Grading agency, Credit Analysis & Research CARE has assigned a `CARE IPO Grade 2` to the proposed Initial Public Offer (IPO) of Astec LifeSciences (ALSL). The grading indicates below-average fundamentals.

IPO grading is an opinion on the relative assessment of the fundamentals of that issuer.

ALSL has proposed an IPO of 7.5 million equity shares of face value of Rs.10 each, at a price which will be determined through a 100% book-building process.

The grading factors in promoters` experience in the agro chemicals and pharmaceuticals industry, long track record of ALSL, consistent growth in terms of turnover and profitability levels in the last few years, moderate gearing and diversified geographical presence.

However, the grading is constrained by ALSL`s relatively small size of operations, pre-dominant control by a single family member, product-concentration risk, absence of long-term contracts with raw material suppliers and clients, dependence on IPO proceeds for the proposed project completion, various pending court cases against the company and the promoter and moderate corporate governance practices.

The grading is further constrained by project risk involved in setting up of new manufacturing facility with deployment of proposed IPO funds.

ALSL is engaged in the manufacture and sale of intermediates, active ingredients and formulations in the off-patent–proprietary category. ALSL has its manufacturing activities in Maharashtra, at Dombivli and Mahad.

The proceeds from the proposed issue of shares are intended to be deployed for expanding the manufacturing facilities at Mahad which is proposed to be a 100% export oriented unit, augmenting the existing research and development facility at Dombivli, meeting registration expenses, long-term working-capital requirements, general corporate purposes and issue expenses.

greyBlog