Innova Captab IPO Review: After the outbreak of the pandemic, there has been an increased focus on pharmaceutical companies due to the surge in worldwide health issues.

One such company in the industry that is coming out with its Initial Public Offering is Innova Captab Limited.

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The IPO will open for subscription on December 21, 2023 and close on December 26, 2023. In this article, we will look at the Innova Captab IPO Review and analyse its strengths, weaknesses, financials and GMP. Keep reading to find out!

Innova Captab IPO Review

About The Company

Incorporated in 2005, Innova Captab Limited is an integrated pharmaceutical company in India with a presence across the pharmaceuticals value chain including R&D, manufacturing, drug distribution and marketing and exports. 

The business of the company is divided into three segments:

  • A CDMO business providing research, product development and manufacturing services to Indian pharmaceutical companies,
  • A domestic branded generics business 
  • An international branded generics business. 

As per the Crisil Report the company has recorded the third-highest operating revenue, the second-highest operating profit margin, the third-highest net profit margin and the second-highest return on capital employed as of FY22.

The company has developed a diversified branded generics product portfolio including tablets, capsules, dry syrups, dry powder injections, ointments and liquid orals.

The company distributed its branded products in the Indian market through a network of around 5,000 distributors and stockists, as well as over 150,000 retail pharmacies. Moreover, it has exported its branded generic products to 20 and 16 countries during FY23 and Q1FY24, respectively.

The company undertakes its operations at its two manufacturing facilities in Baddi, Himachal Pradesh along with a new facility planned in Jammu. Furthermore, the company has a dedicated R&D laboratory and pilot equipment located at its manufacturing facility in Baddi, Himachal Pradesh.

The company has a wide range of customers which includes Cipla Limited, Glenmark Pharmaceuticals Limited, Wockhardt Limited, Corona Remedies Private Limited, Emcure Pharmaceuticals Limited, Lupin Limited, Intas Pharmaceuticals Limited, Medley Pharmaceuticals Limited, Leeford Healthcare Limited, Cachet Pharmaceuticals Limited, Eris Healthcare Private Limited, Indoco Remedies Limited, J. B. Chemicals and Pharmaceuticals Limited, Oaknet Healthcare Private Limited, Zuventus Healthcare Limited, Ajanta Pharma Limited, Mankind Pharma Limited and Smart Laboratories Private Limited.

About The Industry

Contract manufacturing is when production is outsourced to third-party vendors. India has become a popular destination for contract manufacturing due to the availability of skilled personnel, lower production costs, and many WHO-GMP-certified plants. Pharmaceutical companies are outsourcing research and development as well as manufacturing activities to move to an asset-light model.

According to a CRISIL report from October 2023, the Indian CDMO market has grown at a rate of 14% in the past five years from fiscal 2018 to fiscal 2023. The report predicts that this trend will continue over the next five years from fiscal 2023 to fiscal 2028, with the Indian CDMO market projected to have a CAGR of approximately 12-14%. As per the report, the market size is expected to grow from ₹1,310 billion in Fiscal 2023 to ₹2,400-2,500 billion in Fiscal 2028.

Innova Captab IPO Review – Financial Highlights

If we look at the financials of Innova Captab we notice that the company’s operating revenues have grown from Rs. 410.66 crores in March 2021 to Rs.926.38 crores in March 2023. 

Their profits have grown from Rs.34.5 crores in March 2021 to Rs.67.95 crores in March 2023. The net profit margin of the company was recorded at 7.34%.

As the Q1FY24, the operating revenue and net profit of the company were recorded at Rs. 2,33.24 crores and Rs.17.59 crores, respectively.

In terms of return ratios, it has a ROE of 24.58% and a RoCE of 22.61% as of FY23. These ratios indicate a good return to shareholders’ capital and efficient use of company resources.

During FY23, the Debt/Equity of the company was reported at 0.85. This indicates that the company majorly uses its own funds to run its business.

Key Players in the Market

The following image will show you the  comparison of Innova Captab with its listed peers in the market:

Innova Captab IPO Review - Key Players  list
(Source: RHP of the company)
Innova Captab - Competitors
(Source: RHP of the company)

Strengths of the Company

  • The company is among the leading players in the CDMO’s formulations. As per the Crisil Report the company has recorded third third-highest operating revenue, the second-highest operating profit margin, the third-highest net profit margin and the second-highest return on capital employed as of FY22.
  • In the CDMO business, the company has developed d strong relationships across the Indian pharmaceutical industry with 182 CDMO customers as of FY23.
  • The company’s manufacturing capacity helps to provide customers with large volumes. As per the CRISIL Research, the company was ranked 3rd among its peers in terms of finished tablet and capsule manufacturing capacity in India.
  • The company’s strong brand recognition coupled with its long-term relationships and ongoing active engagements with its distributors has helped them expand their product offerings and geographic reach.
  • The company’s R&D has and will continue to assist in developing newer technologies, delivery systems, and manufacturing processes. This helps the company to reduce costs, improve safety, and provide growth opportunities.

Weaknesses of the Company

  • The company operates in a highly fragmented and competitive industry. Stronger competitors with more resources could respond faster to market changes could hurt the market position and financial performance of the company. 
  • The business relies heavily on a small group of contract development and manufacturing organisations (CDMOs). If the number of CDMO customers decreases or unfavourable circumstances prevent establishing or continuing relationships with these CDMOs, it could negatively impact the company’s operations.
  • The company’s dependence on China, China SEZ and Hong Kong for its raw material supplies exposes it to political, economic and social conditions in greater China.
  • The company require huge capital to run its operations. The inability to acquire such working capital requirements could have an adverse effect on the business.
  • Any shortfall in the supply of raw materials, an increase in raw material costs, or other input costs, may adversely affect the pricing and supply of the products. This could have an adverse effect on the company’s business.

Innova Captab IPO Review – GMP

The shares of Innova Captab Limited traded at a premium of 46.88% in the grey market on December 18th, 2023. The shares tarded at Rs 658. This gives it a premium of Rs 210 per share over the cap price of Rs 448.

Key IPO Information

ParticularsDetails
IPO Size₹570.00 Cr
Fresh Issue₹320.00 Cr
Offer for Sale (OFS)₹250.00 Cr
Opening dateDecember 21, 2023
Closing dateDecember 26, 2023
Face Value₹10 per share
Price Band₹426 to ₹448 per share
Lot Size33 Shares
Minimum Lot Size1
Maximum Lot Size13 (429 shares)
Listing DateDecember 29, 2023

Promoters: Manoj Kumar Lohariwala and Vinay Kumar Lohariwala

Book Running Lead Manager: ICICI Securities Limited and JM Financial Limited

Registrar to the Offer: KFin Technologies Limited

The Objective of the Issue

The proceeds from the IPO will be utilised for the following purposes:

  • Complete or partial, repayment/prepayments of outstanding loans of the company
  • Complete or partial, repayment/prepayments of outstanding loans availed by the subsidiary, UML.
  • Funding the company’s working capital requirements.
  • General corporate purposes

In Closing

In this article, we looked at the details of Innova Captab IPO Review. We conclude that though the CDMO market is highly fragmented, the company has strong financials coupled with a dominant position and industry growth. Thus, the company has a good potential to grow in the future.

What do you think the future holds for the company? Are you applying for the IPO? Let us know in the comments below.

Written By Aaron Vas

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