BLUE JET HEALTHCARE LIMITED | INITIAL PUBLIC OFFERNING

Blue Jet Healthcare Limited, originally known as Jet Chemicals Private Limited, began its journey in 1968 when it was incorporated under the Companies Act, 1956, in Mumbai. Over the years, the company has undergone significant transformations. In December 2020, the company changed its name to Blue Jet Healthcare Private Limited, and subsequently, it evolved into a public limited company in May 2022, rebranding itself as Blue Jet Healthcare Limited.

BLUE JET HEALTHCARE LIMITED | INITIAL PUBLIC OFFERNING

On 17^th October, 2023, Blue Jet Healthcare Limited officially issued its Prospectus mentioning the important details regarding its recent Initial Public Offering (hereinafter referred as IPO) which had started from Wednesday, 25 October, 2023 and will close on Friday, 27 November, 2023. Before delving deeply into the details of the IPO. Let us briefly look at the Business Operation of ‘Blue Jet Healthcare Limited.’

ABOUT BUSINESS OPERATION

Blue Jet Healthcare Limited, originally known as Jet Chemicals Private Limited, began its journey in 1968 when it was incorporated under the Companies Act, 1956, in Mumbai. Over the years, the company has undergone significant transformations. In December 2020, the company changed its name to Blue Jet Healthcare Private Limited, and subsequently, it evolved into a public limited company in May 2022, rebranding itself as Blue Jet Healthcare Limited.

Blue Jet Healthcare specializes in the pharmaceutical and healthcare industry, focusing on the development and production of specialized chemical ingredients and intermediates. Their customer base primarily consists of innovator pharmaceutical companies and multinational generic pharmaceutical companies. The company's success can be attributed to its unique "Collaboration, Development, Manufacturing" approach. This strategy has enabled them to establish long-term partnerships with their clients, often based on multi-year contracts, some extending up to five years. These collaborations have been instrumental in driving their Contract Development and Manufacturing Organization (CDMO) business forward.

Blue Jet Healthcare's core competencies lie in two main areas: contrast media intermediates and high-intensity sweeteners, such as saccharin and its derivatives. They have invested significantly in research and development (R&D) and manufacturing infrastructure, allowing them to handle the entire production process, from key starting intermediates to advanced intermediates. This integrated approach ensures consistent quality and cost-effectiveness. Over the past three financial years and the first three months of 2023, Blue Jet Healthcare Limited has served over 400 customers in 39 countries. Their commitment to quality and long-term relationships with their customers has been a driving force behind their success. They continually adapt and expand their product offerings to meet the evolving needs of their clients, relying on their manufacturing capabilities and technology-driven product development.

PRODUCTS AND SERVICES

Blue Jet Healthcare Limited operates across three distinct product categories, each serving specific purposes:

1. Contrast Media Intermediates: Within this category, the company specializes in the production of intermediates used in the creation of contrast media. Contrast media are vital agents employed in medical imaging to enhance the visibility of body tissues under imaging methods such as X-rays, CT scans, MRI, and ultrasound. Blue Jet Healthcare is a primary supplier of critical starting intermediates and advanced intermediates directly to some of the world's largest contrast media manufacturers. Notably, their enduring relationships with major manufacturers like GE Healthcare AS, Guerbet Group, and Bracco Imaging S.p.A, underscore their commitment and reliability in delivering essential components for medical imaging.

2. High-Intensity Sweeteners: Blue Jet Healthcare's high-intensity sweetener business is focused on the development, manufacturing, and marketing of saccharin and its salts. This segment also embodies a commitment to environmental sustainability through backward integration, aiming to produce with zero by-products and cost-effective processes. Saccharin, a key product in this category, finds its applications in various areas, including table-top sweeteners, oral care products like toothpastes and mouthwashes, beverages (especially soft drinks), confectionery products (e.g., mints, candies, and bakery items), pharmaceutical products, food supplements, and animal feeds.

3. Pharma Intermediates and Active Pharmaceutical Ingredients (APIs): Blue Jet Healthcare's involvement in the pharmaceutical intermediate and API business centres on their Contract Development and Manufacturing Organization (CDMO) activities. They collaborate with innovator pharmaceutical companies and multinational generic pharmaceutical companies by providing pharma intermediates that serve as foundational building blocks for APIs. These intermediates are crucial in the production of medications for chronic therapeutic areas such as the cardiovascular system (CVS), oncology, and the central nervous system (CNS), including new chemical entities (NCEs). The company engages with many of its CDMO customers early in the drug development process, fostering relationships that can expand as the drug development advances from the clinical phase into commercial manufacturing. Blue Jet Healthcare Limited's CDMO services have been instrumental in certain product lines for over the past two decades.

BOARD OF DIRECTOR AND PROMOTERS OF THE COMPANY

The Board of Directors (BoD) of Blue Jet Healthcare Limited comprises the following key members:

·       Akshay Bansarilal Arora: Serving as the Executive Chairman, he holds a pivotal role in the company's leadership.

·       Shiven Akshay Arora: Fulfilling the role of Managing Director, Shiven Akshay Arora plays a central role in the company's management and operations.

·       Naresh Suryakant Shah: As the Executive Director, Naresh Suryakant Shah contributes to the executive decision-making and strategic direction of the company.

·       Girish Paman Vanvari: Girish Paman Vanvari is an Independent Director, offering impartial expertise and guidance to the company.

·       Preeti Gautam Mehta: Also, an Independent Director, Preeti Gautam Mehta brings her independent perspective and insights to the Board.

·       Divya Sameer Momaya: Completing the trio of Independent Directors, Divya Sameer Momaya adds further independent counsel and oversight to the company.

The promoters of Blue Jet Healthcare Limited include Akshay Bansarilal Arora, Shiven Akshay Arora, and Archana Akshay Arora. These individuals are instrumental in the company's foundation and continued growth.

INDUSTRY OUTLOOK

The contrast media market plays a crucial role in diagnostic imaging by enhancing the contrast in various imaging modalities, thereby aiding in the diagnosis of diseases. These contrast agents are selectively taken up by different body tissues, temporarily improving the visibility of organs and tissues, which ultimately leads to more accurate diagnoses. The market for contrast media can be divided into three primary segments based on the imaging modality they are used for:

1. X-ray and Computed Tomography (CT) Contrast Agents: Predominantly iodine-based, these contrast agents are crucial for enhancing X-ray and CT imaging.

2. Magnetic Resonance Imaging (MRI) Contrast Agents: Mainly gadolinium-based, these agents are essential for improving MRI imaging.

3. Ultrasound (USG) Agents: Stabilized microbubble-based contrast agents used to enhance ultrasound imaging.

As of June 2023, the global contrast media formulations market is estimated to be approximately US$5.9 billion (about ₹442.5 billion). Several key factors are driving the growth of this market:

·       Growing Population and Changing Demographics: The global population is on the rise, and the segment of the population aged 65 and above is increasing. This aging population is contributing to increased healthcare spending, including diagnostics.

·       Growing Prevalence of Lifestyle Diseases: Factors like hypertension, smoking, irregular diets, and the rising prevalence of diabetes and obesity are leading to lifestyle diseases at a younger age. This trend is expected to drive higher spending on diagnostics.

·       Rising Healthcare Expenditure: Healthcare expenditure is increasing, both out-of-pocket and publicly funded. This growth in domestic healthcare spending is supported by innovative public and private financing initiatives.

·       Focus on Early Diagnosis: Advances in diagnostic technologies and growing public awareness are boosting the demand for diagnostic services.

·       Increased Convenience: Offering convenience through online booking and reporting, as well as reducing turnaround times for tests, is becoming a key driver for diagnostic services. Diagnostic labs are investing in expanding their networks and advanced technologies to enhance patient convenience.

·       Increasing Demand for Preventive Healthcare: Globally, there is a growing demand for preventive healthcare due to increased awareness and rising curative costs. Employers are promoting preventive and wellness tests for employees to support well-being and reduce health risks.

In terms of geographic distribution, the United States leads in contrast media sales, accounting for the largest share by value, with approximately US$1.6 billion (₹125 billion) as of June 2023. China is the second-largest market, with around US$1.41 billion (₹106 billion) in the same period. Japan and the EU5 markets (Germany, France, the UK, Italy, and Spain) collectively make up about 29% of the total market share. This underlines the global nature of the contrast media market and the need for these essential diagnostic tools in healthcare worldwide. The industry outlook can also be inferred from the Data Provided below which shows the share of different countries in this Industry.

COMPETITION

Blue Jet Healthcare Limited operates within the global pharmaceutical industry, which can be broadly categorized into two segments: regulated markets and emerging markets. These two segments present differing levels of competitiveness and entry barriers. Emerging Markets: In emerging markets, the barriers to entry are relatively low. This is due to less stringent regulatory requirements concerning qualifications, quality controls, and intellectual property rights. As a result, companies can enter these markets with relative ease. Regulated Markets: On the other hand, regulated markets, which include regions such as the United States, Europe, and Japan, pose higher barriers to entry. These barriers are a consequence of more rigorous regulatory practices. Meeting the strict requirements of these markets demands a significant commitment to quality and compliance.

To maintain a competitive edge in this dynamic industry, Blue Jet Healthcare Limited employs several strategies like the company regularly updates its existing facilities and adopts new technologies for its manufacturing processes, helping them produce high-quality products efficiently. The company also focuses on cost control in production. Keeping production costs low is essential for maintaining a competitive advantage and sustaining profitable margins. The company actively seeks new product registrations, marketing authorizations, and approvals from regulatory authorities. By expanding their product offerings, they aim to meet the evolving needs of their customers and access new markets.

FINANCIAL ASPECT

When considering an investment in a company, investors invariably scrutinize the Key Financial Indicators to make informed decisions. Among these, Revenue from Operations stands out as a pivotal figure. Notably, in the Financial Year 2022-23, Blue Jet Healthcare has generated a remarkable revenue of INR 7,209.82 (in ₹ Millions). And in the FY 2021-22 it had a revenue of INR 6,834.69 (in ₹ Millions). Their profit for the FY 2022-23 stands at INR 1,600.27 (in ₹ Millions). And the profit for the FY 2021-22 stands at INR 1,815.91 (in ₹ Millions).

Blue Jet Healthcare Limited's financial performance over the past few years and quarters underscores the significance of their revenue from high-intensity sweeteners. In the Financial Year 2021, this segment accounted for ₹987.24 million, constituting 19.98% of the total revenue from contracts with customers. This figure showed an upward trajectory in the subsequent years, with the Financial Year 2022 witnessing a substantial increase to ₹1,574.83 million, representing 23.27% of the total revenue. In the Financial Year 2023, the revenue from high-intensity sweeteners continued its growth, reaching ₹1,758.97 million, which accounted for an even more substantial share of 24.48% of the total revenue. Delving into the quarterly breakdown, the three months ending June 30, 2022, showed revenue of ₹522.57 million from high-intensity sweeteners, constituting a significant 36.28% of the total revenue during that period. In the following year, for the three months ending June 30, 2023, the revenue from high-intensity sweeteners remained a vital contributor, amounting to ₹401.55 million and making up 22.48% of the total revenue. These figures highlight the remarkable growth and consistent contribution of the high-intensity sweeteners segment to Blue Jet Healthcare's financial success, reflecting its strategic importance within the company's overall financial landscape. For a comprehensive understanding of the financial aspects of Blue Jet Healthcare Limited, the following table provides valuable insights of financial ratios for a comprehensive assessment of the company's financial condition and performance.

OBJECTIVE OF THE IPO

The primary objectives of the Offer are twofold:

1.     Achieve Listing Benefits: The first objective is to secure the advantages that come with listing the Equity Shares on the Stock Exchanges. Listing offers the company an opportunity to access the financial markets, enhance its visibility, and potentially attract a broader investor base.

2.     Offer for Sale: The second objective is to facilitate the Offer for Sale of up to 24,285,160 Equity Shares by the Selling Shareholders. In this process, the Selling Shareholders will be entitled to the proceeds generated from the sale of these shares, after deducting Offer-related expenses and relevant taxes. It's important to note that the company itself will not receive any proceeds from this Offer.

Additionally, the company anticipates that the proposed listing of its Equity Shares will enhance its visibility and brand image while also providing a public market for these shares in India. The Offer-related expenses encompass a range of costs associated with this process, including listing fees, commissions, legal fees, registrar fees, banking fees, processing fees, marketing expenses, and various other miscellaneous costs, all of which are necessary for successfully listing the Equity Shares on the Stock Exchanges.

IMPORTANT DATES

DETAILS OF THE IPO

Blue Jet Healthcare has launched its Initial Public Offering (IPO) in which they intend to offer up to 24,285,160 Equity Shares for cash. These shares are being offered within a specific price band, ranging from ₹329 to ₹346 per equity share. Each of these equity shares has a face value of ₹2. Investors interested in participating in the Blue Jet IPO will need to consider the lot size, which is set at 43 equity shares. After this initial lot, additional shares can be purchased in multiples of 43 equity shares. It is important to note that the Blue Jet Healthcare IPO is structured as an Offer for Sale (OFS) of the entire 24,285,160 equity shares. This means that the shares offered in this IPO are existing shares held by current shareholders, and there is no fresh issue component involved, as indicated in the RHP (Red Herring Prospectus). In terms of the IPO size, it amounts to ₹840.27 crore. The floor price for the IPO is 164.50 times the face value of the equity shares, while the cap price is set at 173 times the face value of the equity shares. This IPO presents an opportunity for investors to acquire equity shares in Blue Jet Healthcare within the specified price range.

RISKS INVOLVED

Blue Jet Healthcare Limited faces several significant risks that could potentially impact its business operations, financial performance, and overall stability:

1. Customer Dependence: The company heavily relies on a limited number of key customers in the pharmaceutical and healthcare sector. The loss of one or more of these customers, their financial instability, or reduced demand for Blue Jet's products could have adverse effects on the company's business, financial condition, and cash flows.

2. Market Dependence: Blue Jet Healthcare's business is closely tied to the European and United States markets, both of which are highly regulated. Any decline in market growth, increased competition, changes in customer preferences, or regulatory actions in these regions could negatively affect the company's operations and financial performance.

3. Geopolitical Risks: While the Russian-Ukrainian war has not currently impacted the company, acts of war or disruptions in the future may have adverse consequences. Such geopolitical events could disrupt business operations and supply chains.

4. Production Capacity: An inability to successfully expand production capacity could hinder the company's ability to meet market demand. A slowdown or shutdown in manufacturing operations could also have detrimental effects on the business.

5. Quality Control and Regulatory Compliance: Manufacturing or quality control issues may result in regulatory actions or litigation, potentially damaging the company's reputation and impacting its business, financial condition, and operations.

6. Credit Risk: The company is exposed to the risk of delayed or non-receipt of payments from customers, which could adversely affect its financial results.

7. Leasehold Lands: Blue Jet Healthcare's facilities and Registered Office are located on leasehold lands. Failure to comply with the terms of these lease agreements could negatively impact business operations. There is no guarantee that lease agreements will be renewed or that suitable alternative premises will be obtained on favourable terms.

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