Entero Healthcare Solutions Limited IPO

Apply 0
Avoid 0

This business overview details the operations, achievements, and strategic positioning of a leading healthcare products distribution company in India, emphasizing its rapid growth, technological innovation, and comprehensive service offerings. Founded in 2018 by Prabhat Agrawal and Prem Sethi, the company has quickly ascended to become one of the top three distributors in its sector by revenue in the 2022 financial year, boasting an operating income of ₹25,220.65 million. It achieved remarkable growth, reaching ₹25,000 million in operating income within just four years, demonstrating its ability to scale operations efficiently.

The company’s foundational vision was to create an organized, pan-India, technology-driven, and integrated distribution platform for healthcare products, aiming to add value across the healthcare ecosystem. It serves as a crucial link between healthcare product manufacturers and the end outlets, including pharmacies, hospitals, and clinics, facilitating wide product reach and accessibility. As of March 31, 2023, the company operates 73 warehouses across India, enhancing the distribution network’s effectiveness with its last-mile delivery infrastructure.

Key highlights of the company’s services include providing healthcare product manufacturers with extensive access to a diverse customer base through a single distribution platform, leveraging India’s fragmented pharmaceutical distribution sector. This is significant as the distribution landscape in India features around 65,000 distributors, mainly catering to localized areas. The company’s approach not only streamlines the supply chain for manufacturers but also enhances operational efficiencies and inventory management, contributing to reduced logistics costs and better market engagement.

For pharmacies, hospitals, and clinics, the company positions itself as a one-stop solution for their procurement needs, offering a broad spectrum of healthcare products. This comprehensive range enables high service reliability and fulfillment rates, mitigating the risk of stockouts and optimizing procurement costs. Additionally, the company’s adoption of technology, such as the Entero Direct B2B application, facilitates efficient order management, real-time inventory visibility, and promotional activities, enhancing the purchasing experience for its customers.

The business also highlights its strategic growth through acquisitions, having integrated 32 entities since its inception, which has expanded its geographical reach and scale. This inorganic growth strategy, combined with its operational efficiencies, positions the company favorably within a market poised for consolidation, as indicated by CRISIL’s report. The Indian healthcare product distribution market is expected to see significant consolidation, driven by regulatory changes, operational efficiencies, and the advantages of scale, with the company well-placed to benefit from these trends.

In summary, the company’s rapid growth, strategic acquisitions, technological integration, and strong operational foundation underscore its significant role in transforming India’s healthcare product distribution landscape. Its efforts to streamline the supply chain, enhance operational efficiencies, and provide comprehensive solutions to manufacturers and healthcare outlets alike reflect a robust business model poised for sustained growth and market leadership.

Objects of the Entero Healthcare Solutions Limited IPO:

The Company proposes to utilize the Net Proceeds from the Fresh Issue towards funding the following objects: i. Repayment/prepayment, in full or part, of certain borrowings availed of by the company and our Subsidiaries. ii. Funding the long term working capital requirements. iii. Pursuing inorganic growth initiatives through acquisitions. iv. General corporate purposes. Total number of shares : - Fresh Issues :- 7,949,125 shares, Offer For Sale : - 4,769,475 shares.
DRHP of Entero Healthcare Solutions Limited IPO
RHP of Entero Healthcare Solutions Limited IPO

Entero Healthcare Solutions Limited IPO Details:

Open Date: Feb 09 2024
Close Date: Feb 13 2024
Total Shares: 12,718,600
Face Value: ₹ 10 Per Equity Share
Issue Size: 1,600.00 Cr.
Lot Size: 11 Shares
Issue Price: ₹ 1195 - 1258 Per Equity Share
Listing At: NSE,BSE
Listing Date: Feb 16 2024

Promoters And Management:

Sujesh Vasudevan is the Chairperson and Non-Executive Independent Director of the Company. He obtained his bachelor’s degree of pharmacy from the University of Bombay, a master’s in management studies from University of Bombay and an advanced management program from Harvard Business School. He has more than 18 years of experience. He is currently an independent director in Eris Lifesciences Limited. Previously, he was associated with Glenmark Pharmaceuticals Limited, Abbott India Limited and Torrent Pharmaceuticals Limited. Prabhat Agrawal serves as the Promoter, Managing Director, and CEO of the company, steering overall strategy, operations, and financial health. With a B.Com from Mumbai University, an MBA from the Indian School of Business, Hyderabad, and qualifications as a Chartered Accountant and Chartered Financial Analyst, he brings over 20 years of rich experience. His career includes leadership roles at Alkem Laboratories and Metalfrio Solutions SA, among others, and he was honored with the “CEO Of the Year – 2016” award at the Pharmaceutical Leadership Summit. Prem Sethi is the Promoter, Whole-time Director and Chief Operating Officer of the Company. He obtained his bachelor’s degree in pharmacy from Rajiv Gandhi University of Health Sciences, Karnataka and a master’s diploma in Clinical Research and Pharmacovigilance from James Lind Institute, Karnataka. He has more than 16 years of experience. Prior to joining the Company, he was associated as Director – Offering Development and Product Management with IQVIA Consulting and Information Services India Private Limited, as Senior Practice Leader with Excellence Data Research Private Limited, as Manager with WNS Global Services Private Limited, and as Business Analyst with Evalueserve Private Limited. He is currently responsible for development and product management in the Company. He received the Business Leader Award from Business Transformation Awards 2021 by Mint and Techcircle.

Financials of Entero Healthcare Solutions Limited IPO:

A. Balance Sheet
Particular (In Million) Mar-21 Mar-22 Mar-23
Equity Share Capital 1.00 38.50 41.12
Reserves 4,853 5,572 5,909
Borrowings 1,417 2,850 3,735
Trade Payables 967 1,398 2,105
Other Liabilities 1,100 1,401 1,297
Total Liabilities 3,484 5,649 7,137
Net Block 409 457 432
Capital Work in Progress 0 6 0
Other Assets 1,600 2,289 2,424
Total NC Assets 2,009 2,751 2,856
Receivables 2,422 3,746 5,149
Inventory 2,439 3,102 3,416
Cash & Bank 828 1,054 1,068
Other Assets 640 607 598
Face value 10 10 10
B. Profit & Loss Statement
Particular (In Million) Mar-21 Mar-22 Mar-23
Sales 17,797 25,221 33,002
Purchases of Stock In Trade 16,852 23,425 30,513
Change in Inventory -471 -300 -194
Employee Cost 759 1,148 1,281
Other Expenses 441 704 762
Other Income 39 45 55
Depreciation 163 198 242
EBITDA 255 289 695
EBITDA Margin 1.43% 1.15% 2.11%
Interest 200 290 490
Profit before tax -108 -198 -37
Tax 45 96 74
Net profit -154 -294 -111
NPM (%) -0.86% -1.17% -0.34%
C. Cash Flow Statement
Particular (In Million) Mar-21 Mar-22 Mar-23
Cash From Operating Activity
Profit From Operation 318 217 693
Receivable -119 -682 -1,337
Inventory -490 -301 -194
Payable -90 185 576
Loans And Advances -3 -3 4
Other WC Items -257 340 -71
Working Capital Changes -959 -461 -1,022
Direct Taxes -46 -109 -124
Net Cash Inflow from Operating Activity -687 -353 -453
Cash from Investing Activity
Fixed assets purchased -95 -99 -55
Investments purchased -228 -84 -226
Investment in subsidiaries -11 -1,469 -246
Other investing items 26 34 41
Net cash inflow from investing activities -309 -1,617 -486
Cash from Financing Activity
Proceeds from shares 784 1,056 448.86
Proceeds from borrowings 352 1,433 885
Intrest paid fin -148 -228 -424
Financial liabilities -42 -88 -116
Other financing items -59 -62 -65
Net Cash Flow -108 142 -211

Comparison With Peers:

Name of the Company Revenue (In Crore) PAT (In Crore) EPS ( in Rs) P/E CMP Mcap (In Crore)
Entero Healthcare Solutions Limited 3300 -11 -2.55 -492.7 1258 5,471
MedPlus Health Services Limited 4558 50 4.17 129.0 632 7,549
* All the data is as per FY23.

Recommendation on Entero Healthcare Solutions Limited IPO:

Review and Recommendation of Entero Healthcare IPO is 4/10 1. Company’s primary line of business is in the distribution of healthcare products to retail pharmacies, hospitals and healthcare clinics in India. They add value to the healthcare product manufacturers that work with them by providing them reach and accessibility to pharmacies, hospitals and clinics through our integrated and technology driven, pan-India healthcare products distribution platform. 2. As of September 30, 2023, they operate 77 warehouses located across the country, last-mile delivery infrastructure and relationships with pharmacies, hospitals and clinics enables healthcare product manufacturers to make their products available to a wide range of customers 3. Summary of the industry in which the Company operates a) The target addressable market for pharmaceutical distributors in India is valued at ₹2.7 trillion in the Financial Year 2023 and is expected to grow at 10% to 11% CAGR from the Financial Year 2023 to the Financial Year 2028. b) The distribution of pharmaceutical products in India is extremely fragmented with approximately 65,000 distributors, as of March 31, 2023, that generally service limited local areas only, unlike developed markets where large nationwide distributors occupy a dominant market position. In the Indian pharmaceutical distribution market, traditional local distributors have a 90-92% market share while large/national distributors have a 8-10% market share. (Source: CRISIL Report) 4. Risk Factors: a) Company has experienced negative cash flows from operating, investing and financing activities in the past. b) Company has experienced losses in the Financial Years 2021, 2022 and 2023, and the six months ended September 30, 2023. c) Company operations are subject to high working capital requirements, and have incurred substantial indebtedness. Their inability to maintain an optimal level of working capital or financing required may impact its operations and profitability adversely.  d) Company has pledged equity shares of certain of their Subsidiaries in favor of certain lenders and if events of default arise under the financing agreements, such lenders could invoke the relevant share pledge agreements, adversely affecting their business, results of operations, cash flows and prospects. e) Corporate Governance- There have been delays in filing certain e-forms filings of the Company in compliance with the Companies Act, 2013. Consequently, the Company may be subject to regulatory actions and penalties for such delays which may adversely impact our business and financial condition. 5. Important Financial Ratios (Rs. In Crores)
Financial Metric 6MFY24 FY23 FY22
Gross Margin 8.92% 8.12% 8.31%
Net Margin 0.61% -0.33% -1.16%
Interest Coverage Ratio 1.42 - -
Debt (INR Cr) 605.99 467.90 395.68
Equity (INR Cr) 660.54 597.66 563.21
D/E Ratio 0.91 0.78 0.70
EBIT (INR Cr) 91.92 45.28 9.16
Capital Employed (INR Cr) 1505.95 1308.72 1125.98
ROCE 6.10% 3.45% 0.81%
Net Profit (INR Cr) 23.28 (11.10) (29.43)
ROE 3.52% -
   6. Valuation The valuation, pegged at INR 5,300 Crore, appears to be fully accounted for. Its closest competitor, Mediplus, which went public last year, is currently trading below its initial public offering price. Operating within the highly competitive sector of distributing medicines and medical equipment to pharmacies and hospitals, the company faces significant challenges. Both suppliers and buyers wield considerable bargaining power, leading to notably low gross margins

Lead Manager of Entero Healthcare Solutions Limited IPO:

  1. DAM Capital Advisors Ltd (Formerly IDFC Securities Ltd)
  2. ICICI Securities Limited
  3. Jefferies India Private Limited
  4. JM Financial Consultants Private Limited
  5. SBI Capital Markets Limited

Registrar of Entero Healthcare Solutions Limited IPO:

  1. Link Intime India Private Limited

Company Address:

Entero Healthcare Solutions Limited Plot No. I-35, Building - B Industrial Area Phase - I 13/7 Mathura Road, Faridabad 121 003 Phone: +91 22-69019100 Email: jayant.prakash@enterohealthcare.com Website: https://www.enterohealthcare.com/

Discussion on Entero Healthcare Solutions Limited IPO:

5 Comments

    Looking as a loss making company right now. Valuation is high.Not applying.

    Reply

    1. The industry size of distributors is huge….2.7 lakh cr…

    2. But more than 65000 fragmented distributors are working in India

    3. 90% market share is with these distributors. and rest 10% is with big distributors.

    4. so, game here is to capture this market.

    5. Entero has acquired close to 32 distributors in the last 3-4 years, that is how scale will come..

    Reply

    1. high working capital business. Not able to generate cash flow from operations due to this.
    2. lot of money is stuck in trade receivables…..and inventory…

    Reply

    This is pure B2B player….focussing on providing medicines, medical equipments etc to Pharmacies and Hospitals. So, in nutshell, they are Large Distributor

    Reply

    *Entero Healthcare Solutions Limited:*

    Company’s primary line of business is in the distribution of healthcare products to retail pharmacies, hospitals and healthcare clinics in India.

    They add value to the healthcare product manufacturers that work with them by providing them reach and accessibility to pharmacies, hospitals and clinics through our integrated and technology driven, pan-India healthcare products distribution platform.

    As of September 30, 2023, our 77 warehouses located across the country, last-mile delivery infrastructure and relationships with pharmacies, hospitals and clinics enables healthcare product manufacturers to make their products available to a wide range of customers.

    *Business model is similar to Pharmeasy*

    Reply

Leave a Reply