, cash flows and future business prospects.

The company is coming out with a maiden IPO of 12,20,000 equity shares of Rs 10 each at a fixed price of Rs 51 per share to mobilize Rs 6.22 crore. On performance front, the company’s revenue from operations was increased by 16.08% to Rs 647.53 lakh for the FY 2024 from Rs 557.81 lakh for the FY 2023 due to increase in its domestic and export sales as it adapted to changing trends in certain of its products which in turn led to increase in its revenue from operations. Moreover, the company’s profit after tax increased by 39.46% to Rs 50.07 lakh in FY 2024 from Rs 35.90 lakh in FY 2023. This increase was mainly due to increase in margin, increase in sales, decrease in salary & purchase expense in proportion to the total revenue.

The company currently markets its products in specific domestic and global locations and is planning to expand its geographical operations. Exploring new markets or expanding product lines for consistent performers could help stabilize and increase its revenue contributions. It currently distributes its products across 22 states in India, majorly including Gujarat, Maharashtra, Uttar Pradesh, Rajasthan, Delhi, Haryana and others. Its goal is to expand its operations nationally across India and globally, establishing its brand as widely recognized. To meet the increasing demand of its existing customers and attract new customer base, it aims to extend its product reach across different regions within India and abroad. This expansion is supported by its dedicated marketing and sales team, which continually expands its network.