IPO Analysis: Tarsons Products Ltd

IPO Rating: Invest for long-term  

About the issue:  

Tarsons Products Ltd primarily caters to various laboratories across research organizations by designing, developing and marketing quality labware products. The company is coming out with its initial public offering (IPO) of equity shares of the face value of Rs 2 per equity share. The maiden offer comprises a fresh issue of Rs 150 crore and the sale of shares worth Rs 873.84 crore by existing investors, according to its red herring prospectus. The price band of the issue has been fixed at Rs 635 to Rs 662 per equity share. The IPO opening date is November 15, 2021, while it will be closing on November 17, 2021. The issue will be listed on the exchange on November 26, 2021. The IPO market lot size is 22 shares. A retail-individual investor can apply up to a maximum of 13 lots (286 shares or Rs 1,89,332). The net proceeds generated from the IPO will be utilized for repayment/prepayment of all or certain of the company’s borrowings; funding a part of the capital expenditure for the new manufacturing facility at Panchla, West Bengal (proposed expansion) and for general corporate purposes.  

Tarsons Products IPO Details: 

About the company:  

Tarsons Products Limited is a leading Indian life sciences company with more than three decades of experience in the production and supply of labware products. The company manufactures a range of quality labware products that helps advance scientific discovery and improve healthcare systems. The company's product portfolio is classified into three broad categories including consumables, reusables, and others. As of March 31, 2021, the company has a diversified product portfolio with over 1,700 SKUs across 300 products.  

Trason's products are used in various laboratories across research organizations, academic institutes, pharmaceutical companies, Contract Research Organizations (CRO), diagnostic companies, and hospitals. The company has many reputed institutes, medical labs, and hospitals as its key clients.  

Currently, the company has 5 manufacturing facilities located in West Bengal spread across approximately 20,000 sq. mt of area. The company has a strong distribution network across India comprising of over 141 authorized distributors as of March 31, 2021, and supplies its products to more than 40 countries.  

 
Competitive Strengths:  

Leading supplier of life sciences products  

Extensive product offering  

Large addressable market of life sciences industry  

Well-equipped and automated manufacturing facilities  

Strong sales and distribution network  

Experienced Promoter backed by a strong management team  

 
Company Financials:  

According to its red herring prospectus, the key financials are mentioned below. From fiscal 2019 to fiscal 2021, its revenues have grown with a CAGR of 12.62 per cent, EBITDA has grown with a CAGR of 18.39 per cent and the PAT has grown with a CAGR of 32.96 per cent. The margins have been pretty strong throughout as for FY21, the EBITDA margin stood at 46.45 per cent, a growth of 342 bps from FY19 margin, and the PAT margin stood at 29.4 per cent, an expansion of 830 bps since FY19. 

 
Recommendation:  

The demand for laboratory equipment has been rising globally on account of advancements in the field of scientific research by the rapidly growing life sciences industry. As a result, the global plastic laboratory equipment market (plasticware products made up for approximately 52.00 per cent of the total lab equipment market in 2020). According to Frost and Sullivan report, the domestic growth of plastic labware products is expected to register a growth of approximately 16.00 per cent CAGR from 2020 to 2025. A couple of decades back, Indian markets were dominated by glassware products in the labs and research, but eventually, the industry has seen the increased contribution of plasticware which currently stands on almost equal terms with glass. Its contribution is expected to increase further which augurs well for the company.   

The business is driven by research activities carried out by various institutions. Be it pharma company research or a tiny laboratory running diagnostic tests for a patient, the company’s plastic tools find application everywhere. Some of its end customers who have been associated for several years include prominent names such as the Indian Institute of Chemical Technology, National Centre for Biological Sciences across academic institutes and research organizations; Dr Reddy's Laboratories, Enzene Biosciences across the pharmaceutical sector, and many others across CROs and diagnostics.  

The company appears to be financially strong. The rise in profitability is supported by the cash flows. The returns for stakeholders are exceptional. Based on our due diligence, the future prospects for the company appear positive from shareholders’ perspective. Hence, we recommend - to invest in the IPO for the long-term.