The growth enzyme

Promoter of the recently listed Advanced Enzyme Technologies jacks up holding

The Rs.331-crore Advanced Enzyme Technologies, the first Indian enzyme company, which went public in August last year has been faring quite well on the bourses. The firm’s stock has gained 54% from its listing price (split adjusted) of Rs.235.66 to the current levels of Rs.361. Over the same period, the benchmark Nifty Pharma Index had declined 21%. The company, whose promoter and managing director is Chandrakant Rathi, is among the top 15 global companies in terms of enzyme sales and has the second highest market share in India at around 30%.

Over the FY13-FY17, revenue has seen a CAGR of 8.5%, while PAT has clocked a CAGR of 12.66%. The firm’s net worth has also witnessed a 1.65x increased in the past one year from Rs.278 crore to Rs.460 crore. Riding the momentum in the stock, between March 20 and May 31, promoter entity Chandrakant Rathi Innovations and Projects bought 10.93 lakh shares at an average price of Rs.1,821.66 a share, cumulatively worth Rs.199 crore . Post the stake purchase, the entity’s holding increased to 21.83%. 

The overall share of promoter holding too has increased from 66.5% to 70.1% between the second and the fourth quarter of FY17. The share of foreign portfolio investors increased from 1% to 1.8%, with Nomura holding 1.02% stake. Among the domestic mutual funds, the Reliance Small Cap fund reduced its stake from 1.35% in Q2FY17 to 1.21% in Q4FY17, while DSP Blackrock Micro Cap Fund increased its stake from 1.28% to 1.72% in the same period. Additionally, the DSP Blackrock Focus 25 Fund bought 1.01% stake, thereby increasing the overall holding of DSP Blackrock to 2.74% by March 2017. Motilal Oswal Most Focused Multicap 35 Fund, however, marginally reduced its stake from 1.43% to 1.42%.

The management reckons that it is not likely to be impacted by US pricing pressure, as its chief area of operations is nutraceuticals (fortified food, dietary supplements). According to analysts, the strong focus of the firm on R&D and the vast untapped potential in the Indian markets are a key competitive advantage for this firm. Analysts expect net sales to witness a yearly growth rate of 22%, while the adjusted PAT is poised to grow at 38.04% in FY18. The current market cap of the company stands at over Rs.4,000 crore, though the stock is not exactly cheap at 27x one-year forward.