We have entered yet another busy week in the IPO markets! Tarsons Products Ltd, a company that makes essential labware products, has launched its IPO today— Nov 15. In this article, we take a closer look into the company and its IPO.
Company Profile – Tarsons Products Ltd
Tarsons Products Limited (TPL) is a leading life sciences company based in West Bengal. It is engaged in the designing, development, manufacturing, and marketing of labware products, which are used extensively in various laboratories across research organizations, academic institutes, pharmaceutical companies, Contract Research Organizations (CROs), diagnostic companies, and hospitals. It offers a wide range of quality equipment that helps advance scientific discovery and improve healthcare. TPL’s products are classified into three categories:
- Consumables – Includes products such as centrifuge ware, cryogenic ware, liquid handling, petri dish, transfer pipettes, etc.
- Reusables – Includes bottles, beakers, measuring cylinders, and tube racks.
- Others – Comprises benchtop instrumentation such as vortex shakers and centrifuge pipettors.
As of June 30, 2021 (Q1 FY22), TPL had a diversified product portfolio of over 1,700 stock-keeping units (SKUs) across 300 products. Some of its clients include the Indian Institute of Chemical Technology (IICT), Dr Reddy’s Laboratories, Enzene Biosciences, Metropolis Healthcare, Dr Lal Path Labs, and Mylab Lifesolutions. The company distributes products to these end customers on a pan-India basis through ~141 authorized distributors. It also supplies its products to more than 40 countries.
Tarsons Products operates five manufacturing facilities in West Bengal, spread across an area of 20,000 sq. meters. These facilities are equipped with automated support systems that help in maintaining quality and reducing costs.
About the IPO
Tarsons Products Ltd’s public issue opens on November 15 and closes on November 17. The company has fixed Rs 635-662 per share as the price band for the IPO.
The fresh issue of shares (of the face value of Rs 2 each) aggregates to Rs 150 crore. The IPO also includes an offer for sale (OFS) of 1.32 crore equity shares by promoters and an investor. Individual investors can bid for a minimum of 22 equity shares (1 lot) and in multiples of 22 shares thereafter. You will need a minimum of Rs 14,564 (at the cut-off price) to apply for this IPO. The maximum number of shares that can be applied by a retail investor is 286 equity shares (13 lots).
Tarsons Products Ltd will utilise the net proceeds from the IPO for the following purposes:
- Repayment or prepayment of all or certain of the company’s borrowings – Rs 78.54 crore
- Funding a part of the capital expenditure for a new manufacturing facility at Panchla, West Bengal – Rs 62 crore
- General corporate purposes.
The total promoter holding in the company will decline from 50.75% to 47.3% post the IPO.
Tarsons Products Ltd has posted a robust financial performance over the past three years (FY19-21). The revenue of the company jumped from Rs 184.7 crore to Rs 234.3 crore during 2019-2021. It has posted good operating margins of over 21% in the last 3 years. TPL has also reported positive operating cash flows (cash inflow) during the same period. Their business and profitability have improved drastically amidst the Covid-19 pandemic. The consumable products that fall under the ‘Use and Throw’ category account for nearly 62% of its overall revenue and bring regular business for the company. Moreover, overseas sales accounted for 33% of revenue in FY21.
The company’s borrowings stood at Rs 105.95 crore as of September 2021, of which nearly Rs 50.6 crore were working capital loans. A significant portion of debt will be reduced after the IPO.
- The failure to meet quality and regulatory compliance standards could adversely affect the demand from end-users and their reputation.
- Any delay, interruption, or reduction in the supply of raw materials to manufacture its products could severely impact its overall business.
- All manufacturing facilities are geographically concentrated in West Bengal. Also, ~86.32% of its total manufacturing revenue comes from the units in Dhulagarh and Jangalpur. TPL’s operations are prone to civil unrest, natural disasters, regional conflicts, and poor weather conditions.
- The inability to effectively manage its existing distribution network in the domestic or overseas markets (or further expand it) could harm its operations and financial performance.
- Any disruption to power or water sources may increase TPL’s production cost and severely affect its overall profitability.
- TPL faces stiff competition from domestic and multinational companies. The inability to compete effectively could result in the loss of customers and market share.
IPO Details in a Nutshell
The book-running lead managers to the public issue are ICICI Securities, Edelweiss Financial Services, and SBI Capital Markets. Tarsons Products had filed the Red Herring Prospectus (RHP) for its IPO on November 8, 2021. You can read it here.
Ahead of the IPO, TPL was able to Rs 305.96 crore from 32 anchor investors. The marquee investors include the Monetary Authority of Singapore, Abu Dhabi Investment Authority (ADIA), ICICI Prudential Mutual Fund (MF), Aditya Birla Sun Life MF, and Edelweiss MF.
As per a Frost & Sullivan report, Tarsons Products had a market share of 9-12% in the labware market in India in 2020. The company has been able to win the trust of the scientists and medical community in India. The report further states that the plastic labware market in our country is estimated to grow at a CAGR of 16% to reach Rs 2,576 crore by FY25. This expansion is on account of the superiority of plastic labware products in terms of shelf life, handling, and safety benefits. Moreover, increased investments by the Indian government in pharmaceutical and biotech research & development (R&D) offer an opportunity for firms such as TPL to grow further.
To establish strong and long-standing relationships with end customers, TPL will have to continue to expand its product portfolio, improve product applications, and build reliable supply chains.
The Grey Market Premium (GMP) of the company’s IPO shares stands at ~Rs 200. It means that shares are being traded in the unofficial market at Rs 200 more than the issue price. Before applying to this IPO, we will wait to see if the portion reserved for institutional investors gets oversubscribed. As always, make sure you carefully weigh out the pros and cons of the company before applying.
What are your opinions on this IPO? Will you be applying for it? Let us know in the comments section of the marketfeed app.