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Nureca Limited IPO Review and Analysis in Detail

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Basis Structure of Nureca Limited IPO

Nureca Limited is gearing up to launch its IPO in the Indian stock market. The IPO is expected to remain open for subscription from February 16-18. Nureca Limited filed its draft papers in November 2020 and it intends to raise Rs. 100 crores from the primary markets.

The Nureca Limited IPO is of the book-building nature. This means the shares that are being offered are quoted with a price band. The other kind of offering is called fixed price offering, and this is characterized by a fixed price for the shares that are on offer.

The fresh issue segment will contain shares which are being newly issued by Nureca Limited IPO. In this case, the company will utilize the proceeds to augment the working capital requirements.

As for the offer for sale segment, that includes those shares which are being sold by existing shareholders. These shares are not being diluted by the company. In this case, the transaction is between the existing shareholders and the new shareholders. The Nureca Limited IPO does not have an offer for sale segment.

The table below summarizes the details about the Nureca Limited IPO. Details about the Nureca Limited IPO share price, Nureca Limited date 2021, Nureca Limited IPO listing date and more have been included.

IPO Details

After the IPO, the Nureca Limited shares will be listed on both NSE and BSE.

About the Company

Nureca Limited was formed in the year 2016. It is primarily engaged in the manufacture of health and wellness products.

Nureca is one of the first companies in India whose distribution channel is predominantly online. From e-commerce websites and online distribution platforms to its own website www.drtrust.in, Nureca’s distribution is as innovative as its product portfolio.

In 2020, Nureca signed cricketer Rohit Sharma as the face of Dr Trust.

Customers

Nureca Limited works on a B2C business model.

Owing to the nature of its products, it comes as no surprise that hospitals take up a majority segment in Nureca’s customer portfolio.

The graph below shows the split-up in the revenue earned from different sources.

Products & Services

Nureca’s products are related to health care and wellness treatment. Marketed under three different brands – Dr Trust, Dr Physio and Trumom – Nureca distributes a range of products which offer innovative one-stop solutions to the monitoring and treatment of chronic diseases.

The image below shows the different products offered by Nureca Limited.

Infographic

Promoter Shareholding Pattern

The table below summarises the shareholding pattern of the company prior to the Nureca Limited IPO.

Promoter Shareholding Pattern 

Financial Overview of Nureca Limited IPO

The table below summarises the main financial figures of the Nureca Limited IPO over the past three years. All the figures mentioned below are in Rs. Crores.

Financial Overview

As we can see above, the financial figures show clear growth trends over the past three years. If we look at the total revenue, it has grown at a CAGR of 122.49%. As for the total assets, that has grown at a CAGR of 117.12%.

Total Revenue

When it comes to the profits after tax, the growth rate is more moderate. Over the past three years, the net income has grown at a CAGR of 41.42%.

Net Income

There are a couple of worrisome points to be noted as well. The negative net cash flow from operating activities has grown at a CAGR of above 780%. As this measure marks the actual cash generated from the primary business operations of the company, this blossoming figure raises questions about Nureca’s efficiency.

Net Cashflow

It can be that the company’s revenues are not being realized in cash. Another possible explanation for the same is that Nureca is generating more money from its other sources of income rather than from the primary operations.

Another point to note is the increasing burden of long-term debt. From Rs. 43 lakhs in 2019 to Rs. 9.77 crores in 2020 is an increase of over 2000%. If this debt burden continues to increase at this rate, it will create pressure on Nureca’s balance sheet.

Industry Analysis

The home healthcare market in India was growing steadily for the past few years. The presence of COVID-19 last year and the corresponding lockdown that proceeded drove up the demand for home healthcare products to new levels.

The market for home healthcare products in India and her neighbouring countries was valued at Rs. 20,757 crores in 2019. By 2025, this market is expected to grow to Rs. 38,920.70 crores. The average CAGR, in this case, is 11%.  

When it comes to the market structure in India, it turns out the home healthcare market is fairly unorganized. There are a large number of small players and local companies. There isn’t a centralized structure, which means the market share is extremely fragmented. This places Nureca in a unique position to capitalize on this opportunity and capture market share.

Apart from that, there is the fact that Nureca distributes its products directly to the customers through its online e-commerce platform.

If you look at the growth rate of the size of the e-commerce market, it has grown from $24 billion in 2017 to $84 billion in 2021. This marks an average CAGR of 36.78%. In India especially, at least 33% of the population resorts to online shopping as opposed to conventional shopping outlets.

Nureca’s position in the market plus its distribution channels are strategically poised for growth.

The graph below shows the demand for different products in the home health market in India and her neighbouring countries. As you can see, the demand for nutritional supplements takes the majority by a significant margin.

Market Split-Up

Nutritional products, in this case, include dietary supplements, immunity boosters, vitamins and other health-related products. This segment falls in the intersection of nutrition and pharmaceuticals. This market was sized at Rs. 17,840 crores in 2019 and it is expected to grow to Rs. 33,368 crores in 2025.

The demand for chronic disease products is, of course, fairly inelastic in nature. Owing to the steadily increasing wave of chronic diseases, this demand is expected to rise in future. By 2026, 12.5% of the population is expected to be geriatric in nature i.e. they will be above the age of 60. This means the demand for health-care products will only increase.

The graph above shows the growth in the market for chronic disease products over the years.

Chronic Diseases

Coming to the market for orthopaedic products, in 2019, it was sized at Rs. 682.80 crores. This is expected to grow to Rs. 1,162.90 crores by 2025. The predicted CAGR, in this case, is 9.2%. The graph below shows the growing market size over the years.

Orthopaedic Diseases

The growth in this market is backed by the growing geriatric segment of the population as well as the increasing number of accidents. This segment includes both rehabilitation products as well as physiotherapy products like wheelchairs, lumbar support, foot massagers, etc.

Peer Comparison of Nureca Limited IPO

There is no listed peer of Nureca Limited. So direct comparison of the company with its peers is not possible.

Strengths of Nureca Limited IPO

One of the primary strengths of Nureca is its distribution network. In a market that is mostly unorganized and fragmented, Nureca has an established presence with an e-commerce platform. Its website www.drtrust.in offers direct sales to its customers.

Apart from that, there is a strong portfolio of products that Nureca has developed over the years. The company has retained its focus on quality and innovation and has translated it to its product portfolio.

Weaknesses of Nureca Limited IPO

Nureca is a fairly small company. Based on its balance sheet and its growth rate, we can estimate the valuation of the company to be around Rs. 106 crores. If you compare this to the size of the Nureca IPO offering, it raises a few questions. The size of the offer is too large in comparison to the size of the company.

Apart from that, the company’s Board of Directors is not completely independent. The company’s promoters have the majority stake and can exercise significant control over the Board and the future operational decisions of the company.

Valuation of Nureca Limited IPO

As mentioned above, there are no direct listed peers for Nureca Limited. We will, therefore, resort to the formula given by Benjamin Graham in his famous book, The Intelligent Investor, to calculate the valuation of the company.

FY20 Profit = Rs. 6.39 crores
Growth Rate = 5%
Value = 6.39 * (8.5 + (2*5)) = 62.07 * 18.5 = Rs. 118.22 crores

According to the Intelligent Investor formula, the value derived above is the intrinsic value of the company on the basis of the earnings growth. If we consider a 10% margin of safety, the value comes out as follows.

By deduction of the margin of safety = 118.22 – 10% = Rs. 106.39 crores

As per the size of the offering, Nureca is aiming for a market capitalization of almost Rs. 400 crores. This means the Nureca Limited IPO is highly overvalued.

Frequently Asked Questions

1. How to apply in Nureca Limited IPO through Zerodha?

Simply log onto the Zerodha website or the Zerodha mobile app. Select the Nureca Limited IPO from the IPO menu. Select the number of lots and submit your bid.

2. When Nureca Limited IPO will open?

The subscription window for the Nureca Limited IPO will remain open from February 15 to February 17.

3. What is the lot size of Nureca Limited IPO?

If the Nureca Limited shares will be available in lots of 35. This means you have to bid on a minimum of 35 shares. If you want to bid on more than 35 shares, you will have to do so in multiples of 35 – that is, 2 lots for 70 shares, 3 lots for 105 shares and so on.

4. How to apply for Nureca Limited IPO?

There are two ways to apply for an IPO. You can apply either through UPI or through ASBA (net-banking). In order to apply, simply log on to your brokerage house’s website, select the IPO for which you want to apply, select the number of lots that you want to bid for, and submit your bid.

5. When is Nureca Limited IPO listing date?

The listing date for Nureca Limited shares is February 26, 2021.

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