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Tarsons Products IPO opens today: Here’s what brokerages are recommending

New Delhi: As the IPO spree continues on Dalal Street, Tarsons Products will launch the subscription to its Rs 1,023-crore share sale on Monday. The issue is open for subscription till Wednesday, November 17.

Incorporated in 1983, Tarsons Products is a leading Indian life sciences company with more than three decades of experience in the production and supply of labware products.

The issue of Tarsons Products is a mix of fresh equity shares worth Rs 1,500 crore, with a face value of Rs 2 each, and an offer for sale (OFS) of 13,200,000 equity shares aggregating to Rs 873.47 crore by existing shareholders. The company is selling its shares in the range of Rs 635-662. Investors can bid for a minimum of 22 shares and in the multiples of thereof.

Tarsons Products is raising funds for repayment or prepayment of full or partial borrowings of up to Rs 78.54 crore, to fund the capital expenditure for a new manufacturing facility at Panchla, West Bengal, and also for general corporate purposes.

Majority of the brokerages are positive over the issue of the Kolkata-based company and have suggested investors bid for the issue for listing pop and long-term gains.

Marwadi Shares and Finance, which has a subscribe rating on the issue, said considering the TTM in June 2021 adjusted EPS of Rs 16.30 on post-issue basis, the company is going to list at a P/E of 40.61 with a market cap of Rs 3,522.3 crore. “The company is a leading Indian supplier to the life sciences sector with strong brand recognition quality products, and provides a diverse range of labware products. It is available at reasonable valuation on an absolute basis,” it added.

Tarsons Products has raised Rs 305.96 crore, allotting 46,21,757 equity shares, from 32 anchor investors at the upper price band of Rs 662 per equity share.

The company has robust financials and strong return ratios. After the IPO, the company would become free of debt, said Canara Bank Securities, with a recommendation to subscribe the issue for listing as well as long-term gains. “On the back of growing the labware industry and being a key industry supplier, the company has potential to grow business going forward,” it added.

The company manufactures a range of quality labware products that helps advance scientific discovery and improve healthcare systems, used in various laboratories across research organisations, academic institutes and pharma companies. Its product portfolio is classified into three broad categories — consumables, reusables and others. The company has a diversified product portfolio with over 1,700 SKUs across 300 products.

Tarsons Products is the beneficiary of the Covid-19 pandemic. With respect to its performance in FY20, its business and profitability increased drastically in the pandemic year, said Choice Broking, which has given it a subscribe with caution rating. The brokerage said the current business growth and profitability expansion were not sustainable. “There is a respectable import market for the company to capture and also a huge export opportunity arising from the China-plus-one strategy,” it added.

Tarsons Products is a leading player in the plastic labware market. The company had about 12 per cent market share in laboratory consumable and life sciences industry in 2020, according to Frost & Sullivan.

The life sciences industry is growing at a rapid pace on account of advancements in the field of scientific research. Religare Broking said the need for various types of equipment across laboratories and the increasing trend of research-based studies was driving the global demand for laboratory equipment. “It has a wide geographic reach through its pan-India sales and distribution network. Going forward, it intends to expand its product portfolio, enhance its manufacturing capacities, and increase its global footprint,” it added.

The revenue of the company has jumped to Rs 234.3 crore from Rs 184.7 crore during 2019-2021, whereas the bottom line zoomed Rs 68.9 crore from Rs 39 crore.

The margins of the company have grown significantly on the back of falling debt. Tarsons products limited was a company with great brand awareness and high-quality goods, said Swastika Investmart. “The company aims to be debt-free after the IPO and is planning for capex which will further increase the revenues. The IPO is arriving at attractive pricing,” it added, with a subscribe rating for listing gain and long term.

There are no listed entities whose business portfolio can be compared with that of the company’s business and its scale of operations, said brokerages.

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