Last updated: 14 Nov, 2021 | 01:06 pm
Tarsons Products Limited IPO opens for subscription on 15th November. The company is looking to raise up to Rs 1,023 crore through the public issue. Here are the details:
About the IPO
Tarsons Products Limited IPO Date: 15 November - 17 November 2021
Tarsons Products Limited IPO Price band: Rs 635 - Rs 662
Issue Size: Rs 1,023 crore (fresh equity issue worth Rs 150 crore and an offer for sale (OFS) of Rs 873 crore)
Post Issue Market Cap: Rs 3,522 crore
Reservation: QIB 50%, Retail - 35%, NII 15%
Employee Discount: Rs 61
Bid lot: 22 shares, and in multiples of 22 shares
Objectives of the issue
The net proceeds from the IPO will be utilized for the following purposes :
- To part finance its plans for repayment (or prepayment) of certain borrowings - Rs 78.54 crore.
- Funding proposed Capex - Rs 62 crore
- General corporate purposes
About Tarsons Products
- Tarsons Products is an Indian labware company engaged in the designing, development, manufacturing, and marketing of consumables, reusables, and others including benchtop equipment.
- Its equipments are used in various laboratories across research organizations, academic institutes, pharmaceutical companies, Contract Research Organizations, Diagnostic companies, and hospitals.
- The company has a diversified product portfolio with over 1,700 SKUs across 300 products as of March 21, 2021.
- The company has a strong distribution network across India comprising over 141 authorized distributors as of March 31, 2021, and supplies its products to more than 40 countries.
- It has received a CE-IVD certificate for products such as micro and macro tips, cryovials, and centrifuge tubes. It indicates that the company's products have been assessed by the manufacturer and deemed to meet EU safety, health, and environmental protection requirements enabling the Company access to the European region.
- The company has long-standing relationships with end customers as well as distributors, which it has achieved by aligning offerings with their business needs and through the support of an on-ground sales and marketing team.
- They have five manufacturing facilities located in West Bengal spread across approximately 20,000 square meters of area.
Tarsons Products
The company has a diversified portfolio that is divided into three main categories
Consumables - It provides a wide range of consumables to diverse end customers across various sectors in the life sciences research industry. Under consumables, its products are pipette tips, centrifuge ware, Petri dishes, crypt ware, etc.
Reusables - They manufacture and sell usable products such as bottles used as standard containers for storing large volumes of solutions in the pharmaceutical sector. Different products in this category are bottles and carboys, beakers, measuring cylinders, tube racks, etc.
Others - They manufacture a wide range of products under the 'others' category. Some of the benchtop instrumentation in this category are vortex shakers, centrifuges, and pipettors. Pipettors enable molecular works of cell collection, extractions, simple spin-down, and f-tuve separation.
Listed Peers
Tarsons has garnered 10% market share in the domestic laboratory equipment market facing tough competition from MNC leaders such as Thermofischer Scientific and Eppendorf, operating in the country. However, there are no listed entities whose business portfolio is comparable with that of the company's business and comparable to its scale of operations.
Financials
- The company has reported a 12.5% CAGR rise in topline from FY19 to FY21 i.e. from Rs 185 crore to Rs 234 backed by a steady demand.
- The company's bottom line has grown at a healthy 30% CAGR during FY19 to FY21. with PAT margins improving to 29% in FY21. The high margins were aided by lower sales promotion and travelling expenses in FY21.
- EBITDA grew at a CAGR of 18.39% while EBITDA margin stood at 46.45%.
- In FY21 revenue from its 'consumables' product category was Rs 140.24 crore, or 61.53% of its revenue from operations, growing at a CAGR of 32.96%. Revenue from its 'reusables' category was Rs 76.9 crore or 33.76% of its revenue from operations, and revenue from its 'others' category was Rs 10.72 crore or 4.70% of its revenue from operations.
- In the same period, the revenue generated from sales through its top 10 distributors represented 55.90% of its revenue from operations.
USPs
It is a leading Indian supplier to the life sciences sector - The company has over 36 years of experience in this space and has successfully built 'Tarsons' into a leading Indian company in the plastic labware market in India. In 2020, they had a market share of 9.00-12.00% of the labware market in India (Frost & Sullivan Report).
Diverse range of labware products - Tarsons is among the top three labware manufacturing companies in India. It provides an extensive range of laboratory consumables, reusables, and others product categories. They have also developed customized products to suit the specific requirements of their customers.
Long-standing relationships with key end customers - Some of its end customers have been associated with them for several years. Some of the prominent names are the Indian Institute of Chemical Technology, National Centre for Biological Sciences across academic institutes and research organizations, and Dr. Reddy's Laboratories.
Well-equipped and automated manufacturing facilities - Its manufacturing facilities have injection molding and extrusion blow moulding machines which are well complemented with advanced automation technologies. They have a robust QA and QC process with a dedicated laboratory for raw material and product testing.
Growth Potential
Increasing foothold in existing markets - There has been significant growth in demand in India for labware products. It provides an opportunity to increase its sales and expand its customer base. Further, with the 'Make in India' initiative and growing advantage of domestic manufacturers as compared to import markets, the company is well poised to grow domestic sales.
Enhancing manufacturing capabilities - Currently, they have five manufacturing facilities and they plan to invest in physical and operational infrastructure to expand manufacturing capabilities with a focus on expanding capacities in existing product categories and diversifying product portfolio by launching new products.
Increasing footprint in the overseas market - International business has been a key contributor to the company's growth. They plan to form a dedicated team whose primary focus will be on exports to overseas markets with a specific focus on certain geographies. Tarsons also plans to enter into arrangements with key distributors in different regions to explore business opportunities in new overseas markets.
Risks
Fail to maintain high standards - The company is committed to maintaining the required industry and regulatory compliance standards while providing high-quality products to its customers. If the company fails to comply with applicable quality standards, it could result in products failing to perform as expected or alleged to result in failure of experiments or contaminated or inaccurate results if the products are defective or are used incorrectly by end customers. It could have an adverse effect on demand from end customers and the company's reputation, business, results of operations and financial condition.
Supply of raw materials - The company procures raw materials from multiple third-party suppliers. It imports more than 75% of its raw materials and purchases specialized grades of plastic resins from global suppliers located across countries including UAE, USA, Singapore, and Taiwan. If suppliers fail to provide the raw materials or services in a timely manner or at all for any reason, it will disrupt the manufacturing capacities.
Dependence on distribution network - They have a sales and distribution network of 186 active distributors comprising 141 active distributors in the domestic market and 45 distributors in the overseas market catering to a diverse set of end customers. If the company is not able to effectively manage its existing distribution network in the domestic market or overseas market or to further expand its distribution network in the overseas market, it may have an adverse effect on its business and financial condition.
Tarsons Products Ltd: INDmoney Analysis
Tarsons Products has reported a 12.5% CAGR rise in topline from FY19 to FY21, backed by a steady demand. The company's bottom line has grown at a healthy 30% CAGR during the same period. The company's PAT margins have also improved significantly in this period to 29% in FY21. The high margins were aided by lower sales promotion and travelling expenses in FY21. Tarsons has also been able to maintain high operating margins reflected in high return ratios of around 25 per cent RoE as well in the last 3 years.
The ongoing Covid-19 pandemic has provided a huge fillip to the companies engaged in scientific research and improvement of healthcare systems. Tarsons Products enjoys the status of being one of the most preferred vendors in the plastic labware space.
At the higher end of the price band, Tarsons Products is reasonably priced at a P/E ratio of 36 times annualised FY22 earnings (fully diluted on a post-issue basis). The company does not have any immediate listed peers to compare with. Given the company's steady rise in topline, good growth in bottomline, healthy margins, robust return ratios and reasonable valuations, we remain 'positive' on the long-term prospects of this issue.