The IPO from Tarsons, a Bengal-based supplier for Dr Lal Path Labs and Dr Reddy’s, gets a unanimous ‘subscribe’ call from the street

• Tarsons Products’ ₹1,000 crore IPO had opened on November 15 and will close on November 17.
• Nearly one in every ten lab equipment sold in India is from Tarsons.
• The grey market premium of the Indian labware company surged to ₹230 from ₹200.
• Check out the latest news and updates on Business Insider.

Today is the second day to subscribe to the Indian labware company Tarsons Products initial public offering (IPO), which will close on November 17. Some of the company’s clients include Dr Reddy's Laboratories, Metropolis Healthcare, Dr. Lal Path Labs. Tarsons sells nearly one in every ten labware products sold in India.

The ₹1,024 crore IPO consists of a fresh issue of equity shares worth ₹150 crore and an offer for sale (OFS) of 1.32 crore equity shares that will be sold by promoters and an investor.

The company said it will repay debt with the money from the IPO and build its sixth manufacturing facility at Panchla in West Bengal .

Tarsons Products is engaged in designing, developing, manufacturing and supplying a diverse range of quality labware products used in laboratories across research organisations, academic institutes, pharmaceutical firms, diagnostics companies and hospitals.

Analysts are betting big on the healthcare sector even post covid and expect the labware products company to continue growing. The grey market premium of the Indian labware company surged to ₹230 from ₹200 earlier.

“Covid has turned out to be a boon for the companies in the healthcare space as worldwide governments have started allocating more funds and people in general have become more conscious towards the healthcare benefits. We expect the firm to grow faster than current CAGR given the laboratory instrument industry is growing at 20%,” said analysts at Nirmal Bang.

Besides, the fact that the company cut down its debt by half in two years has impressed analysts. The company total borrowings came down to ₹33 crore in FY21 from ₹64 crore in FY19.

Further, the company said it will utilise ₹78 crore from the IPO proceeds to repay/prepayment debt.

“The margins of the company have grown significantly on the back of declining debt. The company aims to be debt free post the IPO and is planning for CAPEX (capital expenditure) which will further increase the revenues,” said analysts at Swastika.

However, analysts at Choice Broking believe that the sharp spike in growth last year may be a one-off event triggered by the pandemic and the company may find it difficult to maintain the same pace in the future.

“There is a respectable import market for the company to capture and also a huge export opportunity arising from the “China plus one” strategy, in case the globe adopts this strategy in the post-Covid period. Thus considering the future growth outlook and the demanded premium valuation, we assign a “Subscribe with Caution” rating for the issue,” the report said. Simply put, the threat of international competition and rising imports is just as valid as the hope of a boom in business for Tarsons.

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