Accretion Pharmaceuticals Ltd. IPO: Key Details

Accretion Pharmaceuticals

• Accretion Pharmaceuticals is coming out with an initial public offering (IPO) of 29,46,000 equity shares in a price band Rs 96-101 per equity share.
• The issue will open on May 14, 2025 and will close on May 16, 2025.
• The shares will be listed on SME Platform of NSE.
• The face value of the share is Rs 10 and is priced 9.60 times of its face value on the lower side and 10.10 times on the higher side.
• Book running lead manager to the issue is Jawa Capital Services.
• Compliance Officer for the issue is Bhavika Dhaval Makadia.

Profile of the company

Accretion Pharmaceuticals is engaged in the business of manufacturing and marketing of Tablets, Capsules, Oral Liquid, External Preparations (Ointment, Cream, Gel, Lotion, Medicated Shampoo, Mouthwash, Dusting Powder), and Oral Powder (Sachet, Dry Syrup) etc.

Apart from manufacturing products for direct sales, the company also manufactures various pharmaceutical products for different marketers on loan license or contract manufacturing basis. Its business is majorly carried out on principle-to-principle basis with different marketers. Also, the company caters to multiple corporate clients on loan licence and/or contract manufacturing basis.

The company is ISO 9001:2015, ISO 14001:2015 and ISO 22000:2018 certified and is led by an experienced board of directors, and a professional and experienced management team with extensive experience in the pharmaceutical.

Proceed is being used for:

• Capital expenditure towards purchase of new equipment/machineries, etc.
• Capital expenditure towards upgradation of existing manufacturing facility
• Repayment/prepayment of certain borrowings availed by the company
• Funding working capital requirements
• General corporate purpose

Industry Overview

India’s pharmaceutical market currently valued at $50 Billion is the world's third largest by volume. With a diversified product base covering generic drugs, active pharmaceutical ingredients, bulk drugs, over-the-counter drugs, vaccines, biologics and biosimilars, the Indian pharmaceutical industry has a strong presence at the global level. “Pharmacy of the world” as it is often called offers around 60,000 generic brands across 60 therapeutic categories, accounting for 20 per cent of global generic drug exports by volume. Not surprisingly, eight of the top 20 global generic companies are based in India.

India’s pharmaceutical sector boasts high rates of quality compliance, with 70311 US FDA approved facilities (as of April 2023), 38612 European GMP-compliant plants (as of November 2022) and 241813 WHO-GMP-approved plants. To further bolster the regulatory framework, in December 2023, revised pharma manufacturing rules were notified under Schedule-M relating to Good Manufacturing Practices, a mandatory requirement that safeguards quality and brings the existing regime in line with global standards.

The pharmaceutical industry in India is expected to reach $65 billion by 2024 and to $130 Bn by 2030. The pharmaceutical industry in India is currently valued at $50 billion. India is a major exporter of Pharmaceuticals, with over 200 countries served by Indian pharma exports. India supplies over 50% of Africa’s requirement for generics, 40% of generic demand in the US and 25% of all medicine in the UK. India also accounts for 60% of global vaccine demand, and is a leading supplier of DPT, BCG and Measles vaccines. 70% of WHO’s vaccines (as per the essential Immunization schedule) are sourced from India. 

Pros and strengths

Wide range of products: Vision of the company is to ensure the quality health care products & to meet the standards of their clients, commitment to provide world class quality, competitive pricing and a constant urge expand their product portfolio has gained reputation as a global manufacturer of various formulation with world class quality products. The company’s variety of product offerings has enabled it to cater to a large customer base in the domestic market as well as international market.

Long-standing relationship with clients and suppliers: It continually invest in strengthening its relationships with its clients and suppliers. Its sales and marketing operations are led by its Promoters Hardik Mukundbhai Prajapati and Vivek Ashok Kumar Patel who has got rich experience in the business of the company.

Quality standards: Quality plays one of the most vital roles in the success of any organization. The company is focused on providing quality products. It constantly strives to improve its industrial processes at every step in the production chain. Its focus on quality is evidenced by the quality certification from ISO 9001:2015 for maintaining quality standards and ISO 14001:2015 for meeting safe environmental standards and policies. Ensuring global standard products will attract domestic and international customers to the company.

Risks and concerns  

Maximum revenue comes from few clients: The company is dependent on certain customers who have contributed a substantial portion of its total revenues. The company has garnered 72.98%, 70.01% and 38.31% of its total revenue from top 10 customers in FY24, FY23 and FY22, respectively. The company has not entered into long term agreements with majority of these customers and the success of its business is accordingly significantly dependent on maintaining good relationship with them. The loss of a significant client or clients may have a material adverse effect on its results of operations/cash flow.

Maximum revenue comes from exports: A substantial share of its revenue is generated from export sales, while its domestic sales contribute a comparatively smaller portion. Its profitability is largely influenced by factors affecting the export market, including fluctuations in foreign exchange rates, changes in international trade policies, regulatory requirements in different jurisdictions, geopolitical uncertainties, and competitive pricing pressures. Any reduction in export demand, increase in production or compliance costs, or unfavorable currency movements could negatively impact its profit after tax (PAT) and PAT margins.

Limited operating history as a company: The company was incorporated as Accretion Pharmaceuticals Limited on November 29, 2023, under the provisions of the Companies Act, 2013. Prior to the incorporation of the company, the current business was being carried its under M/s Accretion Pharmaceuticals, a partnership firm registered under the provisions of the Partnership Act, 1932 and whose erstwhile Partners are the current Promoters of the company, viz., Harshad Nanubhai Rathod, Vivek Ashokkumar Patel, Mayur Popatlal Sojitra and Hardik Mukundbhai Prajapati. It has a very limited operating history from which the investors might evaluate its business and future prospects and viability.

Outlook

Accretion Pharmaceuticals is a pharmaceutical company that manufactures and sells tablets, capsules, and other healthcare products. The company holds ISO 9001:2015, ISO 14001:2015, and ISO 22000:2005 certifications, reflecting its dedication to quality and environmental management systems. The company has expanded its global footprint, marking its presence in more than 20 countries, including regions in Africa, Southeast Asia, and the Middle East. On the concern side, a significant portion of its revenue is derived from exports, and any decline in export profitability may adversely impact its overall financial performance. Also, the company has a very limited operating history, which may make it difficult for investors to evaluate its historical performance or future prospects.

The company is coming out with a maiden IPO of 29,46,000 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 96-101 per equity share. The aggregate size of the offer is around Rs 28.28 crore to Rs 29.75 crore based on lower and upper price band respectively. On performance front, the company’s total revenue increased to Rs 3,393.86 lakh for the year ended on March 31, 2024, as compared to Rs 2,953.15 lakh for the year ended on March 31, 2023. Moreover, profits after tax as a percentage of total income is 13.72% during the year ended March 31, 2024. In absolute terms, profit after tax was Rs 465.77 lakh during the year ended March 31, 2024. During the year ended March 31, 2023, profit after tax was 0.35% of Total Income. In absolute terms, profit after tax was Rs 10.39 lakh during the year ended March 31, 2023.

The company’s product portfolio is primarily focused on offering differentiated products and registered formulations based on customer’s requirements. It intends to continue to grow its sales by registering more and new products in these markets as well new market. Its growth strategy will vary from country to country depending on their specific regulatory and product requirements. It may either form important relationships with companies having strong local presence or alternatively appoint local distributors through which it can undertake its own sales and marketing. Further, the company also proposes to get registration of its plant and products with the respective authority of the countries globally so as to enable the company to directly export its products to global market.