Money Tree

Alpa Laboratories Limited IPO opens on 12th July 2007. The salient features and extracts from the Red Herring Prospectus of the issue are given hereunder:

Issue Opens On : July 12, 2007
Issue Closes On : July 17, 2007
Issue Size : 95,00,000 Equity shares
Face Value : Rs.10/-
Price Range : Rs. 62 to Rs. 68/-
Issue Type : Book Building
Tick Size : Re.1/-
Market Lot : 100
Minimum Order Qty : 100
Listing Stock Exchange : NSE, BSE

Objects Of the Issue :

Setting up a new plant at Pigdamber, Indore for increasing our production & testing capacities;
Meeting Margin money working capital requirements;
General Corporate Purposes and
Meeting Issue Expenses

Basis for Issue Price :

Face Value : Rs.10/-
Issue Price : 6.2 Times(Lower Price Band) of the Face Value.
Issue Price : 6.8 Times(Higher Price Band) of the Face Value.
Issue Price : Rs. 62 to Rs. 68
EPS for the last financial year 2006-07 : Rs 5.25
EPS for the last year 2005-2006 : Rs 7.31
EPS for the financial year 2004-05 : Rs. 2.61
Weighted Average EPS for the years April 2004- March 2007 : Rs 5.50

Industry PE ratio:

Highest : 22.1
Lowest : 3.8
Industry Average : 13.40

PE ratio of Alpa Laboratories Ltd. on the higher side of price band comes out to 12.95 times and on the lower side of the price band comes out to 11.81 times on the basis of the EPS for the year ended 31st March 2007.

PE ratio of the Peer Group

Venus Remedies : 12.20
Perental Drugs : 6.5
Syncom Formulations : 4.3

Industry Overview :

The Indian Pharmaceuticals sector has come a long way, being almost non-existent during 1970, to a prominent provider of health care products, meeting almost 95% of country’s pharmaceutical needs. The domestic pharmaceutical output has increased at a compound growth rate (CAGR) of 13.7% per annum. Currently the Indian pharmaceutical industry is valued at approximately $ 8.0 billion. Globally, the Indian industry ranks 4th in terms of volume and 13th in terms of value. Indian pharmaceuticals industry has over 20,000 units. Around 260 constitute the organized sector, while others exist in the small scale sector.

Business Overview :

The company manufactures a range of products such as ethical drugs, generic drugs, over the counter drugs (OTC) and veterinary products in various dosage forms and market them under the trade mark ALPA which is a registered trademark in the name of Alpa Labs (India) Limited, a promoter group company. It also manufactures formulations for a number of other pharmaceutical companies of national and international repute such as Cipla, Zydus Cadila, Lupin, Glenmark, Genom Biotech, Jenburkt, etc. (under their own brands) located both in India and abroad in countries such as Philippines, Iran, Iraq, Sierra Leon, Madagascar, Kenya, Liberia, Puerto Rico, Haiti, Sudan, Ghana, Nigeria, Srilanka etc. The company also undertakes
contract manufacturing of a large variety of pharmaceuticals.

History :

Mr. Purushottam R. Patel, Mr. M.S. Chawla and Mr. Pravin C. Shah, partners of M/s Alpa Laboratories, which was formed in the year 1967, incorporated a private limited company in the name of Alpa Laboratories Private Limited on March 18, 1988 for manufacture of pharmaceutical formulations. In the year 1998, Alpa Laboratories Private Limited was converted into a public limited company with effect from September 3, 1998 with the name of Alpa Laboratories Limited.

Financial Information :

Total income of the Company for the year ended 31st March, 2007 : Rs. 10180.81 lacs
Total income of the Company for the year ended 31st March, 2006 : Rs. 7124.55 lacs
Total income of the Company for the year ended 31st March, 2005 : Rs. 3848.93 lacs

Net profit (after tax) for the year ended 31st March, 2007 : Rs. 633.12 lacs
Net profit (after Tax) for the year ended 31st March, 2006 : Rs. 411.84 lacs
Net profit (after Tax) for the year ended 31st March, 2005 : Rs. 145.43 lacs

Comments :

The issue has been priced at a PE multiple of about 12 times of the EPS for the year ended 31st March 2007, which seems to be on a higher side as compared to its peers. Though the company has seen a fast growth in the last couple of years and the future prospects also seem to be bright but the issue price does not match with the fundamentals and therefore we do not recommend subscribing to the issue.