Nureca Limited would be the sixth company to come out with its initial public offering (IPO) in the present calendar year- 2021. It is very inspiring to see such a young company doing an IPO just 5 years from its incorporation. The IPO is already open. Let us take a closer look into the company, learn more about its IPO, and check whether you should subscribe or not.
Company Profile – Nureca Limited
Before investing in any company, it is always important to understand what it does or learn about its products and services. Nureca Limited is a business-to-consumer (B2C) firm that deals in home healthcare and wellness products. It was incorporated in November 2016. The company offers specialised medical tools that monitor chronic ailments or diseases and help people improve their lifestyle. [Chronic diseases include diabetes, asthma, obesity— which lasts for a long time]
Nureca has classified its product portfolio into five categories. This includes chronic device products, orthopaedic products, mother and child products, nutrition supplements, and lifestyle products.
- The company’s flagship brand, ‘Dr Trust‘, sells blood pressure monitors, pulse oximeters, thermometers, nebulisers, self-monitoring glucose devices, humidifiers, and steamers. A pulse oximeter is used to measure blood oxygen levels, and have seen very high sales during the Covid-19 pandemic.
- ‘Dr Physio‘ is another brand of Nureca that offers electric massagers, wheelchairs, and walkers.
- The ‘Trumom‘ brand sells a variety of products under the mother & child-care category. The company has entered into contracts with third parties to manufacture these products.
Nureca has a strong distribution network that ensures the sale of its premium quality healthcare products to end-consumers. It is a digital-first company, which means that it sells products through online channel partners such as e-commerce platforms, distributors, and retailers. In fact, almost 95% of its total revenues come from online sales. The firm also sells products through its website- www.drtrust.in
A major part of the production is outsourced by the company. However, it has been trying to increase its in-house production recently.
About the IPO
In January 2021, Nureca received approval from the Securities and Exchange Board of India (SEBI) to raise Rs 100 crore through an initial public offering (IPO). The public issue opened on February 15 and will close on February 17.
Price band for the IPO has been fixed at Rs 396-400 per share. Fresh issue of shares (of the face value of Rs 10 each) aggregates to Rs 100 crore.
Individual investors can bid for a minimum of 35 equity shares (1 lot) and in multiples of 35 shares thereafter. The maximum number of shares that can be applied by a retail investor is 490 equity shares (14 lots). But take care to not apply for more than 1 lot, as your capital will get blocked for no reason if the IPO is oversubscribed.
The public issue includes a reservation of shares worth up to Rs 1 crore for Nureca’s employees. The eligible employees will get shares at a discount of Rs 20 per share.
Nureca will utilise the net proceeds from the IPO for two main purposes:
- To meet incremental working capital requirements.
- Meeting the required funds for general corporate purposes.
The company’s total promoter holding by Saurabh Goyal and others will decrease to 70% post the IPO, from the current shareholding of 93.33%. Ahead of the IPO, Nureca was able to raise Rs 44.55 crore from two anchor investors on February 12.
|*||31 March 2020 (FY20)||31 March 2019 (FY19)||31 March 2018 (FY18)|
|Profit After Tax||6.40||6.23||3.11|
From the chart, it is clear that Nureca’s revenues and profits have increased exponentially over the past 3 years. The company’s revenue has grown at a CAGR of around 70.5% over FY18-FY20. During the same period, its net profit grew at a yearly rate of 27.2%. The stellar growth in profits in the current financial year was primarily driven by increased demand for their products amidst the Covid-19 pandemic. Earlier, people used to visit diagnostic centres or hospitals for checking their sugar or blood pressure levels. As people were forced to stay at home and avoid hospitals, many turned to Nureca’s medical tools and products. There is high optimism that the company will surpass these figures in the upcoming financial year as well, already posting great results for the first few quarters.
So far, Nureca has been able to effectively manage its costs/expenses. It has allocated sufficient funds for research & development activities, which is a core requirement for such firms. They have also managed to launch an effective advertising campaign, with Rohit Sharma as its brand ambassador. However, an important point to be noted is that these limited financial records are insufficient to assess Nureca’s long-term growth.
- As mentioned earlier, Nureca depends on third-parties to manufacture medical tools and other products. There could be a situation wherein these parties are unable or unwilling to manufacture them. Or, these products could fail to comply with regulatory standards. In such cases, Nureca’s business could be negatively affected.
- If third-party e-commerce platforms, distributors, or retailers fail to manage orders or distribution networks effectively, the company’s performance could be harmed.
- The products are subject to strict domestic and foreign regulations. Any strong regulatory action might affect Nureca’s financial conditions and business operations.
- Nureca’s promoters and directors have been subject to a ‘search and seizure’ operation by the Income-Tax department. There could be an increase in the company’s tax liability if the authorities find any wrongdoings. Ongoing litigation against the company regarding internal transactions of shares of Nectar Life Sciences Limited (the listed company of Saurabh Goyal’s father – Sanjiv Goyal).
- The market in which the company operates is highly competitive in terms of pricing, service quality, and product developments. Thus, Nureca’s revenue and profits are highly dependent on its ability to adapt, innovate, and customise its products and services. Also, the medical tools sold by the firm need to maintain a high rate of accuracy.
- Over the years, the company has experienced negative cash flows, which may also arise in the future. This could harm its overall operations.
IPO Details in a Nutshell
|IPO Date||Feb 15, 2021 – Feb 17, 2021|
|Issue Type||Book Built Issue IPO|
|Face Value||Rs 10 per equity share|
|IPO Price||Rs 396 to Rs 400 per equity share|
|Lot Size||35 shares|
|Issue Size||Rs 100 crore|
|Listing Date||February 25, 2021|
|Listing At||BSE, NSE|
ITI Capital was selected as the book-running lead manager to the public issue. Nureca Ltd had filed draft papers for its IPO in November 2020. You can read it here.
The home healthcare and wellness segment is expected to grow at a CAGR of 11% by 2025. This is primarily driven by rising awareness of health and wellness, increasing disposable income, and the growing burden of chronic diseases such as diabetes and asthma. Currently, Nureca is the only company in this segment. The firm is likely to receive heavy competition over the next few years. At the same time, the company plans to further diversify its product line and enhance its online presence.
As mentioned earlier, the robust growth it has shown in the current financial year was due to a change in consumer sentiments amidst the Covid-19 pandemic. Experts state the high sales and profit growth witnessed during Covid is difficult to sustain in the long term. Do consider the risks associated with this company and then come to your own conclusion.
Before applying for listing gains, I will personally wait to see if the institution portion of the IPO is getting oversubscribed. As per reports, Domestic Institutions have bought in a lot of shares in the recently concluded IPOs. So if that is the case here as well, we may be able to see some listing gains.
What are your opinions on this IPO? Will you be applying for it? Let us know in the comments section.