GreenSignal Bio Pharma IPO - Should you buy?

Despite its name, this company has raised far more red signals for us than green ones. Nonetheless, let us look at the green ones first. India has a birth cohort of 27 million babies every year - a ready market for the company's principal product - childhood tuberculosis vaccines for which it has only one major competitor. Higher priced exports are also increasingly contributing to the company's revenues. The company has also been WHO pre-qualified to supply its products to UNICEF (which counts it as a supplier). And now for the red. The company had negative earnings in the four years preceding the last financial year (at which point they barely edged into positive territory). Cash flows are equally abysmal being negative in the current year and in two of the past five preceding years. The company derives about 80% of its revenues by selling a single vaccine (which faces the very real risk of being replaced by a better substitute). Its revenues are strongly dependent on government contracts and its largest product is subject to price regulation. The company's management has failed to explain in sufficient detail, certain major changes in its financials in the prospectus and we are also sceptical of a recent allotment of shares to the promoter. That said, a fuller picture is revealed in the answers to our questions. Read on. Who's selling and how much? The Promoters and other shareholders are selling a part of their stake. After the stake sale, the Promoter holding will fall from 83.55% to 51.79%. In total, shares worth 117 crore are being offered. Company / Business 1. Are the company's earnings before tax more than Rs 50 cr in the last twelve mont