Brief Summary
This video provides an analysis of two IPOs: Spunweb NonWoven (SME) and Anthem Biosciences (Mainboard). The speakers discuss the companies' business models, financials, growth potential, and potential listing gains. They also share their personal investment strategies for these IPOs.
- Spunweb NonWoven: A technical textile company with good growth potential and strong anchors.
- Anthem Biosciences: A CRDMO company with a complex business model and high valuation, but potential for long-term growth.
Opening Remarks
Manish introduces the episode, mentioning that they will be discussing two companies whose IPOs are closing soon: Anthem Biosciences and Spunweb NonWoven. He clarifies that this is not a recommendation but a discussion of the companies and their potential. He also shares links to previous videos on Smartworks Co-working and Monica Alcob.
Spunweb NonWoven (SME)
Manish provides a brief overview of Spunweb NonWoven, a manufacturer of laminated and UV-treated nonwoven fabrics used in doormats, bags, carpets, and tarpaulins. The company has a manufacturing facility in Rajkot, Gujarat. The IPO is for ₹61 crores, entirely a fresh issue, with a market cap of ₹231 crores, resulting in approximately 27-28% dilution. The company's standalone financials for FY25 show a revenue of ₹227 crores.
Rohit explains that Spunweb NonWoven manufactures polypropylene-based spunbond non-woven fabrics used in hygiene, healthcare, and packaging, categorizing them as technical textiles. He details the spunbond non-woven manufacturing process, where polypropylene polymers are melted, extruded into filaments, laid down in a web-like structure, and bonded together. The company's products include hydrophobic and super-soft fabrics, ideal for diapers. Spunweb is one of the largest manufacturers in India with a capacity of 32,000 MT TPA, currently operating at 70% utilization. Rohit is impressed with the company's high-quality facilities and significant investment in property, plant, and equipment (PP&E), valued at ₹50-60 crores. The promoters have fully acquired a previously separate but similar business before the IPO, which Rohit views as a positive sign.
Rohit shares that the company's pro forma numbers, including the acquired entity, show a topline of ₹266 crores and a PAT of ₹15 crores. While standalone numbers show good growth at 40-50% year-on-year, the balance sheet is a bit heavy with ₹90 crores in borrowings, impacting the EBITDA to PAT conversion. He identifies Fiberweb India as a peer, though its recent margin spikes seem unsustainable. Other comparable companies like Raj Poly Pack and Jindel Poly trade at 15-25 PE. Rohit believes the company will be valued more on demand and supply dynamics due to its unique business. He finds the anchor investors, Madira and Invicta, to be very decent and reliable funds. Rohit estimates the company will achieve a revenue of ₹340-350 crores and a PAT of ₹19-20 crores this year, with potential for 30-40% listing gains. He also expresses a positive view of the promoters, considering them young and entrepreneurial.
Manish clarifies that the PE is 15x based on pro forma numbers. Rohit confirms this, explaining that the acquisition timing affects the numbers. Manish notes that the promoters held 89% pre-IPO. Rohit confirms there were no interesting pre-IPO deals. Manish concludes that it seems like a good company to apply for, although it is heavily subscribed.
Anthem Biosciences (Mainboard)
Manish introduces Anthem Biosciences, incorporated in 2006, as an innovation-driven CRDMO (Contract Research, Development, and Manufacturing Organization) with fully integrated operations. The IPO is for ₹3,400 crores, entirely an OFS (Offer for Sale), with promoters taking a partial exit. The market cap is approximately ₹32,000 crores, diluting about 10%. Financials for FY25 show revenue of ₹1,930 crores and PAT of ₹451 crores, resulting in a high PE valuation of 60-70x. The lead managers are JM Financial, Citi, JP Morgan, and Nomura.
Yash describes Anthem Biosciences as a tech-driven company focused on contract research, development, and manufacturing, offering end-to-end solutions across the drug discovery and manufacturing process. Anthem is among the few players in India that has integrated chemistry and biotechnology. It is the only company in India with a strong presence across both small and large molecules, including biologics. Anthem is one of three CRDMOs in India with technology and capabilities across ADCs, RNAi, peptides, and oligo nucleotides. The company offers fee-for-service contracts to small pharmaceutical and biotech companies, primarily from the US, and also provides a full-service model. As of March 31, the company has served over 150 customers, from small biotech firms to large pharmaceutical companies.
Yash highlights that Anthem is fully integrated and innovation-led, offering end-to-end product services across the value chain, including discovery services, preclinical discovery, drug development, and manufacturing. They work on specialized ingredients, probiotics, enzymes, APIs for nutritional supplements, vitamin analogs, and biosimilars. Anthem is involved in custom synthesis of small molecules and GMP manufacturing of large biopharmaceutical therapeutics, including antibodies, enzymes, and proteins. They are the first in India to initiate ADC development.
Yash mentions that Anthem has been profitable and generates substantial growth from matured projects of 10-15 years. They supply active pharmaceutical ingredients to 10 major commercial molecules globally, defined as blockbuster drugs exceeding $1 million in sales. The company has a pipeline of 16 new molecules in late-stage development, representing significant future growth potential. The management expects sustainable margins of 35-36% and plans to deploy over ₹1,000 crores for unit expansion in the next few years. The company has a large base of 1,500 engineers and scientists focused on research.
Yash notes that Anthem has a good reputation for top-quality work and sticky customer relationships, with customers often lacking the expertise to switch vendors. The company has low dependence on Chinese inputs (20% or below), differentiating it from many other pharmaceutical companies. Anthem is actively supporting and developing GLP1 analog products, differentiating them from competitors who rely on Chinese imports for fermentation fragments. They have 10 new peptides in the pipeline, focusing on late-stage discovery and early development programs. Customer relationships typically last 8-10 years, with word-of-mouth being a key driver of new business.
Yash states that Anthem's average growth rate over the last 5 years is 20%, with a historical rate of 24%. Last year's margin was 36%, with aspirations to maintain mid-30s. He likes the business but finds the pricing a bit high, given it's a complete OFS. He suggests applying and holding for the long term, as the sector is hot and the company should be a consistent compounder.
Manish appreciates Yash's technical review, highlighting the complexity of the pharma sector. He notes that the promoters' presentation of the company was impressive. Manish likes companies that help others, comparing Anthem to those who sold shovels during the gold rush. He appreciates Anthem's FDA-approved facilities and service-milestone-based model, which leads to more success and stable cash flows from commercialization. Manish acknowledges the business will be evaluated on its future success rate. He was impressed with the quality of the company and the promoters' explanation for the 100% OFS, citing their strong cash position and free cash flow generation. Manish notes the high demand for the issue and will be applying, although he is conflicted between Spunweb and Anthem due to limited funds.
Closing Remarks
Manish, Rohit, and Yash discuss expected subscription rates. Yash will likely prioritize Anthem over Spunweb. Rohit believes Anthem is a no-brainer and suggests applying for it first, then using any remaining funds for Spunweb's SHNI category. He estimates a 1 in 7-8 chance of allotment for Anthem with a ₹10 lakh investment, compared to a 1 in 200-250 chance for Spunweb. Manish anticipates Anthem's retail category to be 4-5x subscribed, with SSNI at 25-30x and big SNI at 7-8x. He expects Spunweb to be 200x subscribed overall. They encourage viewers to subscribe to the YouTube channel and provide feedback.
