Survival Technologies IPO: Survival Technologies Ltd. is a leading Indian manufacturer of specialty chemicals, catering to diverse industries like pharmaceuticals, agrochemicals, and electronics. They excel in both Contract Research and Manufacturing Services (CRAMS) and custom manufacturing of specialized chemicals, often replacing imports from China.
Survival Technologies IPO Key Details:
- IPO dates: Yet to be announced. Expect it sometime in FY24.
- Offer size: Up to Rs. 1,000 crore, comprising a fresh issue of Rs. 200 crore and an offer for sale of Rs. 800 crore by promoters.
- Price band: Not yet determined.
Latest News:
- SEBI approval received in December 2022, paving the way for the IPO.
- Strong financial performance:
- >50% revenue from CRAMS activities, showing growth potential.
- Revenue grown at a CAGR of 25.1% from FY20 to FY22.
- Gross profit CAGR of 39% during the same period.
Survival Technologies Offer Details:
Securities Offered:
The Survival Technologies IPO will offer only equity shares of face value Rs. 2 each. No bonds or other instruments will be offered.
Reservation Percentages:
The tentative reservation percentages for different investor categories are as follows:
- Retail investors: 35%
- Qualified Institutional Buyers (QIBs): 50%
- Non-Institutional Investors (NIIs): 15%
Minimum Lot Size and Investment Amount:
The minimum lot size for retail investors is likely to be 100 shares. This translates to a minimum investment amount of Rs. 200 (100 shares * Rs. 2 per share).
Survival Technologies Company Profile:
History and Operations:
- Founded in 2007, Survival Technologies is a leading Indian manufacturer of specialty chemicals with a focus on Contract Research and Manufacturing Services (CRAMS) and custom synthesis.
- They cater to diverse industries such as pharmaceuticals, agrochemicals, electronics, polymers, and performance chemicals.
- Operates from four GMP and ISO certified manufacturing facilities in Gujarat and Maharashtra.
Market Position and Share:
- Exact market share information is not readily available, but Survival Technologies is considered a key player in the Indian specialty chemicals market, estimated to reach USD 7.2 billion by 2027.
- Their focus on CRAMS and import substitution positions them strategically for significant growth.
Key Facts:
- Strong customer base: Includes prestigious names like Dr. Reddy’s Laboratories, Zydus Cadila, and Sun Pharma.
- Innovative R&D: Dedicated R&D team with over 80 scientists, resulting in several successful product launches.
- Export focus: Exports to over 30 countries, diversifying their revenue streams.
Prominent Brands and Partnerships:
- Prep-NXT: Their flagship brand offering comprehensive CRAMS solutions.
- Partnerships: Collaborate with leading research institutions and universities for technology development.
Peer Competitors:
- Aarti Industries Limited
- Balaji Amines Ltd
- Dishman Carbochem Limited
Key Milestones and Achievements:
- Received SEBI approval for IPO in December 2022.
- Strong financial performance with revenue CAGR of 25.1% and gross profit CAGR of 39% from FY20 to FY22.
- Received various industry awards for innovation and export excellence.
Competitive Advantages:
- CRAMS expertise: Strong capabilities in process development and scale-up, attracting major pharmaceutical companies.
- Focus on import substitution: Capitalizing on the government’s “Make in India” initiative with cost-effective solutions compared to Chinese imports.
- Dedicated R&D: Continuously expanding their product portfolio and developing cutting-edge technologies.
Survival Technologies Financials:
Recent Financial Performance:
Survival Technologies has demonstrated impressive financial performance in recent years:
- Revenue Growth: Strong and consistent growth: FY20-FY22 recorded a Compound Annual Growth Rate (CAGR) of 25.1%.
- Profitability: Gross profit CAGR of 39% during the same period, indicating healthy margins.
- Debt Levels: The company maintains a conservative debt profile with a debt-to-equity ratio of approximately 0.4 as of March 2022.
Key Financial Ratios (as of March 2022):
- Price-to-Earnings Ratio (P/E): Not yet available as the IPO price is undetermined.
- Earnings per Share (EPS): Rs. 3.5 (estimated based on FY22 financials).
- Debt-to-Equity Ratio: 0.4
Industry Benchmarks:
- Specialty Chemicals Industry P/E: The average P/E for listed Indian specialty chemicals companies currently ranges from 20 to 30.
- Debt-to-Equity Ratio Benchmark: An ideal debt-to-equity ratio for chemical companies varies between 0.5 and 1.0.
Comparative Analysis:
Based on the available information, Survival Technologies appears financially healthy with strong growth, stable profitability, and manageable debt levels. Compared to industry benchmarks, the company’s debt-to-equity ratio seems favorable, but the P/E ratio will be determined post-IPO pricing, making direct comparison difficult at this stage.
Survival Technologies IPO Objectives:
Survival Technologies’ decision to go public can be attributed to a combination of factors aimed at fueling their future growth and expansion:
Capital Raising:
- The primary objective is to raise approximately Rs. 1,000 crore through the IPO.
- This funding will be split between a fresh issue of Rs. 200 crore and an offer for sale of Rs. 800 crore by promoters.
Growth Strategies:
- The fresh issue capital will be used for:
- Funding additional working capital requirements (Rs. 175 crore): This will help meet growing demand for their products and support future operational activities.
- General corporate purposes (Rs. 25 crore): This flexibility allows them to pursue strategic initiatives like R&D, marketing, and potential acquisitions.
Enhanced Visibility and Liquidity:
- Listing on the stock exchange will improve brand recognition and market reputation, attracting wider investor interest and potential partnerships.
- It will also provide liquidity to existing shareholders, including promoters, who plan to offload part of their stake through the offer for sale.
Survival Technologies Lead Managers:
Survival Technologies has appointed a consortium of renowned investment banks as lead managers for its IPO:
- ICICI Securities Limited: A leading investment bank in India with extensive experience managing successful IPOs like Zomato, Nykaa, and Glenmark Life Sciences.
- IIFL Securities Limited: Another prominent player in the Indian capital markets, having led notable IPOs like Adani Wilmar and Dixon Technologies.
- Axis Capital Limited: A well-established investment bank with a strong track record in handling IPOs like HDFC Bank and SBI Cards.
Track Record:
These lead managers collectively boast a successful history of guiding companies through IPOs in diverse sectors, providing expertise in areas like:
- Pre-IPO advisory: Assisting with preparation of IPO documents, investor roadshows, and valuation setting.
- Marketing and investor outreach: Creating awareness and generating interest among potential investors.
- Order book management: Efficiently handling subscription and allocation of shares during the IPO process.
Survival Technologies Registrar:
Link Intime India Private Limited has been appointed as the registrar for the Survival Technologies IPO. They are a highly respected and reputed registrar with a vast experience in managing various securities and handling various corporate actions. Their track record includes managing IPOs for major companies like LIC, Reliance Industries, and Bajaj Finance.
Survival Technologies Potential Risks:
While Survival Technologies holds promise, potential investors should carefully consider the following risks and concerns before investing in the IPO:
Industry Headwinds:
- Volatility in raw material prices: Fluctuations in the cost of key raw materials, like crude oil and chemicals, can impact the company’s margins and profitability.
- Regulatory changes: Stringent environmental regulations or changes in drug approval processes could affect demand for certain chemicals or delay research and development progress.
- Competition: The Indian specialty chemicals market is becoming increasingly competitive, with both domestic and international players vying for market share. This could put pressure on pricing and margins.
Company-Specific Challenges:
- Dependence on key customers: A significant portion of Survival Technologies’ revenue comes from a few large clients. Loss of a major customer could have a substantial impact on the company’s performance.
- Limited product portfolio: While their CRAMS services are strong, their presence in specific niche chemicals might leave them vulnerable if those markets experience downturns.
- Intellectual property (IP) protection: Failure to adequately protect their proprietary technology or processes could expose them to competition and loss of market share.
Financial Health Analysis:
- Debt levels: While the current debt-to-equity ratio is manageable, any significant increase in debt could raise concerns about the company’s financial stability.
- Working capital requirements: The proposed use of a significant portion of the IPO funds for working capital needs suggests potential strain on current cash flow.
- Profitability: Although recent profitability trends are positive, investors should keep an eye on future profitability margins in the face of potential headwinds.
Red Flags for Investors:
- Limited track record: As a relatively young company, Survival Technologies’ long-term performance remains to be proven, leaving some investors cautious.
- Dependence on government policies: Government initiatives promoting import substitution and chemical manufacturing could provide tailwinds, but their sustainability and effectiveness might influence future success.
- Uncertainty surrounding IPO valuation: Without a finalized price band, it’s difficult for investors to assess the potential for stock price appreciation and determine if the investment justifies the risk.
Also Read: Upcoming IPOs 2024 in India
