Cian Healthcare BSE SME IPO review (May apply)

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Review By Dilip Davda on April 24, 2019

• CIAN is in allopathic, nutraceutical and Ayurvedic pharma products.
• It has developed over 1000 products and 2000 brands for domestic markets.
• Already registered 353 products for exports and applied for 585 more products.
• It operates under different business models ensuring growth prospects.
• CIAN enjoys a special licence for veterinary product manufacturing.

ABOUT COMPANY:
CIAN Healthcare Ltd. (CIAN) is a WHO-GMP & ISO -9001:2015 certified transnational manufacturing Company with a wide range of Pharmaceutical, Nutraceutical, Ayurvedic, Cosmeceuticals, Sexual Wellness and Food supplement products. The Company has a full-fledged R & D and regulatory department. It complies with the standard manufacturing practices as laid down by the World Health Organization and is also certified by the Food and Drug Control Administration.

CIAN develops, manufactures and commercializes pharmaceutical products including sales, marketing, quality assurance, distribution, compliance and regulatory aspects under 12 therapeutic segments like Orthopaedics, Gynaecology, Paediatrics, Cardiac, Diabetic, Dermatology, Pain Management, Antibiotics, Neuro, Critical Care, Gastro-Intestinal and Nutraceuticals, along with 10 sales division focused on developing and growing its engagements in specialist and super specialist division.

The company works under different business models like Brand Business, Export, Third Party Manufacturing and Government Supplies. CIAN has developed more than 1,000 formulations and 2000 brands for the domestic market. CIAN is honoured as 'India's Small Giants' amongst thirty-six leading MSME's of India selected by NDTV and SME forum of India; it is also being honoured as WINNER of the 'Top 100 SME's of INDIA'by 2nd Edition of India SME 100 Awards. CIAN has already registered 353 products in the International market and applied for more than 585 products for registration/approval in the international market.

It has product approvals under the license issued by Drug Controlling & Licensing Authority Uttarakhand, for manufacturing of Tablets, Capsules, Oral Liquids and Ointments and also for the analysis of Chemical, Instrumental & Microbiology. CIAN manufactures innovative products comprising of Tablets, Capsules, Liquid Orals, Ointments, Creams, Lotions, Gels and Sachet. The Company has a special licence for manufacturing veterinary products for the client like SAVAvet and Venky's.

CIAN has developed 150 products and around 50 products under development for Global Market. The company is in process of rapid expansion of its global business and has registered and in process of registering around 100 formulations globally, also looking forward to registering more innovative products in next two years, covering South East Asia, C.I.S., African and Latin American Countries.

Post proposed expansion (which is underway) CIAN's Tablet capacity will increase by 35 Cr Tablets, 5 Cr Capsules, and Syrup by 15 Lakh bottles and Cosmetics by 40 Lakh tubes per month.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its plans for up gradation of Unit-I (Rs. 3.50 cr.), margin money for Unit-II (Rs. 7.28 cr.), brand building (Rs. 1.50 cr.), acquisition and other strategic initiatives (Rs. 7.09 cr.), working capital (Rs. 10.00 cr.) and general corpus fund needs, CIAN is coming out with a maiden IPO of 6216000 equity shares of Rs. 10 each via book building route. It has fixed a price band of Rs.61- Rs. 65 per share and mulls to mobilize Rs. 37.92 cr. – Rs. 40.40 cr. (based on lower and upper price bands). The issue opens for subscription on 02.05.19 and will close on 09.05.19. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue constitutes 26.63% of the post issue paid up capital of the company.

The issue is solely lead managed by Fedex Securities Pvt. Ltd. while Bigshare Services Pvt. Ltd. is the registrar to the issue. NNM Securities Pvt. Ltd. is the market maker for this issue.

Having issued initial equity at par, CIAN raised further equity in the price range of Rs. 20 to Rs. 96 per share between March 2013 AND October 2018. It has also issued bonus shares in the ratio of 11 shares for every 1share held in August 2018. The average cost of acquisition of shares by the promoters is Rs. 0.83 per share. Post issue, CIAN's current paid up equity capital of Rs. 17.14 cr. will stand enhanced to Rs. 23.36 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, CIAN has posted turnover/net profits of Rs. 47.16 cr. / Rs. 1.37 cr. (FY16), Rs. 51.85 cr. / Rs.2.24 Cr. (FY17) and Rs. 59.59 cr. / Rs. 3.76 cr. (FY18). For 9MFY19 it has reported a net profit of Rs. 5.25 cr. on a turnover of Rs. 44.48 cr.

For the last three fiscals, CIAN has reported an average EPS of Rs. 1.69 and an average RoNW of 19.01%. The issue is priced at a P/BV of 4.39 (based on upper price band) based on its NAV of Rs. 14.79 as on 31.12.18.

If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 21.66 P/E against the industry average of 54 (as on 31.03.18)

As on 31.12.18, CIAN has an order book of Rs. 150 cr. plus for the tender business segment as it has over 100 products out of 800 in BPPI essential medicine list. CIAN is an active supplier under Pradhan Mantri Jan Aushadhi Pari Yojana as well as Madhya Pradesh Public Health Services Corp. Ltd. (MPPHSCL). It has also entered into contracts with AFMS, BARC, HLL etc.

COMPARISION WITH LISTED PEERS:
As per offer documents, it has shown Deccan Healthcare, Zota Healthcare, Sakar Healthcare and Jenburkt Pharma as its listed peers that are currently trading at a P/Es of around 12.4, 65.6, 24.9 and 12 (as on 24.04.19). Although none of them is comparable on apple to apple basis.

MERCHANT BANKER'S TRACK RECORD:
On merchant banker's front, this is the 8th mandate from its stable. Out of last 10 listings, Out of last 6 listings, 1 opened at par and 1 at discount to offer price. Rest 4 opened with a premium ranging from 2% to 56.52% on the day of listing.

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