Anlon Healthcare IPO — Should You Subscribe Or Not? Read Anand Rathi's Report For Key Details

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Anand Rathi Report

Anlon Healthcare Ltd.'s initial public offering will open for subscription on Aug. 26 and concludes on Aug. 29. The company has fixed the price band in the range of Rs 86 to Rs 91 per equity share.

The Rs 121.03-crore, comprises entirely a fresh issue of 1.33 crore shares.

Investors can place bids starting from a minimum of 164 shares and in multiples thereafter.

Interactive Financial Services Ltd. is the book-running lead managers for the public issue, while KFin Technologies is the registrar to the offer.

Objects of the Issue

• Funding of capex requirements for proposed expansion and for the company.

• Prepayment/re-payment of certain borrowings availed in the company.

• General Corporate Purpose.

Strengths:

• Strong product portfolio and scalable business.

• High entry and exit barriers due to long customer approval cycles and strict product standards.

• In-house Testing, Quality Control and Quality Assurance for quality control.

Key Strategies:

• Increasing their manufacturing capacity to focus on the growing demand of core products.

• Continue to increase wallet share with existing customers and continued focus to expand customer base.

• Expand existing product portfolio.

• Improve cost management and operational efficiencies along with focus on rationalizing their indebtedness.

Valuation

Anlon Healthcare has a comprehensive and diversified product portfolio, comprising more than sixty-five (65) commercialized products, twenty-eight (28) products currently at the pilot stage, and forty-nine (49) products undergoing lab testing and validation.

Company operates on a scalable business model that allows it to consistently expand its offerings and cater to evolving industry requirements. In addition, Anlon has built a well-established and growing customer base.

The sector in which the Company operates is characterized by high entry and exit barriers, primarily owing to the extensive customer approval timelines, stringent regulatory compliance requirements.

At the upper price band company is valuing at P/E of 19.0x to its FY25 earnings, with EV/Ebitda of 16.7x and market cap of Rs 4,836 million post issue of equity shares. We believe that the IPO is fully priced and recommend a “SubscribeLong Term” rating to the IPO.

Key Risk:

• Company is subject to stringent quality specifications and regular customer audits. Non-compliance may result in order cancellations, warranty claims, or reputational damage. In the past, manufacturing facility was non-operational for a period of four (4) months to address certain directions and recommendations issued by the Brazilian Health Regulatory Agency, which temporarily halted their manufacturing operations.

• Any failure to maintain product quality or comply with evolving quality standards may lead to customer dissatisfaction, loss of business, and legal liability.

• Company have a limited operating history in manufacturing.

• In the past, Manufacturing Facility remained non-operational for a period of four (4) months, resulting in a halt in their manufacturing capabilities. Any future event that causes a temporary or prolonged shutdown of Manufacturing Facility could significantly impact production capacity, disrupt their supply chain, and adversely affect their business operations.

• Company is yet to place orders for the equipment, plant and machinery for the expansion of the Manufacturing Facility. Any delay in placing orders or procurement of such equipment, plant and machinery may delay the schedule of implementation and possibly increase the cost of commencing operations.

• Products are exposed to risks of contamination, adulteration, and tampering during manufacturing, storage, or transit, which may adversely impact product quality, lead to regulatory non-compliance, and result in reputational and financial loss.

• Company is exposed to risks of product recalls and liability claims, which may involve significant costs, reputational harm, and regulatory consequences.

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