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Between FY22 and FY24, the company recorded a Compound Annual Growth Rate (CAGR) of around 51 per cent in revenue and 54 per cent in net profit.

About the issue 
Standard Glass Lining Technology Ltd is preparing to launch its Initial Public Offering (IPO) for equity shares. Below are the issue details.

Objects of the Issue  

The offer encompasses both the fresh issue and the offer for sale. It's important to note that the company will not accrue any proceeds from the offer for sale. The company plans to allocate the net proceeds raised from the fresh issue for the following purposes:

1. Funding of capital expenditure requirements of the company towards the purchase of machinery and equipment

2. Repayment or prepayment, in full or in part, of all or a portion of certain outstanding borrowings availed by the company and investment in the wholly owned material subsidiary, S2 Engineering Industry Pvt Ltd, for repayment or prepayment, in full or in part, of all or a portion of certain outstanding borrowings availed by the subsidiary

3. Investment in the subsidiary for funding its capital expenditure requirements towards purchase of machinery and equipment

4. Funding inorganic growth through strategic investments and/or acquisitions

5. General corporate purposes

Promoter holding
Nageswara Rao Kandula, Kandula Krishna Veni, Kandula Ramakrishna, Venkata Mohana Rao Katragadda, Kudaravalli Punna Rao and M/s S2 Engineering Services are the promoters of the company. The promoters currently hold a pre-issue shareholding stake of 65.31 per cent in the company.

Company profile
The company ranks among the top five specialized engineering equipment manufacturers for the pharmaceutical and chemical sectors in India, based on revenue in Fiscal 2024. With comprehensive in-house capabilities across the entire value chain, it offers solutions spanning design, engineering, manufacturing, assembly, installation, and commissioning, as well as the establishment of standard operating procedures on a turnkey basis for pharmaceutical and chemical manufacturers.

Its diverse portfolio includes essential equipment for pharmaceutical and chemical production, categorized into three segments: (i) Reaction Systems, (ii) Storage, Separation, and Drying Systems, and (iii) Plant, Engineering, and Services, along with ancillary components. Furthermore, it is one of India’s top three manufacturers of specialised engineering equipment made from glass-lined, stainless steel, and nickel alloys, in terms of revenue in Fiscal 2024.

Over the last decade, the company has supplied over 11,000 products and built a marquee client base that includes 30 of the approximately 80 pharmaceutical and chemical companies listed on the NSE 500 index as of June 30, 2024. Notable clients include Aurobindo Pharma Limited, Cadila Pharmaceuticals Limited, Laurus Labs Limited, Natco Pharma Limited, Piramal Pharma Limited, and Suven Pharmaceuticals Limited, among others.

The company operates through eight strategically located manufacturing facilities in Hyderabad, Telangana, recognized as India’s ‘Pharma Hub.’ This region contributed 40 per cent of India’s total bulk drug production in Fiscal 2024.

Financials 

The company has consistently delivered robust growth in both revenue and profits over the past few years. Between FY22 and FY24, the company recorded a Compound Annual Growth Rate (CAGR) of around 51 per cent in revenue and 54 per cent in net profit. When annualized, the figures from the H1FY25 indicate an around 13 per cent revenue growth and a 21 per cent surge in net profit compared to FY24.

Valuation & Returns

The issue is priced with a P/BV ratio of 5.74 times, calculated using its Net Asset Value (NAV) of Rs 24.40 as of September 30, 2024. At the upper price cap, it is priced at a P/BV ratio of 3.76 times, considering its post-IPO NAV. Considering the company's annualized FY25 earnings and fully diluted equity capital, the price-to-earnings (P/E) ratio stands at 37x.

The company delivered a robust return on equity (RoE) of 21 per cent and a return on capital employed (RoCE) of 25 per cent for FY24. As a result, the company has notably outperformed its listed peers in terms of both valuation and returns.

Outlook

The Indian pharmaceutical industry is witnessing robust growth and demonstrated resilience even in Q2FY25, a period when many sectors faced weak performance. Given the significant growth potential of the pharmaceutical and chemical sectors, coupled with the company’s strong market position, diversified product portfolio, and proven financial track record, the company is well-positioned for sustained growth. Additionally, its plans for inorganic expansion are expected to further enhance earnings in the future. Therefore, we recommend investors subscribe to this issue with a long-term investment perspective.