First SME IPO of 2023 scheduled to open on February 21 at a fixed price of ₹27

Patron Exim is a member of a large group of businesses that also includes Cedac Medicorp, Evoque Remedies, Earum Pharmaceuticals, Auxilia Pharmaceuticals, Madrid Diamonds, Atlantis Exim, N G Overseas, and many others. The Group of Companies operates primarily in the pharmaceutical, chemical industries and adjacent industries.

Patron EXIM acquires, manufactures, and distributes surgical and non-surgical products, active pharmaceutical ingredients (APIs), drug intermediates, Medical Pharmaceutical Chemicals, bio-chemical product preparation & formulation, and other products for the international and domestic markets. In addition to 20 years of business experience and a vast array of certifications, the company has a diversified product portfolio, seasoned promoters, and a high level of client satisfaction in order to conduct business efficiently in the International markets.

The majority of their customers are direct suppliers to corporations such as Johnson & Johnson, Dr. Reddy, Cipla, Sun Pharma, Torrent Pharmaceuticals Ltd, Pidilite Industries, Akzo Nobel India, British Paints India Pvt. Ltd., Vaseline, etc.

The Fixed Price Offering will be priced at ₹27 per share, with an issue size of  ₹16.69 Crores. The proceeds from the public offering will be used for operating capital, general company objectives, and public issue costs. The initial public offering was priced at ₹27 per equity share, based on a Face Value of ₹10 and a NAV of ₹17.

Patron Exim also takes up government contracts & had carried out business during Covid-19. They supplied raw materials to all of the major Indian pharmaceutical companies and are on the government’s list of important businesses. During Covid -19, i.e., throughout the lockdown period, they had conducted commercial operations without incident.

Although Patron Exim had generated a substantial amount of income during the Covid-19, the company’s profit margins were unable to withstand the competition. Instead of purchasing and selling the goods, the company decided to act as a commission agent and charge the commission, which resulted in excellent financial returns with a net profit increase of 6500% from Rs. 2.2 lakhs in March 2020 to Rs. 2.28 crores in November 2022, and revenue nearly doubling every two quarters from Rs. 5 crores in March 2022 to Rs. 10.54 crores in November 2022.

The company’s P/E ratio is 11.25, which is lower than the industry average of 22.73, and its EPS is ₹5.84, which is expanding exponentially every quarter. The RoNW is 8.94% and the company’s net worth has increased by 525 percent from Rs. 2.6 crores in 2020 to Rs. 16.25 crores in 2022. Given the decreased P/E ratio and rising EPS, Networth, and RoNW, the company exhibits strong and consistent growth, which, when combined with its industry, makes it recession-proof. Moving to the commissioning model raised profit margins by 70% and decreased dead inventory/stagnant inventory time, both of which are essential for any trading and pharma-related organisation.

The company had always remained profitable irrespective of the situation and after they had switched to the commissioning model we could see a massive jump in EBITDA in 2022, i.e of 142% from 2021 to 2022. If a company has a higher EBITDA margin, that means that its operating expenses are lower in relation to total revenue, which ultimately increases the PAT even if the revenue stays stagnant or declines. 

Patron Exim has a pending order book worth ₹23 crores that is likely to be delivered during the following quarter, indicating a lucrative quarter is in the works. Also, the company has secured new distributors in Canada and Eastern Europe, which will ultimately increase the company’s export reach in the coming years.

Nikhil Bhatt (SEBI Registered) of Investment Point rates Patron Exim’s IPO as “Subscribe for Long Term.”