Will Sudeep Pharma’s IPO stand out as a long-term growth opportunity?

ET Intelligence Group: Sudeep Pharma, a pharmaceutical and specialty nutrition company, plans to raise ₹95 crore through fresh issue to fund capex. It also has an offer for sale of upto ₹800 crore. The promoter group’s stake will fall to 76.2% after the IPO from 89.4%. It plans to raise the manufacturing capacity by 50,000 tonnes to 1.2 lakh tonnes by the end of March 2026. About 60% of its revenue comes from exports to around 100 countries. However, the top three customers contribute over 22% to revenue, signalling high concentration. In addition, net working capital days increased to 282 days in FY25 from 143 days in FY23 reflecting higher working capital requirement. Given these factors, investors may wait to watch post-listing financial performance.

Business

Incorporated in 1989, Sudeep Pharma manufactures excipients (inactive elements in a medicine) and specialty ingredients for the pharmaceutical, food and nutrition sectors. The Vadodara-based company operates three plants in Gujarat and recently expanded internationally with a facility in Ireland. It has a diverse portfolio of over 100 products. It is one of the largest exporters of mineral ingredients for pharma excipients (including dicalcium phosphate and magnesium stearate) and nutritional ingredients from India to the global market in terms of volume as of December 2024. About 23% of revenue comes from North America and 14% from Asia-Pacific excluding India.

Financials
Revenue grew 5% to ₹502 crore and net profit jumped 30.6% to ₹138.7 crore between FY23 and FY25. Operating profit before depreciation and amortisation (Ebitda) grew annually by 26.4% to ₹199.3 crore while Ebitda margin improved to 39.7% from 23% during the said period. Return on capital employed marginally increased to 29.8% in FY25 from 29.4% in FY23. Days sales outstanding (DSO) increased to 133 from 79 and days payable outstanding (DPO) grew to 132 in FY25 from 76 in FY23.
Valuation

Considering the post-IPO equity and net profit for FY25, the company de-mands a price-earnings (P/E) multiple of up to 48 and a price-sales (P/S) multiple of up to 13. It does not have a direct publicly listed Indian peer.