Introduction:
After a steady performance in the first quarter of FY 2023-24, the IPO market in India has gained traction in the second quarter. The upcoming launch of multiple Initial Public Offerings (IPOs) promises an exciting year ahead for investors.
One such company, Hexagon Nutrition Ltd., has received a green signal from the market regulator to release its upcoming IPO 2023 on the Indian stock exchanges. The company filed its preliminary papers with the Securities and Exchange Board of India (SEBI) in December 2021 to raise approximately Rs. 600 crores through the capital market. Let’s evaluate whether this IPO is worthy of your attention as a potential investor or not.
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About the company
Hexagon Nutrition Ltd. is a fully integrated and research-oriented company offering holistic nutritional and nutrition-enhancing products. Its product portfolio comprises clinical nutrients, micronutrient premixes, and therapeutic nutritional products. The company has a pan-India presence and supplies its products to more than 70 countries, including UAE, Qatar, France, Russia, Brazil, and Malaysia.
Hexagon was founded in 1993 as a micro-nutrient formulations business with its headquarters in Mumbai. Now, it is well known in the industry as the developer of brands “PENTASURE”, “OBESIGO”, and “PEDIAGOLD”. It has three manufacturing facilities in India at Nasik in Maharashtra, Chennai, and Thootukudi in Tamil Nadu.
Strengths and Weaknesses
Let’s evaluate the key strengths and weaknesses of Hexagon Nutrition Ltd. to understand it better:
Strengths
- One of India's premier wellness and clinical nutrition companies
- A trailblazer in the micronutrient premix formulation business in Southern Asia
- A long list of marquee clients across the world has led to recurring orders and stable revenues
- Known for its excellent R&D capabilities and innovations
- Manufacturing facilities are equipped with state-of-the-art equipment to ensure quality and safety
- Pan-India omnichannel distribution with extensive regional distributors in all parts of the country
- Excellent track record of strong financial performances
Weaknesses
- Heavy reliance on the premix formulation business and some established customers in that segment for revenues
- The absence of long-term contracts with third-party vendors can result in a supply shortage during high demand
- The government tightly regulates business. Any change in government’s policies can bring an adverse impact
- Heavy dependence on regional distributors and third-party logistics providers for product distribution
- Unfortunate supply of expired or defective products can harm the company’s reputation and can bring down its revenues quickly
- A cut-throat competition in the industry in which the company operates
Financial Snapshot
The financial snapshot of Hexagon Nutrition Ltd. paints a very favorable picture for investors. As of September 2021, the net worth of the company stood at Rs. 153.10 crores, and the total borrowings were Rs. 24.4 crores. It reflects the company’s ability to operate on its own capital instead of relying heavily on external sources.
Regarding operational performance, the company achieved a total income of Rs. 126.9 crores during the Financial Year 2020-21. Tax-adjusted profit of the company for the same period stood at Rs. 15.2 crores. Below is the table depicting Hexagon Nutritional Ltd.’s financials as per its draft red herring prospectus:
|
Particulars (In Millions)
|
Period ended Sept. 2021 (Rs) |
As of and For FY Ending March 31 |
| 2020 (Rs) |
2019 (Rs) |
2018 (Rs) |
| Total Equity |
111 |
111 |
111 |
111 |
| Net Worth |
1531 |
1380 |
1167 |
992 |
| Total Borrowings |
244 |
203 |
337 |
302 |
| Revenue From Operations |
1269 |
2154 |
2108 |
2359 |
| Profit After Tax |
152 |
229 |
186 |
148 |
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IPO Details
As per the DRHP filed by the company, Hexagon Nutritional Ltd. plans to raise approximately Rs. 600 crores through its IPO, which will comprise a fresh issue worth Rs. 100 crores and an offer for sale of around Rs. 500 crores. The actual valuation of the IPO will be known once the company decides on the price band and other details. 35% of the offer would be reserved for retail investors, and the face value of shares would be Rs. 1 per share.
The opening and closing dates of the IPO are yet to come out in the public domain but are expected to be revealed soon. Equirus Capital Private Limited and SBI Capital Markets Limited will serve as the book-running lead managers for the IPO.
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