Expensive antibiotic

Parabolic Drugs, a Chandigarh-based manufacturer of active pharmaceutical intermediates, is planning to raise Rs 200 crore from the primary market. Of this about Rs 180 crore will be used to fund its expansion plans and repay debt while the rest will go to investors such as BTS and Alden which are planning to exit their holdings in the company. The offer is open for subscription till June 17.

Parabolic derives its revenues from second and third-generation cephalosporin and semi-synthetic penicillin antibiotics. With key players in this area such as Orchid, and Aurobindo having tied up with players such as Hospira and Pfizer, the company believes that its expertise in this area would help expand its presence.

The company has entered into a tie-up with the other major player in this space, Ranbaxy and will be manufacturing two products exclusively for the pharma major.
 

GOOD SO FAR
In Rs crore	FY10*	FY11E
Net Sales	461.0	576.3
Ebitda	95.0	118.8
Net profit	28.0	33.6
P/E  (x) at 85	-	13.1
at 75	-	11.6
*annualised; E:Estimates

On the financial front, expansion of its geographic presence in 45 countries including regulated markets, improving cephalosporin product mix and client base has helped it to grow its sales annually by 68 per cent between (FY05 and FY09) and profits by 60 per cent over the same period.

The company may face competition from existing CRAMS companies for a share of the pie going ahead. At the price band of Rs 75-85 the stock is being valued at about 11.5 times its 2010-11 earnings estimates at the lower end of the price band which, analysts believe, is demanding considering that a much larger player such as Nectar Lifesciences is available at 5 times its 2010-11 earnings estimates.