IPO Analysis: Blue Jet Healthcare Ltd

IPO Rating: Apply for the long-term

About the Issue:

Blue Jet Healthcare Limited specializes in pharmaceutical and healthcare ingredients and intermediates, with a focus on providing unique products tailored for innovator pharmaceutical firms and multinational generic pharmaceutical companies.

The company is gearing up to launch its Initial Public Offering (IPO) for equity shares, each having a face value of Rs 2. The IPO price range is set between Rs 329 and Rs 346 per equity share, resulting in a total issue size of Rs 840.27 crore at the upper price band.

The IPO is scheduled to commence on October 25, 2023, and will conclude on October 27, 2023. Anticipated listing on the exchange is set for November 06, 2023. The market lot size for the IPO is 43 shares, with the option to apply for multiples of this lot. Individual retail investors have the opportunity to apply for a maximum of 13 lots, equivalent to 559 shares or a total investment of Rs 1,93,414 assuming the upper price band.

Objects of the Issue

Considering that the issue is exclusively an offer for sale, it is crucial to emphasize that the company will not directly profit from the offer proceeds. Instead, all offer proceeds will flow to the selling shareholders, distributed in accordance with the number of offered shares they sell as part of the offer.

Promoter holding

Akshay Bansarilal Arora, Shiven Akshay Arora and Archana Akshay Arora are the promoters of the company. The promoters currently hold a pre-issue shareholding stake of 100 per cent in the company.

About the company

Blue Jet Healthcare Limited specializes in pharmaceutical and healthcare ingredients and intermediates, with a focus on providing unique products tailored for innovator pharmaceutical firms and multinational generic pharmaceutical companies. Boasting a rich legacy spanning over five decades, the company currently serves a clientele of over 140 customers in 50 different countries and operates four manufacturing facilities.

The company has adopted a Contract Development and Manufacturing Organization (CDMO) business model, underpinned by its specialized chemistry expertise in contrast media intermediates and high-intensity sweeteners. This strategic approach has been made possible through early investments in research and development (R&D) and manufacturing infrastructure. The company's business segments encompass integrated contract media intermediates, niche pharmaceutical intermediates, APIs as well as Saccharin and its salts.

Financials 

Outlook and Valuation

An analysis of the company's financial performance reveals a notable trend of consistent revenue growth in recent years. However, the profit figures experienced a decline in comparison to the previous fiscal year, primarily attributed to the sharp increase in raw material prices and employee expenses. Nevertheless, in Q1FY24, the company reported a significant improvement in its financial performance, driven by a softening of prices.

When we compute the PE ratio for the company by considering annualized Q1FY24 earnings to the post-IPO fully diluted paid-up equity capital, the resulting PE ratio stands at 34. According to its official documents, the company has stated that it does not have any publicly listed peer companies for comparison or reference.

When considering risks, one of the most significant concerns lies in the company's heightened reliance on regulated markets such as Europe and the USA. Furthermore, the fluctuation in raw material prices presents a notable risk to the company's operations. Additionally, there is a risk associated with a 100 per cent offer for sale (OFS) scenario, as all proceeds will be directed exclusively to the selling shareholders.

On the other side, the company holds a prominent position as a major manufacturer of contrast media intermediates and operates in specialized niches characterized by formidable barriers to entry, which represents a notable strength for the company. Additionally, its enduring partnerships and multi-year contracts with multinational clients provide a solid foundation for the company to explore opportunities for expanding its presence in adjacent sectors within the pharmaceutical intermediates and API categories.

Given that the issue seems to be fully priced, we recommend that investors consider subscribing to the issue with a long-term perspective.