After IT and ITeS it is the time for the biotech revolution in India. This sector is being seen as a store of opportunities by investors. Expansion plans and associated investments are being announced. Saamya Biotech (India) (SBIL) is one such player that intends to capture this opportunity.
SBIL, based at Hyderabad, was incorporated on August 13, 2002 as a 100% EOU unit. The objective of this issue is to carry on the business of manufacturing, buying, importing, exporting, and generally dealing in all types of chemicals, pharmaceuticals, drugs, and intermediates. Presently, SBIL has yet to begin undertaking any of these businesses.
The company intends to raise funds for its maiden project. SBIL intends to set up manufacturing facilities including R&D and pilot plant facility for production of active bio pharmaceutical ingredients, namely Daunomycin and hyaluronic acid – pharma grade and cosmetic grade. The company will use Rs 1 crore towards meeting the margin money for working capital requirements.
The two products SBIL intends to manufacture are used worldwide. Daunomycin can be used in the treatment of leukemia. Low molecular weight hyaluronic acid is used as a moisturiser in the cosmetic industry. High molecular hyaluronic acid weight is used as injectables in ophthalmic surgery and osteoarthritis treatments. However, both of these products are more of a commodity nature and prices are on the decline due to immense competition in global markets.
The company in the initial period will be dependent on two products and will have only one business client-Finchimica. SBIL’s 100% buyback agreement with Finchimica does not make any price reference. This entails high concentration risk. SBIL at the same time does not have any prior experience of any business and carries the risks associated with project execution. ICRA has assigned grading 1, denoting poor fundamentals to the initial public offer of the company.
State Bank of India has appraised the project as it is extending Rs 5 crore as a term loan for the project. The promoters have contributed to the extent of Rs 8.08 crore by subscribing to equity shares at par. The issue is underwritten by Enam securities along with UTI securities and Saffron capital advisors. The issue, though available at par and the presence of Biofin – the strong technology supplier of SBIL – the issue is a high risk one and should be considered accordingly.
