IPO: Bluejet Healthcare

Bluejet Healthcare, a leading manufacturer of contrast media intermediates and artificial intensity sweeteners, has come out with its IPO (initial public offering). Here's an overview of its business, strengths, weaknesses, and growth prospects. In a nutshell Quality : Its three-year average return on equity (ROE) and return on capital employed (ROCE) are 39.7 and 42.8 per cent, respectively. In FY23, its ROE and ROCE were 26.6 and 31.7 per cent, respectively. Growth : Its topline grew by 5.5 per cent and 37 per cent in FY23 and FY22, respectively, driven by higher contrast media intermediates exports. Valuation : The stock will be priced at a P/E and P/B of 34 and 8.3 times, respectively. There are no listed peers currently. Overview : It is posed to be a direct beneficiary as the diagnostics industry grows due to high expenditure on healthcare. Its sweeteners business should also benefit from consumers switch from normal sugar to lower-calorie alternatives. However, high working capital requirement and stringent regulatory environment calls for caution. About Bluejet Healthcare Bluejet Healthcare (incorporated in 1968) is a pharmaceutical contract development and manufacturing (CDMO) company. It primarily develops and manufactures contrast media intermediates used in CT scans, MRIs and ultrasounds. It also manufactures APIs and artificial sweeteners for pharmaceutical and oral care companies. Strengths of Bluejet Healthcare Largest Indian exporter of contrast media intermediaries , accounting for 75 per cent of all exports (in terms of value) between 2020-2022. It operates in a niche category with high entry barriers, allowing it to maintain long-standing relationships with its clients. Weaknesses of Bluejet Healthcare Revenue concentration : Its top 10 largest customers accounted for 84 per cent of FY23 revenue. It is a high working capital business. Consequently, the company's receivables have grown annually at 29 per cent since FY21. Additionally, receivables as a percentage of revenue has remained consistently high. Highly dependent on the European markets as they contribute around 78 per cent of the total revenue. This makes its topline highly vulnerable to adverse macroeconomic factors. IPO Details Total IPO size (Rs Cr) 840 Offer for sale (Rs Cr) 840 Fresh Issue (Rs Cr) 0 Price Band (Rs) 329-346 Subscription dates October 25 to 27,2023 Purpose of issue Offer for sale Post-IPO M-cap (Rs cr) 6002 Net worth (Rs cr) 726 Promoter holding (%) 86 Price/earnings ratio (P/E) 34 Price/book ratio (P/B) 8.3 Financial performance Financial History 2Y growth (% pa) TTM FY23 FY22 FY21 Revenue (Rs cr) 20.2 756