Nov 132016

Green Signal Bio Pharma LTD IPO Review 

About Green Signal Bio Pharma LTD

Green Signal Bio Pharma LTD (GBPL) is among the top 4 companies that have got the approval from WHO to supply the BCG vaccines to the UNICEF. They are the second company from India that has been held in such a high esteem apart from Serum of Pune.

On November 23, 2015, the GBPL has secured a long term contract with UNICEF to supply them with BCG vaccines. It has also been supplying the BCG vaccine to India for the last 5 years. Besides India and UNICEF, it provides the vaccines to countries like Nepal, Indonesia, etc. They have been successful in obtaining the bids for 5 consecutive financial years with the government.

Green Signal Bio Pharma LTD IPO Review

Not just that but GBPL’s Immunotherapy drug is available all over India and the company intends to extend its business overseas. This means that the BCG ONCO for immunotherapy is to be marketed worldwide by the company. It must be noted that they already supply the drug to Switzerland, Turkey, Saudi Arabia and Lebanon.

The company has its manufacturing unit set up at Tamil Nadu and its registered office in Chennai. The operations of the company are classified according to their demographical area.

Why is GBPL in question?

GBPL has raised eyes because when there is a falling share market, GBPL is going to raise Rs. 116 crore (approx) through IPO. The company’s shares have been marked at Rs. 76 to Rs. 80 per share. The offer although consists of the 38 per cent paid up capital that has been fully diluted by the company.

This is why we are to understand if this company is worth investing. Till now we know that the company has made quite a name overseas and has been working closely with UNICEF and the Indian government.

What does the company produce?

It produces BCG vaccines as already mentioned for Tuberculosis. Apart from that it also produces BCG ONCO for immunotherapy for the Urinary Tract Carcinoma diseases. They also have a brand name for it – it is called UROVAC.

Both the drugs are produced by this company are generic so they don’t require a patent name for it. However they do have to have a patent name for BCG ONCO and so they did. The registered trademark for it is UROVAC itself. So they don’t have a patented name and they haven’t applied for a patent.

How has the company performed financially?

The company’s financial performance has been average considering the ups and downs it has had to face. On March 31st 2016 – that is in the first quarter of the year, the company posted that its revenue has been Rs. 20.39 crore. This means that it has had a 210% rise from the year 2015 in its revenue.

Also, the EBIDTA margin hasn’t been that well in the past year with only 28% in 2015. However in the first quarter of 2016 its EBIDTA margin was reportedly 73% and in the second quarter it was 68%.

Talking about the overall financial status of the company, it has turned profitable only in the year 2016. In the past couple of years the company has showed some slump in growth. In 2016 however they submitted a PAT of Rs. 5.31 crore. From 2012 to 2016 – this is the only profitable year for the company.

Talking about RoNW, it has recorded a RoNW of 11.86% in 2016 whereas in the last two years the RoNW was in negative range.

If you see the “Earnings per Share” record then that too has turned positive only n the last year that is in 2016. Before this the company was not able to give positive returns on investment.

Will the company do well in the future?

This is what the investors want to know. Since we are dealing with the drugs market and the company deals with the world market, there are a few things to be noted.

  • The world vaccines market is to reach $57 billion by the year 2019. In 2014 this was only $33 billion. Hence an 11.8% growth in CAGR is to be expected in this sector.
  • Among all the sectors, the pediatrics sector is expected to grow largely in 2019. In fact it is expected to have the largest share in the market with the largest CAGR growth.
  • Also, since India is making it a priority to increase the use of vaccines the Indian market is expected to rise. With more awareness campaigns and increasing affordability the CAGR is expected to grow 12-15% of the next five years.

Hence, it seems like the market is going to increase for the company in the future.

Good points about Green Signal Bio Pharma

  • First of all they have managed to procure long term arrangements with the UNICEF. They are obviously among the most sought after companies in the country.
  • The company has existed since 2005 and it has managed to keep up its position as the highest exporter of BCG vaccines till date. It has also expanded its services and is exporting to 17 other countries now.
  • Together Ministry of Health of India and UNICEF consist of 50% of the revenue producers of this company. Hence, you can be assured that there is a steady source of income that this company is going to produce for the next few years.
  • The company also has a registered trademark of a product under its own name. This only means that the company is going to expand majorly in the future too.

Bad points about Green Signal Bio Pharma

  • For the past year, the performance of the company has been really inconsistent. During the fiscal year 2014 and 2015, there was a sharp decline in the revenues because they lost a tender with the Ministry of health. Also, Cadila Healthcare Limited ordered low amounts of the drug and they also increased the price. This also affected the revenue of the company in past two years.
  • The company used to work with one of the biggest drug makers in India in the past. But recently they have broken ties with them. The impact of the same is yet to be seen. GBPL has not updated its September quarterly revenue reports yet.
  • As we already know, Indian Government has now capped the price of BCG vaccines to Rs. 5.58 per dose. This limit is going to affect the revenue generation of the company majorly.
  • Also the main big client of the company – UNICEF will have its contracts expire with GBPL on November 2018 and there is no assurance as of yet whether that will be renewed.
  • We told you about the trademark. But what we didn’t tell you is that the company is currently going on a legal tussle related to the trademark. What’s more? There was also a criminal litigation cited by the Central Bureau of Investigation against the company.

So should you invest in GBPL?

There is a shortfall of BGC vaccines by 3 crores annually. The company has managed to manufacture 1 crore units while operating at only 50%. The unutilized capacity of the company can be put to use. It will generate good revenue for the company in the future.

Anyhow, you should generally wait for a few more quarters to check their progress before investing.

Serial No. General Information Data
1 Face value per share Rs. 10
2 The listing proposed at Bombay Stock Exchange, National Stock Exchange
3 Minimum Order value Rs. 13300 to Rs 14000

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