IPO: Valiant Laboratories

Valiant Laboratories, an active pharmaceutical ingredient (API) manufacturer, has launched its IPO (initial public offering). Here's a breakdown of the company's strengths, weaknesses and growth prospects to help investors make an informed decision. In a nutshell Quality : The three-year average ROE and ROCE of Valiant Laboratories are 38.7 and 43.1 per cent, respectively. It also reported positive cash flow from operations in the last three financial years. Growth : Revenue and net profit have grown by 35.3 and -2.6 per cent per annum over FY 21-23. Valuation : The stock will be priced at a P/E and P/B of 21 and 2.4 times respectively, compared to its peers' median P/E and average P/B of 47.8 and 6.2 times, respectively. Overview : The company plans to expand its product portfolio into specialty chemicals through its subsidiary Valiant Advanced Sciences. The money is being raised for the construction and working capital requirement of the proposed facility for Valiant Advanced Sciences. They plan to use some of the products for backward integration as well as for B2B business. About Valiant Laboratories Valiant Laboratories, a part of the Valiant group, specialises in the production of active pharmaceutical ingredients (APIs) and bulk drugs with a primary focus on the manufacture of Paracetamol. At present, they are operating through their only manufacturing plant in Palghar, Maharashtra with an in-house R&D facility. Strengths Decent returns: The three-year average ROCE and ROE of Valiant Laboratories are 43.1 and 38.7 per cent, respectively. Weaknesses Being a single-product manufacturer in the paracetamol API industry, any industry shifts or changes in product demand could severely impact the company's revenue and profitability. The company might face raw material supply challenges , as top three foreign suppliers are responsible for about 75 per cent of raw materials, making them vulnerable to cost fluctuations, operational interruptions, and production losses. Revenue concentration : Top five customers contributed about 30 per cent to revenue in FY23. IPO details Total IPO size (Rs cr) 152 Offer for sale (Rs cr) 0 Fresh issue (Rs cr) 152 Price band (Rs) 133-140 Subscription dates September 27, 28 and October 3, 2023 Purpose of issue To fund capex and working capital Post-IPO M-cap (Rs cr) 608 Net worth (Rs cr) 253 Promoter holding (%) 74.9 Price/earnings ratio (P/E) 21 Price/book ratio (P/B) 2.4 Financial history Key financials 2Y growth (% pa) FY23 FY22 FY21 Re