Advanced Enzyme Technologies IPO: A Growth Catalyst

Enzyme manufacturing company Advanced Enzyme Technologies (AETL) will soon be tapping the primary markets to raise funds. The company has already filed its DRHP with the SEBI.

The said IPO will include both fresh issue and offer for sale (OFS). The fresh issue aggregates to Rs 200 crore, but the company has not disclosed the number of equity shares for this portion as yet. The OFS portion includes up to 37 lakh equity shares which are offered by the promoter group and selling shareholders.

The issue has a reservation of one lakh equity shares as the employee portion and remaining will be the net issue to the public. The offer will be based on the book building method, for which the lead managers are ICICI Securities and SBI Capital Markets.

AETL is a research-based company incorporated in the year 1957. It is engaged in the research, development, manufacturing and marketing of enzyme products. The company mainly operates in two business verticals, viz. healthcare & nutrition and bio-processing. It has developed more than 400 enzyme products from 55 enzymes. Its product list includes human nutrition, animal nutrition, food processing, dairy processing, baking, cereal extraction, biomass processing, textile & leather processing, bio-fuels and bio-catalysis, etc.

Currently, AETL has four fully-integrated R&D laboratories, three in India and one quality control R&D in California, USA. Along with this, it has four manufacturing facilities in India, three located in Maharashtra and one in Madhya Pradesh. The company has a step-down subsidiary in Chino (also in California) which serves as satellite blending, mixing and formulation facility to cater the North American market.

In India, AETL has a long customer list which includes Nestle India, Abbott Healthcare, Cipla, Sanofi India, Torrent Pharmaceuticals, etc. It also has a huge market presence outside India, catering to Europe, Japan, North America, South America and South East Asia-Pacific. Higuchi Inc., Stockmeier and BASF Personal Care & Nutrition GmbH are some of AETL’s international clients.

The healthcare & nutrition segment is the major revenue driver for the business, generating over 70% revenue, while the remaining is derived from the bio-processing segment. On a consolidated basis, AETL’s topline grew by 45% in FY12 to Rs 174.6 crore from Rs 120 crore in FY11. During the same period, its bottomline grew by 104% to Rs 34 crore. Higher material costs and an increase in employee expenses pushed up the company's total expenses by 25% on a YoY basis in FY12 to Rs 126.5 crore.

AETL intends to use the funds raised through this issue for Phase-III expansion at its Indore plant (Rs 43 crore including plant and machinery expenses, operative expenses and other work), as also to establish an R&D centre at Nashik and Thane (at an outlay of Rs 43 crore and Rs 37 crore respectively), and to set up an R&D and manufacturing plant in its step-down subsidiary, Cal India Food International (Rs 21 crore). It also intends to invest a sum of Rs 10 crore for further acquisitions and other strategic initiatives.

In the present scenario, Indian consumers are choosing nutritious and healthy food products, and this creates a good opportunity for the company. AETL is the second largest player in its sector domestically, next to Novozymes (the world's largest enzyme company). These factors will definitely benefit the company when it comes out with its IPO.

The price band and minimum bid lot size for the issue have not been declared so far. Keep watching this space for further issue-related details.