Sudeep Pharma IPO: Premium Excipient Player Eyes Growth - Should You Subscribe?

At a Glance

Company and Its Business Operations

Sudeep Pharma Limited, incorporated on December 21, 1989, transitioned from a private to a public company on October 21, 2024. Headquartered in Vadodara, Gujarat, the company manufactures pharmaceutical excipients, food-grade minerals and specialty nutrition ingredients, supplying to over 100 countries.

It operates six manufacturing facilities—three in India (Nandesari I, Nandesari II, Poicha) and one in Ireland—with a combined capacity of 50,000 MT. Its portfolio includes over 200 mineral-based products spanning calcium, magnesium, iron, zinc, potassium and sodium.

The company has five subsidiaries:
• Two Indian subsidiaries (Sudeep Nutrition Pvt Ltd; Sudeep Advanced Materials Pvt Ltd)
• Three foreign subsidiaries (USA, Netherlands, Ireland)

As of December 31, 2024, Sudeep Pharma employed 704 permanent staff. In May 2025, it acquired Nutrition Supplies and Services Ireland Limited for Rs 1.4 crores, expanding its European footprint.

Industry Outlook

The pharmaceutical excipients industry is experiencing robust growth globally as well as in India. The global excipients market, currently valued at Rs 86,320 crore in 2024, is projected to reach Rs 1,07,900 crore by 2029 at a 4.7 per cent CAGR. In comparison, the Indian excipients market, estimated at Rs 7,105 crore in 2024, is expected to expand at a much stronger 11 per cent CAGR through 2029.
The micronutrient premixes market is also growing steadily, with the global market rising from Rs 57,270 crore in 2024 to Rs 80,510 crore by 2029 at a 7.2 per cent CAGR, while the Indian segment is expected to grow from Rs 5,354 crore to Rs 7,868 crore at an 8 per cent CAGR.
Similarly, the granulated minerals market globally is projected to increase from Rs 2,299 crore in 2024 to Rs 3,229 crore by 2029 at a 7 per cent CAGR, whereas the Indian market is poised for much faster expansion, rising from Rs 465 crore at a strong 12 per cent CAGR.
This significant gap in growth rates between global and domestic markets clearly indicates favourable industry tailwinds for Sudeep Pharma, particularly within India’s rapidly expanding excipients and nutrition ingredients ecosystem.

Objects of the Issue

Fresh Issue Proceeds Utilisation:
• Rs 75.81 crore for machinery procurement at Nandesari Facility I
• Remaining funds for general corporate purposes

Offer for Sale (OFS): Rs 800 crore (proceeds go to selling shareholders)

SWOT Analysis

Strengths

• One of only nine global companies with CEP and WC certifications for Calcium Carbonate as an API
• High profitability: EBITDA margin 39.7 per cent, PAT margin 27.63 per cent in FY25
• Presence across 100+ countries, strong EU/US footprint
• Wide portfolio with 200+ products across excipients, minerals and nutrition
• Active R&D: 2 facilities, 41 personnel, 420+ projects over 3 years
• Strong balance sheet: D/E ratio 0.20, RONW 27.88 per cent in FY25

Weaknesses

• India imports ~80 per cent of its excipient requirements → supply chain vulnerability
• Limited domestic market share against global giants controlling ~85 per cent of supply
• Exposure to raw material volatility
• High forex exposure due to the export-led model

Opportunities

• Indian excipients market growing at 11 per cent CAGR vs global 4.7 per cent
• Outsourcing demand rising as US/EU manufacturing costs increase
• Strong global growth in functional/advanced excipients (8–10 per cent CAGR)
• Nutraceutical, dietary supplement and functional food markets are expanding
• India’s biopharma/biosimilar push is increasing demand for specialised excipients

Threats

• Lengthy multi-jurisdictional regulatory approval cycles
• Competition from multinational giants (BASF, Ashland, Evonik, Roquette, Dow Corning)
• High regulatory compliance burden
• Customer hesitation in switching suppliers
• Potential regulatory shifts in global food/pharma fortification standards

Financial Performance

(a) Profit & Loss (Rs crore)

(b) Balance Sheet (Rs crore)

(c) Working Capital & Metrics

6. Peer Comparison

Sudeep Pharma has no direct listed peer in India, given its niche focus on mineral-based excipients and specialty nutrition ingredients.

Valuation Snapshot (FY25):

Outlook & Relative Valuation

Sudeep Pharma holds a distinctive position in a rapidly expanding industry, supported by strong regulatory moats such as dual CEP and WC certifications, a broad portfolio of over 200 products and an extensive global presence. Its financial performance is equally impressive, with an exceptional EBITDA margin of 39.70 per cent, PAT margin of 27.63 per cent, RONW of 27.88 per cent and a robust net profit CAGR of 49.21 per cent between FY23 and FY25. However, these strengths are overshadowed by serious concerns surrounding the company’s working capital structure and earnings quality. Despite a presence across 100+ countries, a strong R&D foundation with 41 personnel and 420 projects, and conservative leverage with a D/E ratio of just 0.20, the company is grappling with critical weaknesses. Receivables have grown at a 25.53 per cent CAGR, nearly 5.7 times the pace of revenue, while inventory has risen at a 27.93 per cent CAGR, over 6.4 times revenue growth, signalling mounting working capital stress. Cash conversion remains poor, with CFO growing at only 0.23 per cent against revenue growth of 5.4 per cent, and CFO declining 25.8 per cent YoY despite healthy profits. Adding to this, valuation appears stretched with a P/E of 44× and P/B of 8.24×, raising concerns about sustainability at current price levels.

Recommendation

The Sudeep Pharma IPO appears unattractive at the upper price band of Rs 593 due to fundamental concerns that outweigh its growth narrative. The company’s working capital cycle is expanding at 5–6 times the pace of revenue growth, indicating structural inefficiencies, with nearly Rs 2.7 getting locked for every Re 1 of incremental revenue—a major red flag. Additionally, the decline in CFO despite strong reported profits points to weak earnings quality, suggesting poor cash conversion, stress in receivables collection and early signs of operational strain. Post-listing, investors must closely track CFO stabilisation, contraction in receivables/DSO, improvement in inventory turnover and a healthier earnings quality ratio (CFO/PAT) of at least 60 per cent. Until these core metrics show meaningful improvement, the stock carries a high probability of correction, making it prudent for investors to wait for more attractive valuations or demonstrable operational improvement.