Blue Jet Healthcare IPO: What Valuations Suggest As Issue Opens

Pharmaceutical ingredient maker Blue Jet Healthcare Ltd.'s initial share sale opens for public subscription on Oct. 25.

The bidding for the IPO, which is entirely an offer for sale of 2.42 crore shares by promoters Akshay Bansarilal Arora and Shiven Akshay Arora, will conclude on Oct. 27. The public issue is priced in the range of Rs 329–346 per share.

The issue is expected to fetch Rs 840 crore at the upper end of the price band. The proceeds will go to the selling shareholders since the issue is an OFS, and therefore the company will not receive any funds from the share sale.

Some of the promoter and promoter group (P&PG) entities are participating in the OFS and offloading 2.429 crore share. Post-issue, P&PG will have an 86% stake in the company. Consequently, public shareholding will increase from nil to 14%.

Valuation Snapshot

There are no comparable peers having products and business operations similar to Blue Jet Healthcare. The following companies have been considered only to benchmark the demanded valuation, according to Choice Broking.

"At a higher price band, Blue Jet is demanding a TTM P/E multiple of 34 times (to its TTM EPS of Rs 10.2), which is at a discount to the adjusted peer average. Thus, considering the above observations," said the brokerage in a note that has assigned a “subscribe” rating for the issue.

Over FY20–23, the company has reported strong growth in the business; however, higher raw material costs have impacted profitability. The return on equity was healthy, despite a 3 times rise in net worth, as per Choice Broking.

According to a StoxBox note, the issue is "fairly valued" at a P/E of 37.5x FY23 earnings. It recommends a 'subscribe' rating for the IPO.

Blue Jet Healthcare is a specialty pharmaceutical and healthcare ingredients and intermediates company, offering niche products targeted towards innovator pharmaceutical companies and multi-national generic pharmaceutical companies. Over the years, the company has developed over 100 products, of which over 40 have been commercialised.

"Going forward, the company will benefit from sustained demand for its products and lower/stabilising raw material prices. It has planned certain brownfield and greenfield expansions, which will increase the installed capacity by around 50% over FY25E," as per Choice Broking.

The company reported a net profit of Rs 160 crore in FY23 as compared to Rs 181 crore in FY22, whereas its revenue from operations rose to Rs 721 crore from Rs 683 crore during the said period.