Blue Jet Healthcare IPO opens today: Should you subscribe to the Rs 840.27 crore issue?

Blue Jet Healthcare IPO is entirely an offer-for-sale of 2.42 crore shares

As Blue Jet Healthcare's Rs 840.27 crore IPO opens for subscription on October 25, several analysts have recommended investors to subscribe the issue owing to the company’s strong business prospects, greenfield expansion plans and promising industry outlook. The price band for the issue has been fixed at Rs 329-346 per share.

The offer is entirely an offer-for-sale of 2.42 crore shares. Since there is no fresh issue component, proceeds will go to the selling shareholders and the company will not get any money from the offer. Although, the prime purpose of the issue is to achieve the benefits of listing shares on stock exchanges. The public offer will close for subscription on October 27 and the stock is expected to list on the bourses on November 6.

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In the financial year 2022-23, the company’s revenue grew 5.5 percent from the previous year to Rs 721 crore but the net profit was down by 11.87 percent to Rs 160 crore. In the first quarter of FY24, profit at Rs 44.1 crore jumped by 58.4 percent from the year-ago period and revenue was up 24.2 percent at Rs 179.5 crore.

Blue Jet Healthcare follows a contract development and manufacturing organisation (CDMO) business model, operating in three product categories— contrast media intermediates, high-intensity sweeteners and pharma intermediates & active pharmaceutical ingredients (APIs).

The company currently operate three manufacturing facilities which are located in Shahad (Unit I), Ambernath (Unit II) and Mahad (Unit III) in Maharashtra. Blue Jet also acquired a leasehold greenfield manufacturing site (Unit IV) in Ambernath in 2021 to build several multi-purpose blocks dedicated to pharma intermediate and API business.

Let’s have a look at analysts’ recommendations:

Swastika Investmart: Subscribe

Blue Jet Healthcare is a niche player with specialized chemistry capabilities in contrast media intermediates and high-intensity sweeteners. The company has the benefit of high entry barriers and a long-term relationship with multinational customers. The company has also reported consistent financial growth except in FY2023, when there was some decline in its profitability.

“Although the company does not have any listed peers, the issue is coming at a P/E valuation of 37.48, which seems fairly priced. So, after considering all the factors, we recommend a Subscribe rating for this IPO,” said Shivani Nyati, Head of Wealth, Swastika Investmart Ltd.

Also Read: Blue Jet Healthcare IPO: 10 things to know before subscribing to Rs 840.27-crore issue

Mehta Equities: Subscribe

“Blue Jet's unique niche product segment and lack of immediate peers might attract demand based on a first-mover advantage, potentially leading to significant listing gains,” said Rajan Shinde, Research Analyst at Mehta Equities Ltd.

While the 100% offer for sale (OFS) is a concern for new investors, Shinde recommends subscribing to the issue with a risk perspective, expecting decent listing gains.

Geojit Financial: Subscribe

At the upper price band of Rs 346, BJHL is available at a P/E of 34x (FY24E annualised EPS), which appears to be fully priced.

“Considering its strong business prospects, healthy return ratios, forward integration, greenfield expansion plans and promising industry outlook, we assign a “Subscribe” rating on a medium- to long-term basis,” said analysts at Geojit Financial Services.

Anand Rathi: Subscribe

The key risk is that the company is dependent on Europe and the United States, which are regulated markets, for a significant portion of its revenue from operations.

“However, we believe that the valuation of the company is fairly priced and recommend a “Subscribe- Long Term” rating to the IPO,” said analysts at Anand Rathi Research.

Choice: Subscribe

Blue Jet Healthcare has reported strong growth in the business over FY20-23, however, higher raw material costs impacted the profitability. RoE was healthy, despite a 3x rise in net worth.

“Going forward, BJHL will benefit from sustained demand for its products and lower/stabilizing raw material prices. we assign a “SUBSCRIBE” rating for the issue,” said analysts at Choice Equity Broking.

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