Sai Parenteral’s IPO Review: APPLY or AVOID? | What You Need to Know

As an investor, it can be very challenging to decide whether Sai Parenteral’s IPO is a good or bad investment. Not anymore. On this blog, we will provide you with all the necessary details related to Sai Parenteral’s IPO to help you decide whether to apply or Not. Read on to know the IPO risks, strengths, valuation, financial details, and expert opinion to make your investment decision better. 

Strengths:

• Sai Parenteral was initially involved in manufacturing parenteral (injectable) formulations, but soon expanded beyond parenteral manufacturing to include multiple dosage forms, including injectables, tablets, capsules, liquid orals, and ointments.
• Its manufacturing facilities are certified and strategically located in smart locations such as ports, airports, and railways to enable cost-effective exports.

• The firm has a strong focus on the CDMO business, in which it develops and manufactures medicines on behalf of other pharmaceutical companies.

• Track record of completing 2 key asset acquisitions, a TGA-Australia-approved facility at IDA Bhongir, Telangana, and a WHO-GMP-certified unit at IDA Bollaram, Hyderabad, has improved manufacturing capacity and demonstrated robust growth. 

Weaknesses: 

• Its manufacturing facilities are located in Hyderabad, Telangana, and Andhra Pradesh. Any risks, such as shutdowns, slowdowns, economic, regulatory, political, or natural disasters, can impact business operations.

• Around 77% of the company’s raw materials come from the top 10 customers, and the company does not have long-term agreements with them. If the supply is reduced or stops can negatively impact the business.

• About 59% of the company’s revenue comes from tablet sales. Any reduction in the demand for these products can adversely impact the business and financials. 

• The company’s reputation is built on its ability to develop and launch new products on time. Failure to do so can impact the business growth and financial condition.

Sai Parenteral’s IPO Review 

Peer Comparison with the Company

Industry peer group P/E ratio 

The industry peer group has a price-to-earnings (P/E) ratio ranging from a low of 32.45 to a high of 107.70, with an average P/E of 62.29.

Promoters & Track Records, if any 

• Anil Kumar Karusala, aged 52 years, is one of the Promoters and is also the Chairman and Managing Director. He holds 4,558,597 Equity shares, representing 12.35% of the pre-issue equity share capital.

• Vijitha Gorrepati, aged 48 years, is one of the Promoters and is also the Whole Time Director on the Board. She holds 12,773,394 Equity shares, representing 34.61% of the pre-issue equity share capital.

• Karusala Aruna, aged 69 years, is one of the Promoters and is also the Non-Executive Director on the Board. She holds 3,268,010 Equity shares, representing 8.85% of the pre-issue equity share capital.

Expansion

• A fund of ₹110.80 crore will be used towards the expansion and upgradation of manufacturing facilities.

• A portion of ₹18.02 crore will be utilized towards the establishment of a new R&D centre.

• ₹20 crore will go towards repayment/prepayment of existing borrowings taken by the company.

• A fund of ₹33 crore will be used to help with working capital requirements.

• A portion of ₹36 crore will go towards investment in a wholly owned subsidiary, Sai Parenterals Pte Limited (Singapore), in relation to the proposed acquisition of Noumed Pharmaceuticals Pty Limited (Australia).

• Lastly, the remaining funds will be used for the general corporate purposes.

Sai Parenteral’s IPO – Should You Apply or Not?

A pharmaceutical brand that not only develops generic medicine for its own brand but also manufactures medicines for other pharmaceutical companies, yes, we are talking about Sai Parenteral’s, launching its IPO on March 24th. Sai Parenteral is a diversified pharmaceutical brand that generates revenue by developing medicines under its own brand and by helping other pharma companies produce their medicines. 

The firm is involved in developing medicines for various health conditions, such as cardiovascular, neuropsychiatry, anti-diabetic, respiratory health, antibiotics, gastroenterology, vitamins, minerals, and supplements (VMS), analgesics, and dermatology. Moreover, its medicines are available in various forms, including tablets, injections, syrups, and ointments. Moreover, we saw some growth in financials, with the company generating revenue of ₹163.74 crore in FY25, up from ₹97.03 crore in FY23. At the same time, PAT stood at ₹14.43 crore, and EBITDA also increased to ₹39.44 crore, reflecting improved operational performance. Furthermore, the firm is planning to use its proceeds from the fresh issue towards capacity expansion, manufacturing units upgrade, and setting up a new R&D centre. 

Here comes the twist: Sai Parenteral is valued at a P/E of 72.19x on the upper price band. When compared to the industry average PE, the IPO is priced relatively high when compared to its listed peers. 

As of March 23, the Sai Parenteral’s IPO GMP is ₹0. If the GMP and subscription stay in support, then investors can apply for this IPO for listing gains. Long-term investors must analyze risks like no long-term contracts with suppliers, negative cash flows, and high valuations before applying.

Please note:

Investors are advised to make their own decisions and apply entirely at their own risk. This article is written using information from the company’s RHP (Red Herring Prospectus) data and online sources. If you have any queries, kindly contact the IPO Watch Team.