Deccan Healthcare IPO Opens 18th December, Should you Invest?

Deccan healthcare Ltd has planned to raise approximately Rs42 crore through the public offer. Deccan healthcare IPO opens on 18th December, including a Fresh Issue and an Offer for Sale.

Deccan Healthcare Ltd Profile

• The company has a diversified product portfolio of more than 1,500 products that can be used for various purposes such as hair care, skin care, heart care, immunity building, etc.
• The company’s manufacturing facility at SIDCUL Pantnagar Rudrapur, Uttarakhand, has an an ISO 9001:2008 certified for Quality Management System for manufacturing and supply of Nutraceutical & Pharmaceutical Products. The facility also complies with GMP and WHO GMP for its health / diet supplements and ayurvedic products. It has also obtained FSSAI license for its products. The unit is spread over 3,536 Sq. mts. and is well equipped with the requisite plant and machinery including Effluent Treatment Plant and other resources required for a manufacturing process.
• The company has a network of more than 140 distributors and around 5,000 marketing agents. To further expand its reach, the company has also signed into two distributorship agreements with foreign distributors situated in Kenya and Tanzania respectively.
• The Company sells products through both Online mode and Offline Mode. 72% of the sales come from Offline and 28% comes from Online. For online they have an e-commerce platform. To drive sales, the company launched BE YOUNG brand through an e-commerce platform. In FY18, the company’s sales were about 39 Cr, out of which 29 Cr comes from Offline and 10.50 Cr from Online. The company is targeting e-commerce revenues of Rs. 100 crore in 5 years from Rs. 10.50 crore in FY18.

The objects of the IPO are:

1. The net proceeds from Issue will be utilized to for repayment of Rs 8 crore debt
2. The company plans to invest on the expansion of manufacturing plant at Rudrapur, Uttarakhand. The company intends to use Rs.5.55 crore for the purchase of plant & machinery and related civil work.
3. Offer related expenses and General expenses of the corporate.

Deccan Healthcare IPO Detail

• Issue Open: December 18, 2018 – December 20, 2018
• Issue Type: Book Build Issue IPO
• Issue Size: 4,212,000 Equity Shares of Rs 10 aggregating up to Rs 42.12 Cr
• Issue Price: Rs 95-100 Per Equity Share
• Market Lot: 1200 Shares
• Minimum Order Quantity: 1200 Shares
• Listing At: BSE SME
• Listing Date: December 28, 2018 

Should you Invest?

The company’s manufacturing facility is underutilized currently. The company plans to utilize some of the funds raised to enable the capacity utilization and increase the business operations. From FY 15- FY 17, the total revenue grew at a CAGR of 78.94% from Rs.919.65 lakhs to Rs.2944.83 lakhs. The EBITDA margin from 20.35% to 43.47% and the net profit grew from Rs.(108.80) lakhs to 948.75 lakhs. However, the valuation (post issue) like EV/EBITDA of 10.20 and P/E*P/B of 26.63 looks stretched

The investors that are risk averse should only “subscribe” to Deccan healthcare Ltd IPO.