IPO ANALYTICS

by Research and Innovation Lab

NAVANA PHARMACEUTICALS LIMITED

IPO Summary RIL Investment Rating

Total Capital Raised (BDTmn) 750 Score 2.8 (Out of 5)
Pre IPO Paid Up Capital (mn) 802 Interpretation The company falls to Below Average Grade
Post IPO Paid Up Capital (mn) 1,073
Authorized Capital (mn) 2,000
Face Value 10 Company Background
Cut-Off price(TK) 34
Offer Price (Tk) 24 Incorporation Date 31/03/1986
Trading Code NAVANAPHAR Company Status Public Ltd.
Subscription Open 13-Sep-22 Office Location 125/A, Motijheel C/A, Dhaka
Subscription Close 19-Sep-22 Subsidiary Status Nil
Credit Rating AA
Product Lines

Issue Manager EBL Investments, AT Capital The company is engaged in manufacturing , marketing and
distribution of pharmaceutical products for human & animal health
Production Capacity Utilization as of 2021 products .
Product Line Actual Utilization
Output Market: Input Market:
Variety of Pharma Products 94%
Domestic & Foreign Market Foreign Market

Capacity Utilization (2021) IPO Fund Utilization Plan

120% IPO Expense
100% 4%
9%
80% 12% Partial loan 31%
60% repayment
28%
40% 91% 88% 104%
20%
0% Construction of
new Utility and
-20% Tablets & Ointments & SVPO -4% Engr. Building
Refurbishment of
Capsules Gel Cephalosporin Unit
13%
24%
Utilized Unutilized

Industry and Market Facts

Navana Pharmaceuticals Limited The "PHARMACEUTICALS INDUSTRY" Fact Sheet

+ Revenue comes from local sales & export + Global Market Growth : 3.46%
+ HQ Location: Motijheel, Dhaka + Domestic Market Growth : 12%
+ Seasonal Impact: Nil + Current Local Market Size : $3 billion
+ Major Competitors are: Square Pharma ,Beximxo, + No. of Registered Companies : 257
Renata,Incepta etc. + Market Leader : Square Pharma
+ Major Customers provides 10% or more revenue: Nil + R&D for Patent Development : Nil
+ Utilities: Power, Gas and Water + Last Year Export Growth : 27%
+ Total no. of Employees : 2,685 + Consumption met by Local Products : 98%
 Return on Equity Net Profit Margin

Peer Companies Navana Pharma Peer Companies Navana Pharma

12.0%

12.0%
10.6%
15.0%

15.0%

14.1%

5.6%
4.4%
6.1%
4.4%

2.9%
2.7%

2019 2020 2021 2019 2020 2021

Analyst Note: The company generated lower shareholders' returns than its peer companies during in past three years which is
reflected in the graph-1. This indicates that the company failed to generate value to the shareholders than its peer companies.
As per the graph-2, the company generated much lower Net Profit Margin than its peer companies during the FY2019-21
which signifies a poor financial performance than its peer companies. These interpretations are an important factor that
should be taken into account while making any investment decision.

Industry Dimensions
Bargaining Power of
Threat of New Entrants LOW Buyers
HIGH
+ Opportunity of good profitability + As exporter the company to face competition,
+ Availability of finances by Bank Loan & IPO foreign buyers have bargaining power
+ Substantial capital investment required
INDUSTRY RIVALRY
MODERATE
Bargaining Power of
Threat of Substitutes LOW Suppliers
MODERATE
+ There are many substitute generic drugs
produce in Bangladesh + Suppliers enjoy moderate bargain power
+ Competitors have already expanded its + Availability of suppliers worldwide at
presence in the industry to greater extent competitive price

SWOT Assessment of Navana Pharmaceuticals

Strength Weakness

+ Strong R&D skills + High upfront investment impacting short term profitability
+ Experienced and credible management team + Lack of high level brand recognition

Opportunities Threats
+ Rising Demand for Pharma products in in + TRIPS policy may push its cost & restrict it to penetrate in
international markets global markets at full swing after FY 2032
+Scope to penetrate in new markets + Volatility of raw material price induced by FOREX volatility
Risk Factors: Analyst Note
+ Due to strong competition in the pharma industry, it may be difficult for the company to maintain its growth &
to gain competitive advantage over the competitors;
+ Cash generation capacity as % of revenue is very low which creates liquidity problems in future;
+ Recent global economic crisis backed by Russia-Ukraine War may adversely affect its revenue and cash flows;
+ Innovative solution developed by the competitors could be a serious threat for future;
+ Interest rate volatility of Bank loan may push its finance cost higher & lower profitability in result;
+ Potential changes in national and international regulations may affect its long term prospects.

Statistical Measures for Risk Assessment

Metrics Sales Net Profit
Moderate
Standard Deviation 451 58
Co-efficient of Variance 14% 42% Business Risk

Management Capability
Name of Directors Position Education Experience in Years Line of Experience
Mr.Anusuzzaman Chy. Chairman Business Graduate 27 Various Industry
Dr. Md.Jonaid Shafiq MD M.B.B.S, Ph.D. 39 Various Industry
Mr.Imrana Zaman Chy Director MBA 20 Various Industry
Mr.Manzurul Islam Director Undergraduate Degree 38 Various Industry
Dr.Zahara Rasul Director M.B.B.S, FCFP 13 Various Industry

Financial Performance 2022(Mar) 2021 2020 2019 2018 HAVE A LOOK

Turnover (BDT mn) 3662 3607 3149 2971 2581 + Ve
Gross Profit (BDT mn) 1621 1627 1416 1334 1157
Assets Growth 11%
Operating Profit (BDT mn) 202 289 193 141 113
NPAT (BDT mn) 192 202 137 85 77
Equity Growth 2%
Total Assets (BDT mn) 7165 5220 4451 4498 4693
Total Equity (BDT mn) 3492 3304 3102 3105 3251
2.7% 3.3% 2.8% 1.9% 1.7%
Sales Growth 17%
Return on Asset Ratio (%)
Return on Equity Ratio (%) 5.5% 6.1% 4.4% 2.7% 2.4% Debt-Equity Ratio
Debt to Equity Ratio 3.3% 4.0% 0.7% 1.8% 2.5%
indicates lower
ROIC 5.0% 5.5% 4.3% 2.6% 2.3%
Diluted EPS (BDT) 2.39 2.52 1.71 1.06 0.95 financial risk
NAV/share (BDT) 43.53 41.19 38.67 38.70 40.52 - Ve
PE at Offer Price 10.04 9.52 14.01 22.64 25.14
Low profitability (ROA,
Cash Flow Performance 2022(Mar) 2021 2020 2019 2018
Cash to CL 2% 4% 16% 10% 7% ROE & ROIC)
Critical Needs Coverage 6% 8% 22% 17% 14%
Cash Interest Coverage 40% 77% 220% 124% 95% Poor Cash Flow
Cash to Sales 2% 2% 6% 4% 4%
Cash to Capital Employed 2% 2% 6% 4% 3% No Dividend History
Dividend Payout 0% 0% 0% 0% 0%
Company Auditor MABS & J partners, Chartered Accountants

Analyst Notes
+ The lower Debt to Equity ratio indicates that it carries lower degree of financial risk;
+ Return on Invested Capital (ROIC) remains at a dissatisfactory level compared to opportunity cost of capital;
+ Cash Flows are very poor as % of revenue which indicates poor level cash generation ultimately ;
+ The company generated poor shareholders' returns in comparison to cost of equity meaning value erosion;
+ The company's equity growth is lower than its asset growth reflecting the liabilities are increasing over time.
Particulars 2022-Q3 2021
Non-growth assets as % of Total Assets 14%
Cash to Current Liabilities 2% 4%

Analysts Notes:

+ The company has significant amount of non-growth assets in it's balance sheet that may not be able to bring any direct
monetary benefits either currently or potentially;
+ The company's has poor cash balance to meet the current obligation as per the cash ratio of 2021 & 2022-Q3;
+ The cash conversion cycle for the year of 2021 and 2022-Q3 were in higher side which indicates that the company may
face working capital difficulty in the future.

RIL Investment Rating

Metrics Score Comment

Management Capacity 3 Management has a few years of experience
Financial Performance 1 Poor, based on profitability and cash flows
Potential of Industry & Business Growth 4 Highly competitive industry with good potential
Planned Use of IPO 3 Most of the money will go for Capex
Risk Assessment 3 Moderately risky as per the Risk Analysis
Average Score 2.8 The company falls to Below Average Grade

Rating Bar:

Poor- 1 Below Avg-2 Average-3 Good-4 Very Good-5

General Rating indication:

Score <3 : the company falls in NON-INVESTABLE grade;
Score 3 to 4 : the company falls in INVESTABLE grade;
Score 4 to 5 : the company falls in HIGH INVESTABLE grade.

All Data are sourced from the Prospectus of the company and RIL's own data bank.
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Disclaimer: This publication is produced by Research and Innovation Lab at Royal Capital Limited RCL) solely for the information of Clients of RCL.
Clients are expected to make their own investment decisions using any information contained herein. The contained info in the report do not be
interpreted as an offer to sell, or a solicitation of any offer to buy any investment. Projections of potential risk is based on published information but
does not guarantee of any actual risk or return to be materialized.