Anthem Biosciences & Spunweb NonWoven - July 3rd week IPOs : Primary Market Chatter

0:00 Hey everyone, welcome to Primary Market Chatter brought to you by Sunday Investing. This is our July 3rd week episode part two. This is a strange week where we have just four listings and yet we are doing two parts uh because it was just uh me and Rohit the last time. It would probably remain similar uh like it would be Rohit and uh me today and then we'll be joined by Ashen sometime. K will continue to be out in this episode as well. But he'll be back soon is what my understanding is. Uh so having said that uh let me just set up what we are going to do today. Uh as you know four companies we have already done smart works the IPO for which has closed and then we already done uh Monica the IPO

0:47 for which is opening tomorrow and will close on Friday. So we have done the two extremes one which uh closed on Monday and the one which closed on uh Friday. What we'll be doing is we'll be talking about two companies today. Uh the IPO for which will be ending tomorrow. One of them is mainboard Enthe Biosciences which has a lot of demand uh from what we can see and is definitely a company to look forward to. Then the second company which we'll uh talk about is a theme company again has demand going for it. It's named spun web nonvenen. Uh it's from textile sector. So you'd want to understand what the company does and your demand does that make sense or not. So we'll start but uh before I start two

1:33 disclaimers that we usually always give one we are not say registered research analyst. So do not think of this as a qualified opinion research basis and decision. This is not a recommendation to apply at all. Uh this is just us talking about the companies and what we feel about uh their scope. Second thing, if you haven't joined the YouTube channel, uh the link to our video of uh smart works co-working and Monika Alcov is in the pinned comments pinned comments uh with respect to if you haven't seen Monica Alcob then there's a question with respect to TFS nothing has changed in 4 days with respect to a company right like and generally we do not take

2:21 we have already shared our opinion We do not talk about listed stocks. Uh the opinion is already on YouTube video. So if you haven't seen that, you can go ahead and uh see that as well. But yeah, with that maybe we can now move forward to the first company uh that we'll be talking about. The first company that we'll do is Punve nonwoven. Just setting up the company uh incorporated in 2015. The company is a manufacturer and supplier of laminated and UV treated nonwoven fabrics primarily used for applications like doormats, bags, carpets and tarpulence. The company has a manufacturing facility situated in Rajcode, Gujarat. So Rajot company technical textile

3:06 and nonwoven material in order for creating door mats etc. from my understanding IPO about 61 crores IPO all of which is a fresh issue market cap company 231 crores market cap 61 crores dilute so around 27 28% dilution FI25 financials standalone financials 227 cr 11 so just on pad basis the company is coming at like let's say somewhere around 20p 20 21p uh standalone pad basis but there's some

3:51 consolidation involved as well but it's at 15p from my understanding but Rohit can correct me if I'm wrong in terms of the LM the LM is Vivro Financial so with that maybe we can now move it over to um Rohit to talk about spun web while I see where yes is over to you do it. Thanks Manish. Uh so I I'll cover this company and I'll explain a couple of things that you you said which is what is a nonwoven fabric what is a technical textile and then I'll get into the business itself. Uh but this looks premisably a pretty interesting and a different business especially within segment. So what this company does is

4:37 they manufacture polyropylene which is a crude based uh raw material. Uh they they they make polyropylene based spun bond non-woven fabrics. Uh these are typically used in hygiene, healthcare, packaging. So a whole bunch of uh industries but this the the overarching category that this uh company operates in is something called technical textiles. So I'll explain both these terms. So technical textile is basically a textile where where the textile is made with some utility in mind as opposed to a fashion or an aesthetic need. So an example is something like a diaper or a face mask. You know these are all textiles where there is a use case behind which this product is made as opposed to just a shirt. uh so that segment is a very is a much

5:24 more I say complex segment a segment where the skill the manufacturing skills are different from just uh you know making a uh uh an aesthetic looking fabric the second term is that spunbond non-woven so what is a nonwoven fabric so typically in fabric you weave uh you know threads together to make the fabric in a non-woven fabric you obviously don't do that and in spun bond nonwoven what you do is you take that polyropylene polymers. You melt it, you create filaments, you extrude it into filaments. Then you sort of put it, you lay it down in a kind of structure, say a web- like structure which can which will say look like uh the uh the weaving of fabric and then you bond those filaments together and that makes the fabric. So this particular and and of

6:10 course when you when you do it like this you can create certain properties based on the material and based on what you're trying to do. You can create certain properties that you won't be able to do with ordinary uh you know cloth based fabric. So that is I I hope that just gives a background on what exactly these guys do and why they are a little different from uh say normal technical textile and normal say clothbased fabric uh textile businesses. So the products that these guys make have a wide range of users but they categorize it into a few segments. say categorize into hydrophobic, hydrophilic which is basically water repellent or water attracting uh flame retardant, super soft, UVs. So there are different different categories. The main categories that they are in is this hydrophilic and sorry hydrophobic and super soft. These are the two segments and you can imagine that this particular combination is perfect to make diapers

6:56 which is I think one of which is I believe their largest category. uh they actually work with if at least parents if there are any parents listening they may have heard of some of these brands like a love lap or a bum dum these are both fairly common especially online brands that you will see for these kind of kids categories uh apart from that they have a bunch of these other decent brands mid-range kind of brands of course these are this guy is also a smallish company so he works with a lot of these midsize brands uh interesting thing is these guys are one of the largest manufacturers in India they have a capacity of about 32,000 MT TPA if you take all of their production lines and include their subsidiary uh and they today operate at a uh utilization of about uh 70%. As Manish was saying, oh sorry just

7:42 before that I'll just mention that this uh production line there are a bunch of pictures on in the RHP there are there are one or two videos also online you guys you guys can have a look but you'll get a feel of how this is an extremely professional very you know the machines are all very high-end they actually a lot of the processes are done in clean rooms dustfree clean rooms so this is not like some of the smallmemes that you get you know with like very average looking uh facilities and and manufacturing setups and so on. This looks very very high class, very high quality. You can get a sense from the videos, you can get a sense from the pictures. So just have a look. But I just felt that this is uh like I I found what they've set up their their capex in fact their if you look at their balance

8:27 sheet you see the amount of uh PP that is a property plant and equipment that they have the values I think 50 60 crores. So they have done a lot of investment in the quality of the facilities. I found it extremely impressive. Uh so Manish was talking about the subsidiary which was earlier owned by the promoters. They have fully so before the IPO they have fully acquired that entity into this business which again I think is a very good sign because very often inme you'll have promoters running one business here and then running a similar business which will be in a similar space. there'll be some conflict of interest but they will run both of these independently and you guys have actually merged the two and brought this full entity for the IPO which I think is excellent. Uh so if you look at the numbers so I'll just get to

9:12 the numbers there is the standard console numbers and then there's a proform numbers the profile numbers are for if this acquisition was done fully and the full numbers reflected for this year. So this thing was done sometime in December or Jan just so basically few like 3 months before the end of the previous financial year. If you had the full numbers this is what the numbers would look like. So they did about 266 cr topline in the proformer case that is with everything sort of included as if they had the full acquisition for last year with about 15 cr pack. Uh they did about I think 3540 cr uh 35 odd cr of eida. uh if you look at just the standalone I think they did about 220 cr and 11 cr so that is the number that you

9:57 will see on screener that's a number you see on chorgar and so on but the correct number is this 260 odd cr it's there on page 270 you can have a look at those numbers and that is the correct number to look at when you're evaluating this company so this company is coming at 15p uh the standalone so in the consult case we don't have the growth numbers because we don't know what the subsidiaries numbers were before but the standalone numbers are really good growing at 40 50% yearonear. Uh the balance sheet is a bit heavy. I think uh one thing I said there's a good amount of assets in the form of you know equipment and stuff which is good but there's also decent amount of borrowings almost 90 cr of borrowings. So what that reflect in is that aida to pad conversion is quite weak you have like a 3540 cr eida converting to 15 cr pat. Uh that's okay. I don't think that's a problem but just

10:44 you know it will not reflect in a very high PE despite them generating decent amount of cash. Um there is no like they have not listed any peers but there is one pier in my view uh which is actually a listed company. I tried to read a little bit about it but it doesn't the company is called fiber web India. Uh it trades at 9p which doesn't make any sense but if you look at their uh their numbers there's some random spike in margin. they operating at a 15% PAT while uh and there's no tax and stuff. So it's it's a bit odd. Uh whereas these guys operate at like a 5% 5 6% kind of PAT which is what they've said is you know fair for the industry. So I'm I'm kind of disregarding what fiber web has done in the last year. Something looks unsustainable there. Uh you have some other uh plastic and polymer companies

11:31 that have a segment that does this this particular nonwoven fabric. Raj poly pack is one. Jindel poly is one. they trade at between 15 and 25p. Uh again the segment is such that numbers can be a little all over the place especially when you're reliant on crude as your raw material. So I don't even know you know P is the way this will get valued. I think it will get valued more on demand and supply of of this particular business given it's a fairly unique business. Uh I found the anchors to be very decent. I think Madira and Invicta these are two recentish funds been around for the last 6 months but they have always held. So if you look at any uh company where you have these two funds, you will see them in the you know this will be the only fund that will be left in the uh in the shareholding pattern after all the flipping funds

12:17 have left. So and both of these have generally had very good picks. uh in terms of what I think they will do for this year there if you look at their working capul working capital projections it looks like they'll do around 325 odd cr but I think they've also given guidance or implied guidance in couple of the interviews where they've said they will do about 90% capacity utilization they're at currently 67 so they should get to around 340 350 cr and maybe 1920 cr you know in that range uh now if you so if you look at this as a pure spun bond non-movement there's Obviously no real pure fiber web is an odd one. But if you just look at technical textiles and if you take the woven technical textile space you have shri which is an example in theme that trades at 27 28 times. Garvare which is obviously a large

13:02 mainboard rates at about 40 times. They have of course different kinds of capabilities and more in boh but I would say that that is a better comparison where you have technical textiles trading at between 25 to 40p. Uh vivo is also very good reliable LM bahring elegance everything. Obviously they're known for Bonda KPG but just about everything that they bring does well. Uh I think this this company is coming at 15 times. I'm fairly confident this company will trade at around 20 to 22 times at least. Uh which means one can expect a 30 40% listing gain maybe some interest after that also. Uh the other thing I'll just add is I really really like the promoters whatever little bit of interviews they're fairly young fairly uh you know entrepreneurial. uh I was very positive about them as uh

13:49 promoters to back. So overall I'm quite bullish about this company uh definitely will apply uh let's see whether this is something I want to hold or not but I think for those who are looking for listing gains there should be a uh it should be a slam dunk and it looked like a really good quality business if someone wanted to hold for longterm as well and wanted to get some exposure to this. Got it. Thanks. Just to clarify, you would give it a 15p and not a 20p, right? Because I was seeing a lot of places where the number was 20p because it is performer. You'll start including it from like the market will start discounting it right away, right? So 100% 100%. Yeah. No doubt. This is just because of when the acquisition was done. So this is the same problem that a ventive had when it came. People are

14:35 looking at the standalone numbers and wondering what what's happening and also standalone numbers will look very weird year on year will look like it's growing like crazy but it is this is I mean you have to look at the performer numbers only because they have also in a way uh spend some capital in making that acquisition also right and and merging that company you can see it in the capital structure so this is the company you are getting for your 231 cr you are getting a company that has done 15 cr pat last year. So it is a 15p only. There is no there's no 20p concept. Got it. And then I'm saying that the promoters held like 89% pre prior to the issue. Is there any preipo which you saw

15:21 and you found interesting or like no no there's nothing there is nothing I think it was just I think that is just to do with the subsidiary car when they yeah there's no I I don't I don't remember any got it got it uh that's helpful um seems like a good company to apply and from the review that you have shared I'll also be going and applying although I think this will be very heavily subscribed um I think it's already like 40x across all categories today itself. uh so expect it to go like somewhere around 100x but uh the second company which is we'll be talking about will probably give close competition to this uh so maybe with that we can move forward and talk about the second company having covered this this is a I

16:08 hope a lot of people get a lotment uh I will apply to this company espan but uh moving forward the next company we'll be talking about is anthem uh biosciences so uh let me just set up the company for Yash to uh talk about. Incorporated in 2006, company is a innovationdriven and technology focused CRDMO contract research development and manufacturing organization with fully integrated operations encompassing drug discovery, development and manufacturing process. Setting up the IPO, it's a 3395 crores IPO 3,400 crores IPO. All of which is a OFS company promoters are taking a part exit from

16:54 the company i.e they are taking out the 3,400 crores. So issue the market cap at which the company's coming is 32,000 crores approximately. So they are diluting like 10%. In terms of the financials, FI25 financials about 1930 crores revenue and 451 crores pat. So at least at P level it's insanely valued like it's at 60 to70p or something like that. Uh ms 32,000 by 450. In terms of the LM, the LM is JM Financial and then there may be a few uh secondary LMS as well which I can just quickly look at to see if there are any other LMS along with uh JM

17:41 Financial. Uh yeah, there is City, there is JP Morgan, there Namura and that is it these four LMS JM Financial, City, JM Morgan and Namura. So with that over to you yes to talk about income biosciences. I heard a couple of interviews and I found the company very interesting. Can you hear me? Yeah. Yeah. Cool. So, Anthem Biosciences uh incorporated in 2006 is a techdriven very focused on contract research, development, manufacturing company uh offering end to-end solution across the entire drug

18:27 discovery, development and the manufacturing uh later down the stage when the product became commercialized. The capabilities spanning new chemical entities and new biological entities across the whole value chain of the drug or the molecule. So company is among the fewest players in India which has utilized the chemistry and got the best integration uh uh between the chemistry and the biotechnology. So this biot transformation uh my cellular technology and other innovative manufacturing techniques be use this is the only company in India which has the strong presence across all the molecules and the large molecules which are majorly the biologics. So Anthem Biosciences is one of the three CRDMOS that possesses the technology and capabilities across India across ADCs,

19:13 RNAi, peptides and oligo nucides which are among the fastest growing in the pharmaceutical industries. So they have uh basically two models. Uh they have adopted a very different model which is quite similar to what the other companies have and basically the second one is very different. So they're offering a fee for service contracts to small pharmaceutical companies or emerging biotech clients which are basically from US uh etc. very small biotech focused company which has which has gotten their funding from VC uh private equity that they have cash to burn. So they are spend they getting uh they hiring those companies though bio biotech companies are hiring Nam as their as their as their uh vendor and now Enam is researching uh the molecule

19:59 uh getting getting uh the phase 1 phase 2 phase three trials uh getting the you know the check check with the reg uh uh authority regular regularity authorities then the fourth stage is the commercialization the job stages Five stages. Then there is the cost effective model which is the full model. Majority of the project

20:49 and they know that you already have a manufacturing capability or capacity proper standardsity. why not just pay them and get get it done. So as of 31st March the company has served over 150 customers from a small biotech to large pharmaceutical companies. Okay. Uh in terms of in terms of the uh company's operation so they are very integrated fully integrated in uh innovationled technologydriven uh company which are offering end to-end product services across the different value chain. Discovery services discovery. Then there is preclinical

21:34 discovery. Then there is drug development and manufacturing drug. phase one, phase 2, phase three and then the commercializer. Finally, specialy ingredients, probiotics, enzymes, APIs for nutritional nutritional supplements or medications. Then there is vitamin analogs. Then there is bioimilars. uh chemical synthesis small molecules they are majorly working into the custom

22:19 synthesis part GMP manufacturing the large bio bioharmaceutical therapeutic antibodies enzymes protein then there is biologics and fermentation manufacturing peptides is very common very common versus the very fastest growing right now. Then there is GLP1 which is coming in and research. They are the first in India to initiate the ADC development then state development by 31st March 2025. First play

23:08 monical antibodies or early phase of development. They have also worked on the glyolippids as an RNAi delivery platform starting in 2016 or significant achievement gene expression technologies among and very few among the you know the Indian CRDMOS capabil strategic investments. Then there is fermentation capabilities. Then there is custom synthesis capacity 247g.

23:56 Then there is another facility lab. Basically these are not facility basically a labide synthesis lab has always been profitable has always been you know very good in cash in terms of existing projects substantial part of growth it's they have matured projects from 10 to 15 years first is the uh drug discovery, then there is uh the three phases, then there is the commercial production uh production to 8 to 10 years. So they currently supplies active pharmaceutical ingredients also to the

24:42 10 major commercial molecules globally blockbuster drugs. As per them, the definition of blockbuster drugs is exceeding $1 million in sales or continuously grow which has obviously commercialized and growing very well to the pipeline 16 new molecules molecules which are in the late state development and ready ready for the filing by their customers. So these molecules represent a significant future growth engine highly probability commercialization and seeing some potentially molecules becoming some blockbuster

25:37 five One became the blockbusterion without any replacement cost. That is much more beneficial for them and much more beneficial for the NM too. Highly probable chances 16 new molecules. We might see some blockbusters or we might not see but definitely but definitely this is a fuel for the future growth or capacity start third manufacturing capacity last year start working on the fourth facility commercialization of the new molecules

26:22 as per management these margins are very sustainable 35 to 36% is what the management is saying that we can sustain over the longer period also. Unit four expansion 30 lands which is due to the company being very cash 625 net cash and has been generating cash positively approximately 300 cash per year from operations or use for the unit expansion key and the company plans to deploy over,000 crores for the purpose in next couple of years. Okay. Majority of focus company almost large base of employees 1500

27:09 engineers and scientists very much focused on the research part. Uh strategic investments in new technology platform modalities ADC peptides a bit margin pack margins should be very sustainable. 35 to 36% for the next couple of years pack margins to 22ish to 24% margins for the next couple of years is very sustainable. Continuous expansion manufacturing facility scale benefit when this C for service and FTS get get commercialized. These 16 new molecules business reputation for the top quality work which which they are doing for many couple of years. Sticky customer

28:03 they might not have the same expertise in developing the same China the supply chain issues majority of dependence Chinese inputs 20% or below compared to 60 70% for the many other pharmaceutical companies which which is another very good thing we don't have uh Chinese dumping coming in and impacting the forward growth trajectory the long-term the company should do very good the another one aspect which I want to talk about is the G gl GLP1 analog development which which is uh which Anthem is actively supporting and developing GLP1 analog products this key products

28:49 fermentation fermentation synthesis especially biosynthetic products which differentiates them from many of The customers who still rely on China and import the fermentation fragment they are doing in house 10 new peptide in pipeline especially small and emerging biotech segment almost 20% of the sale is from the new small segment their focus is on late stage discovery and early development programs customer relationship 8 to 10 years, 12 years. The word of mouth is the another keyace.

29:38 This is this product has been giving very good sales. So then if a very small company which has a vision probably will end up going to the same company and suppose company fail to say I'll tell you why because these small businesses are funded by the VC and the P uh P businesses they they tend they as a P as a VC I want my business if if it's failing to fail early usually businesses fail They have burned so much cash. the biotech giants they they end up failing

30:26 but still CXOs then they start another company does not get much affected last 5 years average growth rate is 20% historical is 24% last year margin 36% aspiration mid30s Similarly for the margins 22% employers uh uh I like the business the only issue is key the pricing is a bit too high given its whole offs uh so I think we

31:12 should we we we should apply and hold for long term uh sector is hot uh valuations are even hotter So I I don't think key there should be very high chance of listing in. I'm not sure but long-term company should do very well and be a consistent compounder for the next 3 4 years. Got it. Thanks. Yes. uh especially thanks for covering this because again want to highlight that pharma is a very very complex uh sector in itself and needs people who understand the sector. people who understand concept molecule

32:01 probability like what is possible, what is plausible, what is probable in terms of success and it in itself is a highly technical skill yet to be able to do this review um is commendable. Thank you for doing it and I understand our review in this would not be that technical because again we do not look at the farmer value chain on a day-to-day basis. uh but from what I could also sense and see uh very high level naive review on this but the way promoter spoke about the company it it just is a company which I I tend to like right because I'll tell you why because like they are like I really like companies which are helping others like

32:48 uh EDM right like uh in the gold rush uh people who sell shovels make more money than people who essentially dig for gold. Similarly, resources to be able to do these res research uh for over six seven years and to be able to do it in clean rooms etc to be able to follow all processes to be able to document and make sure highlight that these are FDA approved facilities in document formulation

33:34 hypothesis and then ham is the one who kind of does them. uh the second thing which I liked was while for others it is a like usually other companies and again I haven't read lot into pharma so can be wrong here but uh according to the promoter other companies work on FT model this company works on a service milestone based service model because of which they have seen more success and as was saying formulations research so when the drug essentially goes into commercialization that's when uh it It essentially is able to uh pick up from there and like the vendor doesn't change or commercialization maybe company which forms the basis for all stable

34:19 cash flows while the first part where they are essentially doing the um research for the companies being their partners is slightly lumpy drug second part gives them the inut sort of a business where they have very stable cash flows. But having said that the business will still come back to being evaluated on like how much is the success factor which they have in future. So if someone really understands the sector go and talk to them about the company to be able to understand about it but at a high level I was very impressed with the quality and again in terms of like there were a lot of

35:04 regular questions like why OFS why 100 why 100% offs the promoter said they have 700 cr of cash like 600 cr of 700 cr cash and 100 cr of working capital so even if you reduce that they have around 7 600 crores of cash and they are they are making 300 crores of free cash flow every year. So they don't need any cash into the company which according to me is a okay enough reason. In terms of the market also the market is valuing the company quite well like is at least from the trends that we are seeing there seems to be a lot of demand in this issue. Uh so that's a positive. I was also uh like appreciative of uh everything that I saw. I wish the valuation was cheaper. Again I haven't done the math exactly on how it would be

35:50 valued etc. But I wish it uh from the high level that I saw it had uh been priced to perfection but again that's the thing right if it's a hot commodity end of the day just 3,000 crores out of which around 800 crores would be logged so it's end of the like 2,000 crores of new paper which is coming which everyone would want a piece of. So because of which it might see some action. So I'll be applying. I'm very confused uh in terms of like spun web and uh this one. Unfortunately, I don't have the money for both. So I'll I'll have to uh do some um juggler around for the lack of a better word. But yeah, that is what my point is that I wanted to add on uh Anthem as well. Thanks Yash for covering

36:36 it. Before I move forward and we talk about expected subscription, Rohit, do you have anything to add on uh Anthem? No, no, man. Nothing. Nothing. Okay, perfect. Uh my next question and we'll probably just wrap up in the next 2 minutes is around uh expected subscription. Uh like what are you guys expecting? What is what are you doing? Are you like are you are you applying to both? Are you preferring? I know yes you might not have a opinion because you don't apply to IPS actively but now that you have uh read entham what are you doing would be I would like to know I will probably go for anthem over uh spun

37:22 web just to be able to because end of the day becomes a lottery like it the chances are so low that I might have to just prioritize anthem but what are your your views I think it's a no-brainer you'll have to apply for anthem first and then whatever is left apply probably SHNI in uh this one uh in spun web because weirdly so far the S shni BHNI has not been very far off in the issues that are closed so far. I would imagine that will start se separating and BH and I will get will become more probable than or significantly more probable and not just like 20% probability for like 3x the uh 3x the capital uh but anthem will be I mean for if you put 10 lakhs in Anthem

38:08 you'll probably have a 1x 7 1x8 chance of getting an allotment if you put 10 lakhs in uh this one in spun web you'll probably have a 1x 200 250 chance of getting so it's an absolute no-brainer I mean just if you're applying retail or HNI just apply in Anthem and whatever is left try your luck you'll probably get one IPO in the year maybe it'll be this one in SM Yep I hope this is the one in terms of like subscriptions I also feel like I feel while in if I talk about retail category I think Anthem would probably be at max like 5x four 5x so should have a decent a lotment chances and then SS

38:53 sni would have like 25 to 30 times while big sni would also probably be like 78 times is how I'm kind of looking at it. Uh but let's see how uh it evolves. Uh spun web also would probably do a 200x across all is what my ideate is but let's see. Uh can completely be wrong on these ones just looking at the subscription to be able to make a guess. Haven't really done the match. Uh but yeah that is what our review was of Anthem and of spun web. We'll try and put these uh on the YouTube channel as well before tonight so that you guys can listen uh at your own leisure. Do let us know how you uh like the show. If there's anything else that you would want us to cover and definitely go ahead and subscribe to the YouTube channel as

39:39 well. With that we'll take your leave. We'll hopefully see you next week with respect to uh the other IPOs that get opened. I know a lot of DRHPs are supposed to come in but haven't really hit. So let's see what comes in next week and then we'll see you again. Thank you so much everyone for joining. Thank you.