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IPO NOTE 12th Nov 2021 Subscribe for Long Term Tarsons Products Limited Company Background Issue Detail Incorporated in 1983, Tarsons Products Limited (TPL) is a leading Indian life sciences company Price Band (Rs) Rs.635 – 662 with more than three decades of experience in the production and supply of labware products. The company manufactures a range of quality labware products that helps advance scientific Face Value (Rs) 2 discovery and improve healthcare systems. The company’s product portfolio is classified into Issue Size (Rs) 1023.47Cr three broad categories including consumables, reusables, and others. As of March 31, 2021, Issue Type Book Building the company has a diversified product portfolio with over 1,700 SKUs across 300 products. Minimum lot 22 Shares Trason’s products are used in various laboratories across research organizations, academic institutes, pharmaceutical companies, Contract Research Organizations (CRO), diagnostic Issue Opens November 15, 2021 companies, and hospitals. The company has many reputed institutes, medical labs, and Issue Closes November 17, 2021 hospitals as its key clients. Listing on BSE, NSE Issue Details The offer comprises Fresh Issue of Equity shares aggregating upto Rs.150Cr and Offer for Indicative Timeline On or before sale of Equity Shares aggregating upto Rs.873.47Cr. Finalization of Basis of November 23, 2021 Issue Objectives Allotment • Repayment/prepayment of certain borrowings of the company: Rs.78.54Cr; Unblocking of Funds November 24, 2021 • Funding a part of the capital expenditure for the new manufacturing facility at Panchla, Credit of shares to West Bengal (the “Proposed Expansion”): Rs.62Cr.; and November 25, 2021 Demat Account • General Corporate Purposes Listing on exchange November 26, 2021 IPO Share Allotment Pattern Number of Shares Number of Shares Issue Size^ Category Allocation Other Detail at Rs.635 at Rs.662 (Rs.Cr) QIB 50% 8030456 7702931 509.93 Edelweiss Financial Services Ltd, ICICI Non-Institutional 15% 2409137 2310879 152.98 Book Running Lead Securities Limited, Retail 35% 5621320 5392051 356.95 Managers SBI Capital Markets Limited Employee* 60000 60000 3.61 Total 16120913 15465861 1023.47 KFintech Private Registrar Source: Company RHP, ACMIIL Research, ^ Issue at upper price band* Employee Discount: Rs.61/- Per Share Limited Outlook and Valuations The plastic labware market in India is sexpected to grow at a CAGR of 16% from Rs 1,225Crin FY20 to Rs.2,575Cr by FY25. TPL is a leading Indian company in the plastic labware market in India. Moreover, they caters to the global plastic laboratory products market which was estimated to be USD 8.4 billion in year 2020 and is expected to expand at a CAGR of approximately 10.50% to reach approximately USD 13.8 billion by year 2025. Tarsons supply their products to over 40 countries across both developed and emerging markets. At the upper price band of Rs.662/-, the stock trades at 35.46x its FY22E EPS of Rs.18.66/-(based on annualize latest earning and fully diluted equity post issue). Hence, We recommend to subscribe the issue from a long-term prospective. Competitive Strengths Leading Indian supplier to life sciences sector with strong brand recognition and quality Distribution Team products E: ipo@acm.co.in Company is an Indian labware company engaged in the designing, development, manufacturing D: +91 22 6132 5931 and marketing of consumables, reusables and bench-top equipment according to the Frost & Sullivan Report. The company believe that, with over 36 years of experience in this space, with Associate successfully built ‘Tarsons’ into a leading Indian company in terms of revenue in the plastic Karan Desai labware market in India and gained expertise in the production of a wide range of labware E: karan.desai@acm.co.in products. In the year 2020, company had a market share of 9.00-12.00% of the labware D: +91 22 2858 3221 market in India. ACMIIL Retail Research Tarsons Products Limited IPO Note www.investmentz.com Providing a diverse range of labware products across varied customer segments Company among the top three labware manufacturing companies in India, providing an extensive range of laboratory consumables, reusables and ‘others’ product categories. The Company was founded on the ideology of serving the needs of the Indian scientists’ community and with expertise in precision manufacturing technologies, The company developed a diverse range of labware products such as pipette tips, petri dish, centrifuge tubes, cryo vials, transfer pipettes, bottles, carboys, measuring cylinder, desiccators, minicoolers, cryobox and test tube racks. As of June 30, 2021, they had a diversified product portfolio with over 1,700 SKUs products across 300 distinct products. Company has established it’s prominence in the labware industry in India with a panIndia distribution presence and five manufacturing facilities. Since inception, company has expanded it’s range of labware offerings and achieved economies of scale in manufacturing operations alongside product portfolio which has enabled to service new markets and explore new product offerings to customers. Recently, in the calendar year 2018, company has set up a PCR line for production of a wide range of PCR products. Large addressable market with long-standing relationships with key end customers The life sciences industry is growing at a rapid pace on account of advancements in the field of scientific research. Laboratories have emerged as multipurpose research facilities that host several types of testing mechanisms, novel developments, and research analogies. The need for various types of equipment across laboratories and increasing trend of research based studies is driving the global demand for laboratory equipment. As a result, the global laboratory equipment market is expected to register a growth of 4.90% CAGR from 2020 to 2025 to reach USD 20.5 billion by 2025 from USD 16.2 billion in 2020. Well-equipped and automated manufacturing facilities Manufacturing capabilities are vertically integrated with design and development being carried out in-house. All manufacturing facilities have injection moulding and extrusion blow moulding machines which are well complemented with advanced automation technologies. Manufacturing processes are automated with use of robotics and certain other technologies that have developed in collaboration with overseas partners. Automation lines help improve product cost efficiencies and output. For instance, they deploy automation in the racking of liquid handling products as well as the automatic insertion of filter into pipette tips. Company has also developed automation for the handling and packaging of product line of petri dish. Automation process is primarily designed to ensure that the complete production process is free from human touch which in turn helps to achieve the desired purity levels required for use in life sciences products. Domestic Market Manufacturing Facilities North: 42 distributors 18% of FY21 Sales Central: 18 distributors 6% of FY21 Sales H eadquarters Kasba BuroshibtalaI & II Jangalapur& W arehouse D hulagarh Am ta(U pcom ing) East: Panchla (U pcom ing) 34 distributors West: 13% of FY21 Sales 11 distributors 24% of FY21 Sales South: 36 distributors 39% of FY21 Sales Source: Company RHP, ACMIIL Research Wide geographic reach through pan India sales and distribution network Company has a pan India sales and distribution network that enables to cater to a wide range of end customers, thereby ensuring effective penetration of diverse range of products. As a result of pan India distribution network and ability to distribute products on a pan-India basis, company believes they have been able to develop a comprehensive customer base that differentiates Company from competitors. Company’s distribution network across India comprises over 141 authorized distributors as at June 30, 2021. ACMIIL Retail Research Tarsons Products Limited IPO Note www.investmentz.com Experienced Promoter backed by strong management team They have a management team with significant experience in the life sciences industry and are led by Chairman and Promoter, Sanjive Sehgal, who has over 30 years of experience in the labware manufacturing sector in India. Business operations are led by Whole-Time Director, Mr. Rohan Sehgal who has 7 years of experience in life sciences industry, is supported by other senior management team members. Company believes that the experience of management team has enabled to extend operating capabilities, improve the quality of products and facilitated growth in the life sciences industry. Management team has ingrained the culture of innovation and development in Company which has helped to build a strong brand and identify new business opportunities. Products Portfolio Strengths Company’s diversified product portfolio can primarily be divided into three main categories: (i) Consumables; (ii) Reusables; and (iii) Others. The Company is primarily engaged in the business of manufacturing and selling of plastic laboratory products and certain scientific instruments, which represents a single business. They does not distinguish revenues, costs and expenses between products in its internal reporting, and reports costs and expenses by nature as a whole and operates and manages its business as a single segment. Cnsumables products • Pipette Tips: Mostly used in research work for transferring small volume of liquids with high precision. Precision moulded tips are made from virgin PP and are certified RNase, DNase and pyrogen free. • Centrifuge Tubes: Perfect for versatile applications, these are used for storage, spinning down & reaction processes. Reliable performance of PP tubes at 16000xg. Clear polypropylene with low extractables, Leakproof performance at 45K pascal, nonpyrogenic and DNase/RNase free. • Petri dishes: Mostly used in the culture of microbes and sensitivity assays. Typically used once and discarded which optimizes time consumed in washing and sterilizing. Optically clear for easy viewing, vented lid permits air circulation during incubation to reduce condensation build up, these are made up from virgin biomedical graded PS. • Cryo Vials: Used for storage of biological materials at temperatures as low as -196°C (vapour phase of liquid nitrogen) and up to 121°C. Complies with IATA requirements of withstanding evacuation to 95kPa without leaking and thus are suitable for transport of diagnostic specimen. Designed for use in mechanical freezer and in vapor phase of liquid nitrogen • Storage vials: Storage vials torage vials are designed for use with samples from -80°C to 121°C. Used for storage of PCR reagents, enzymes and other diagnostics, biochemical reagents or samples. Manufactured using high purity virgin polypropylene. Products are DNase, RNase, and Pyrogen free. Reusables Products • Bottles: Company’s bottles offer ultimate solution in containment and protection and transportation of various kinds of reagents. Available in three different resins, they are ensured to be leakproof, strong and durable. Bottles are leak proof, puncture resistant and free of any leachables and mould releasing agents. • Carboys: Mostly used for media formulation and mixing, aseptic protocols. Stirring and storage of intermediates. Used for solid and powder material storage (wide mouth). Leakproof, round for homogeneous stirring, convenient shoulder handles for easy carrying and pouring, graduations for volume determination at a glance, wide mouth version available for easy cleaning, filling and dispensing. Made of high-quality virgin resin. • Beakers: Beakers are used for mixing. The graduations are approximate and not intended for accurate liquid measurement. Economical enough to discard after one use, or strong enough to reuse. Moulded in PP, these are beakers with excellent strength and chemical resistance. Clarity graduations and autoclavable properties makes it unique. • Cylinders: Used to measure the volume of a liquids, chemicals, and solutions during daily lab work. Graduated cylinders are more precise and accurate than the common laboratory flasks and beakers. Measuring cylinders are made up of PP or PMP. Other Products • Centrifuge: Molecular works of cell collection, extraction, simple spin-down, f tube separation, etc. Compact design built in to accommodate PCR tubes & Micro centrifuge tubes (0.5 to 2 ml). Built to accommodate PCR tubes and micro centrifuges for seamless separations. With safety lid lock and lid drop protection, these centrifuges have a fully digital display. Equipped with automatic lid opening to prevent sample overheating, this centrifuge is for sensitive operations. ACMIIL Retail Research Tarsons Products Limited IPO Note www.investmentz.com • Vortex: It is used in all the research and laboratories for mixing and shaking. Heavy metal base & rubber feet prevent movement of the shaker during use. Products are compact and offer variable speed control. Maximum speed 3.000 RPM. • Pipettors: This is a common, yet an essential laboratory instrument used to accurately and precisely transfer volumes of liquid in the microliter range. Rugged construction, extremely smooth piston movement, Autoclavable tip ejector and tip holder, easy to maintain. Individual factory calibration of each pipette. Financial Snapshot Particulars (Rs.Mn) FY19 FY20 FY21 3MFY22 Equity share capital 1.92 2 1.92 101.88 Net worth 1353 1976 2443 2690 Net asset value per share* 26.56 38.72 47.65 52.8 Revenue from Operations 1847 1801 2343 711 EBITDA 776 734 1088 387 EBITDA % 42% 41% 46% 54% Net Profit 390 405 689 248 Net Profit Margin 21% 22% 29% 35% Diluted EPS (Rs) 7.5 7.75 13.43 4.88 ROE 28.80% 20.51% 28.19% 9.23%^ ROCE** 31.61% 28.44% 34.54% 37.29% Source: Company RHP, ^ Not annualised, *Net Asset Value per Share = net worth at the end of the year / Number of equity shares outstanding during the year after considering the impact of bonus and sub-divided shares., **ROCE = (EBIT for 12-month period ending June 30, 2021)/ Capital Employed as of June 30, 2021). Comparison With Listed Peers As per the offer documents, TPL has no listed peers to compare with. Risks and Concerns • Company imports over 75% of raw materials and any delay, interruption, or reduction in the supply of raw materials to manufacture products may adversely affect to business. • If any plastic products banned in India or in any of the markets where the company export the products. 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