IPO closes on 25 Nov'25
Sudeep Pharma Ltd
Minimum Investment
₹ 14,825 / 25 shares
Our Verdict:
Avoid
- Sudeep Pharma Ltd (SPL) presents an impressive financial profile with a strong EBITDA margin of ~40%, a PAT margin of ~28% and a remarkable net profit CAGR of 49% between FY23 and FY25. While these metrics demonstrate the company’s profitability, there are some concerns that overshadow its operational strengths.
- One of the primary issues is the company’s expanding working capital cycle, which is growing at a rate 5–6 times faster than its revenue growth. This suggests underlying inefficiencies in its operations that could affect future performance.
- Moreover, despite strong reported profits, the decline in Cash Flow from Operations (CFO) raises alarms about the quality of earnings. The weak cash conversion and potential difficulties in receivables collection further highlight concerns about the firm’s operational efficiency.
- From a valuation standpoint too, the IPO appears fully priced, with a P/E ratio of 46x FY25 earnings. This leaves little room for significant short-term upside. Any potential listing gains will likely be driven more by market sentiment than the company’s fundamentals.
- On the macroeconomic front, the pharma and food ingredients industries hold strong potential, especially considering the excipient market. Over 80% of excipients used in India are imported, with China being a major supplier, presenting a promising opportunity for import substitution. Additionally, the company’s entry into the battery-grade phosphate market could drive long-term growth, although this is still an evolving space. Investors should carefully watch how this segment develops.
- Given the company’s weak cash flows and operational challenges, it would be prudent for investors to wait for signs of operational stability and post-listing before making any investment decisions. While the long-term potential is promising, the current concerns warrant a cautious approach.
About the company
Founded in
21 Dec'89
Managing director
Sujit Bhayani
- SPL is a manufacturer of excipients and specialty ingredients serving the pharmaceutical, food and nutrition industries. Excipients are inactive yet crucial components that ensure the stability, form and proper dissolution of medicines, while specialty ingredients are functional additives that enhance the quality, texture and performance of food and nutrition products. It also plans to expand into the battery chemicals sector.
- SPL operates 4 manufacturing facilities with a combined annual capacity of 72,246 MT, alongside 2 R&D facilities. In Q1FY26, the pharmaceutical, food and nutrition segment contributed 66% to total revenue, while the specialty ingredients segment accounted for 34%.
STRENGTHS
- Global Reach: SPL operates in approximately 100 countries across key regions, including the United States, South America, Europe, the Middle East, Africa and Asia-Pacific, as of June 30, 2025. In Q1FY26, India contributed 41% to total sales, with exports making up the remaining 59%.
- Steady Growth: Revenue from operations has grown at a CAGR of 8% between FY23 and FY25. During the same period, EBITDA expanded at a remarkable CAGR of 42%, while net profit saw a substantial growth of 49% CAGR.
- Strong EBITDA Margin: With an EBITDA margin of approximately 40% in FY25, SPL stands out in comparison to major players in the chemicals, pharma and FMCG sectors.
- Diverse Clientele: As of June 30, 2025, SPL serves over 1,100 customers. Its prominent clientele includes industry leaders such as Pfizer, Intas, Mankind Pharma, Merck, Alembic Pharma, Aurobindo Pharma, Cadila, Micro Labs and Danone. The average relationship tenure with its top 5 customers is 7.08 years, reflecting strong client retention.
- Exclusive Certification: SPL is the only company in India and one of only nine companies globally to hold the Council of Europe’s (CEP) certification of suitability. This certification, along with written confirmation, allows SPL to sell calcium carbonate as an API in the European Union as of June 30, 2025.
- Battery Chemicals Opportunity: SPL has established a subsidiary, Sudeep Advanced Materials Pvt Ltd, to enter the precursor cathode active materials (pCAM) market for Lithium-ion batteries. It aims to leverage its expertise in mineral chemistry to manufacture battery-grade iron phosphate for lithium iron phosphate batteries.
RISK FACTORS
- Client Concentration: SPL’s revenue is heavily dependent on a few large clients. The top 10 clients contributed 41% of operating revenue in FY25, while the top 5 accounted for 30%. Any loss or reduction in business from these major clients could materially impact revenue and overall financial performance.
- Geographic Concentration: 3 of the 4 manufacturing facilities and 1 of the 2 R&D facilities are located in Vadodara, leading to significant geographic exposure. Any adverse regional developments could disrupt operations and negatively impact business continuity.
- Export Dependency: Exports contributed 59% of SPL’s operating revenue in FY25, with North America alone accounting for nearly 23%. Unfavourable trade developments such as tariffs, restrictions or anti-sourcing regulations in key markets may adversely affect revenue growth and profitability.
- Cash Flow Concerns: SPL reported negative cash flow from operating activities in Q1FY26. Sustained negative cash flows could strain liquidity, affect day-to-day operations and weaken financial flexibility.
- High Attrition: The attrition rate has increased from 26.73% in FY23 to 30.45% in FY25. Continued high attrition of skilled talent can lead to rising recruitment costs, reduced productivity and operational inefficiencies.
- Trade Receivables Risk: Trade receivables were Rs 187.58 crore in Q1 FY26 (150% of operating revenue) and Rs 185.35 crore in FY25 (37% of operating revenue). High receivable levels expose the company to counterparty credit risk. Delays or failure in collections may adversely affect working capital and financial results.
Financials
All Values are in Cr.
Issue details
Issue type
Mainstream
Issue size
₹ 895 crore
Fresh Issue
₹ 95 crore
OFS
₹ 800 crore
Price range
₹ 563 - 593
Lot size
25 shares
Issue Objective
The fresh proceeds from the net issue will be utilised towards the following purposes:
- Procurement of machinery for the production line at Nandesari Facility I; and
- General corporate purposes.
Dates
Bidding open
21 Nov'25
Bidding close
25 Nov'25
Allotment date
26 Nov'25
Refund date
27 Nov'25
Listing
28 Nov'25
IPO Reservations
Qualified institutional buyers
<50%
Non-institutional investors
>15%
Retail individual investors
>35%
Read the Offer Document
© 2025 by Liquide Solutions Private Limited, SEBI Registered Research Analyst (Registration number - INH000009816)
This document has been issued by Liquide Solutions Private Limited for information purposes only. It does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this document. Investors should seek personal and independent advice regarding the appropriateness of investing in any of the funds, securities, other investment or investment strategies that may have been discussed or referred herein and should understand that the views regarding future prospects may or may not be realized. In no event shall Liquide Life Private Limited and / or its affiliates or any of their directors, trustees, officers and employees be liable for any direct, indirect, special, incidental or consequential damages arising out of the use of information / opinion herein.