Astonea Labs Ltd. IPO: Key Details

Astonea Labs

• Astonea Labs is coming out with an initial public offering (IPO) of 27,90,000 equity shares in a price band Rs 128-135 per equity share.
• The issue will open on May 27, 2025 and will close on May 29, 2025.
• The shares will be listed on SME Platform of BSE.
• The face value of the share is Rs 10 and is priced 12.80 times of its face value on the lower side and 13.50 times on the higher side.
• Book running lead manager to the issue is Oneview Corporate Advisors.
• Compliance Officer for the issue is Avneet Kaur.

Profile of the company

Astonea Labs specializes in the manufacturing and marketing of a wide range of pharmaceutical and cosmetic products. These include antibiotic drugs, anti-cold medications, antihistamines, and drugs for diabetes, cardiovascular diseases, gynecological concerns, analgesics, fungal infections, and multivitamins. It also offers products for skin, tooth, and hair care, available in various forms such as gels, ointments, creams, lotions, oils, and serums. All its products adhere to the rigorous standards of the pharmaceutical and cosmetics industries. Additionally, it is involved in the trading of certain packing materials and raw materials used in pharmaceutical and cosmetic products.

The company is based in Haryana, India equipped with a state-of-the-art manufacturing facility having a core manufacturing area of 7,500 square meters, meticulously designed and operated in strict conformity with ISO standards.

The company is engaged in contract manufacturing of pharmaceutical and cosmetic products for companies both within India and internationally. In addition to contract manufacturing, it manufactures and markets its own products under the brands “Glow Up” and “Regero” in the domestic market, wherein the products under Glow Up are also available through e-commerce platforms like Amazon and Tata 1MG. Further, the company is planning to launch a new line of skincare products under the brand name “Avicel” in the domestic market. It also exports its products directly to countries such as Iraq and Yemen and to further advance its export business directly, it has recently undergone an audit by the USFDA for OTC products and have submitted the compliance report. The milestone of USFDA for OTC products is significant as it positions it to expand its presence in the United States market and several other countries.

Proceed is being used for:

• Funding of expenses proposed to be incurred towards product registration in Bolivia, South America
• Purchase and installation of plant and machineries for ointment production for the purpose of export in accordance with the international standards and protocols, on the 2nd floor of the Existing Premises
• Advertising, marketing and brand building
• Investment in procuring hardware and software
• Funding of working capital requirements
• General corporate purposes

Industry Overview

India is the largest provider of generic drugs globally and is known for its affordable vaccines and generic medications. The Indian Pharmaceutical industry is currently ranked third in pharmaceutical production by volume after evolving over time into a thriving industry growing at a CAGR of 9.43% since the past nine years. Generic drugs, over-the-counter medications, bulk drugs, vaccines, contract research & manufacturing, biosimilars, and biologics are some of the major segments of the Indian pharma industry. India has highest number of pharmaceutical manufacturing facilities that comply with the US Food and Drug Administration (USFDA) and has 500 API producers that make for around 8% of the worldwide API market. Indian pharmaceutical sector supplies over 50% of global demand for various vaccines, 40% of generic demand in the US and 25% of all medicine in the UK. The domestic pharmaceutical industry includes a network of 3,000 drug companies and 10,500 manufacturing units. India enjoys an important position in the global pharmaceuticals sector.

Market size of India pharmaceuticals industry is expected to reach $65 billion by 2024, $130 billion by 2030 and $450 billion market by 2047. According to the government data, the Indian pharmaceutical industry is worth approximately $50 billion with over $25 billion of the value coming from exports. About 20% of the global exports in generic drugs are met by India. Indian hospital market valued at $98.98 billion in FY23 and projected to grow by 8% CAGR and reached to $193.59 billion by FY32. India is among the top 12 destinations for biotechnology worldwide and 3rd largest destination for biotechnology in Asia Pacific. The country holds 3-5% of the global biotechnology industry pie. In 2022, India’s bio-economy was valued at $137 billion, and aims to achieve $300 billion mark by 2030.

Meanwhile, the Indian cosmetics sector is currently going through a phase of tremendous expansion. The market for cosmetics in India was estimated to be worth $11.6 billion in 2017 and is projected to expand at a CAGR of 15-20% from 2017 to 2025. The Indian cosmetics sector is expanding for a variety of reasons. The rise of the cosmetic sector has been fuelled by rising purchasing power, rising image consciousness among Indians, and the embrace of Western culture and lifestyle. Since ancient times, India has had an extensive record and a rich tradition of cosmetics. It is currently a thriving sector, and in the upcoming years, it is anticipated to surpass all other countries in terms of cosmetic consumption. 

Pros and strengths

Scalable business model: The company has a scalable business model as its business model is customer-centric and order-driven, and requires optimum utilization of its existing resources, assuring quality supply and achieving consequent economies of scale. The business scale generation is basically due to the development of new markets and products in both domestic and international markets by exploring customer needs, marketing expertise, and consistent product quality.

Wide and diverse range of product offerings: The company has a wide product portfolio comprising pharmaceutical and cosmetic products such as antibiotics drugs, anticold drugs, antihistamine drugs, drugs for diseases like diabetes, cardiovascular diseases, gynecological concerns, analgesics, fungal infections, and multivitamins, and products for skin and hair care in form of tablets, capsules, gels, creams, and lotions, oil, serum all of which adhere to the rigorous standards of the pharmaceutical and cosmetic industries.

Quality Service: The company has set very high standards for itself when it comes to timeliness and quality of service it provides to its customers. The stringent systems ensure that all the products reach its customers on stipulated time and there are minimal errors to ensure reduced product rejection. Its quality service has earned it a goodwill from its customers, which has resulted in customer retention and order repetition. It has also helped it to add to its existing customer base. The company focuses on maintaining the level of consistently in its service, thereby building customer loyalty for its products.

Risks and concerns  

Dependent on third parties for the supply of raw materials: The company is dependent on third parties for the supply of raw materials and such third parties could fail in meeting their obligations, which may have a material adverse effect on its business, results of operations and financial condition. Further, 35.47%, 41.96%, 55.74% and 33.90% of its total purchases are derived from top 10 suppliers for Financial Years ended on March 31, 2024, March 31, 2023, March 31, 2022 and for the period ended December 31, 2024 respectively. While the company may find new and additional suppliers to supply these products, any failure of its suppliers to deliver these products in the necessary quantities or to adhere to delivery schedules, credit terms or specified quality standards and technical specifications may adversely affect its business and its ability to deliver orders on time and at the desired level of quality, as a result, it may lose customers.

Limited operating history: The company has a limited operating history, making it challenging for investors to assess its historical performance or predict its future prospects accurately. The company was incorporated on April 11, 2017. Due to this relatively short period of experience, there is limited historical data available for evaluation, which increases the uncertainty regarding its business model, strategies, and potential for future success. As a result, investors may find it difficult to make informed decisions about its financial stability and long-term viability.

Geographical constrain: The company’s manufacturing facility is located at Haripur, Tehsil - Raipur Rani, District Panchkula, Haryana, which exposes it to several risks. Any unforeseen events or circumstances that negatively affect these areas could materially adversely affect its sales and profitability. These factors include, among other things, changes in demographics, population and income levels. In addition, its business may also be susceptible to regional natural disasters and other catastrophes, such as telecommunications failures, cyber-attacks, fires, riots, political unrest. Any materially adverse social, political or economic development, natural calamities, civil disruptions, or changes in the policies of the local governments in this region could adversely affect operations at its manufacturing facility.

Outlook

Astonea Labs is engaged in contract manufacturing of pharmaceutical and cosmetic products for companies both within India and internationally. The company manufactures and markets a variety of pharmaceutical and cosmetic products, including antibiotics, anti-cold medicines, antihistamines, and treatments for diabetes, heart, gynecological issues, infections, and more. On the concern side, the company is dependent on third parties for the supply of raw materials and such third parties could fail in meeting their obligations, which may have a material adverse effect on its business, results of operations and financial condition. Moreover, major revenue of the company is generated from contract manufacturing and any adverse factors affecting the outsourcing of manufacturing by its customers could have an adverse on its business, results of operations and financial condition.

The company is coming out with a maiden IPO of 27,90,000 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 128-135 per equity share. The aggregate size of the offer is around Rs 35.71 crore to Rs 37.67 crore based on lower and upper price band respectively. On performance front, during the Fiscal year March 31, 2024 revenue from operations was Rs 8019.09 lakh. Revenue from Operations for the financial year March 31, 2023 stood at Rs 6705.08 lakh representing significant increase of 19.60%. The revenue from operation was increased due to increase volume of its business operations and higher volume of sales. Moreover, the company reported Restated profit after tax for the Fiscal year March 31, 2024 stood at Rs 380.98 lakh in comparison to profit after tax of Rs 66.52 lakh in the financial year March 31, 2023.

Expanding and launching a new product range will enable the company to utilize its capacities, manpower, and other resources better. The marketing of the new products will be aided by its existing customer base, longstanding trade relations, and overall goodwill in the industry. Going forward, the company aims to broaden and deepen its presence in its existing product portfolio. This involves enhancing its market penetration and reach for the products it currently offers. By leveraging its strengths and understanding market dynamics, it seeks to capture a larger share of the market while also strengthening its relationships with existing customers. Additionally, it will explore opportunities to expand its product offerings within its current portfolio, identifying areas for innovation and differentiation to meet evolving customer needs.