BOR: Astec LifeSciences IPO: AVOID

Astec LifeSciences IPO: AVOID

Incorporated in 1994, Astec LifeSciences Limited is engaged in business of Agrochemicals and Pharmaceuticals. Company is primarily involved in the production of active ingredients and intermediates for agrochemicals and pharmaceutical segment. Hexaconazole, Tebuconazole, Metalaxyl and Propiconazole are some of their key products in agrochemical segment which are generally used in crop protection and Dicap is one of the key Pharmaceutical intermediate which is used in manufacture of antifungal agents.

At present, the company has two manufacturing plants at Mahad in Maharashtra with a total capacity of 2,800 tonnes. Beside this, it also has a R&D centre at Dombivili, also in Maharashtra.

CARE has assigned an IPO Grade 2 to Astec LifeSciences Limited IPO. This means as per CARE, company has below average fundamentals

Financial:

Rs in Crs	2008-09	1st quarter 2009
Total Income	93.72	27.47
EBIDTA	12.4	4.01
Operating Margin % (Inc Dep & Int)	13%	15%
PAT	10.72	3.42
PAT %	11%	12%
EPS Rs	11.37
Book Value Rs	32.36
RONW	35.15%

Issue Detail:

»» Issue Open: Oct 29, 2009 - Nov 04, 2009
»» Issue Type: 100% Book Built Issue IPO
»» Issue Size: 7,500,000 Equity Shares of Rs. 10
»» Issue Size: Rs. 57.75 - 61.50 Crore
»» Face Value: Rs. 10 Per Equity Share
»» Issue Price: Rs. 77 - Rs. 82 Per Equity Share
»» Market Lot: 75 Shares
»» Minimum Order Quantity: 75 Shares
»» Listing At: BSE, NSE

The company will utilize IPO proceeds worth Rs 32.5 crore to increase its production capacity at Mahad to 3950 tonnes, Rs 2.55 crore for expansion of its R&D facility at Dombivali, Rs 3.75 crore for meeting product registration expenses and Rs 11-crore for long-term working capital requirements.

M-View: Investors can avoid the initial public offering considering the inherent challenges that the small pharma & agrochemical industry faces in driving revenues & competition from the big giants. In specific with the company Astec it is very important to have patents & formulation registration under the company name whereas Astec has currently 43 registration in which 3 are under Astec while other rig are with the local firms in the respective marketing countries. The perspectives for the company are limited, so we are not much impressed with the business.