Advanced Enzyme Technologies Ltd

One-time assessment
CRISIL IPO Grade 3/5 (Average)
September 05, 2013

Grading summary
CRISIL has assigned a CRISIL IPO grade of 3/5 (pronounced three on five) to the proposed IPO of Advanced Enzyme
Technologies Ltd (AETL). This grade indicates that the fundamentals of the IPO are average relative to the other listed
equity securities in India. However, this grade is not an opinion on whether the issue price is appropriate in relation to the
issue fundamentals. The grade is not a recommendation to buy, sell or hold the graded instrument, its future market price
or suitability for a particular investor.
The grade is driven by AETLs position as the largest domestic manufacturer and exporter of enzymes in India. The
company has 30% share of the domestic enzyme market, second after Denmark-based Novozymes A/S (which operates
in India through its South Asian subsidiary). AETL has developed a portfolio comprising over 400 enzyme products
developed from 55 proprietary enzymes. With an aggregate fermentation capacity of 360m 3, the company is one of the
largest producers of industrial enzymes in South-East Asia. It also has a strong R&D focus with three development labs
in India and one in California, US. AETL is one of the few enzyme companies in the country which are present across the
industry value chain including R&D, manufacturing, marketing and distribution of enzyme products. This integrated
approach provides AETL better control over quality and enables it to price its products more competitively. Since India is
not a large market for enzyme products at present, the company is strategically focusing on exports (59% of total sales in
FY13). It intends to expand its foothold further in the lucrative international markets, particularly the US and Europe.
Domestic and global enzyme markets are both estimated to grow strongly at CAGR of 12% and 6.9%, respectively, over
2010-2020, driven by demand for food and beverage and clinical diagnostic enzymes.
The grade is constrained by project-related risks associated with the expansion of AETLs existing manufacturing plants
and R&D facilities; and execution risks related to its acquisition plans in the global markets. The extent to which these
proposed investments can be monetised is uncertain. Currently the company has a niche positioning in the international
markets and offers customised solutions. However, in our opinion, to expand further in these markets the company has to
start providing standardised products and compete directly with market leaders such as Novozymes.
AETLs consolidated operating income grew at 26.8% CAGR over FY09-13 to 2.2 bn, driven primarily by growth in
exports. Over the same period, standalone sales grew at 14.9% CAGR. Discontinuation of non-core operations and
better realisations from exports boosted EBITDA margin to 41.5% in FY13, up from 20.7% in FY09. Average RoE over
FY09-13 was a strong 31.9%, mainly due to better margins and improved fixed asset turnover.

CRISIL IPOGradingRationale
About the company
AETL, established in 1989, manufactures and markets enzyme products. The company has developed a portfolio of over
400 proprietary enzyme products from 55 enzymes. It is the largest domestic enzyme manufacturer and exporter in India
and second in terms of market share after Denmark-based Novozymes, the largest enzyme company worldwide. AETL
operates through two business verticals, healthcare and nutrition (which is divided into human healthcare and nutrition,
and animal nutrition) and bio-processing (which is divided into food processing and non-food processing).
AETL produces value-added enzymes from all four existing natural sources: plant, fungal, animal and bacterial. It offers
these enzyme products to nearly 700 customers across a range of industries including healthcare, human and animal
nutrition, food processing, baking, dairy, cereal extraction, brewing, textile and leather processing, and paper and pulp
processing. It also develops customised solutions for its clients.
The company has established four manufacturing facilities, including two integrated fermentation, recovery and
formulation facilities in Sinnar, Nashik and Indore; one extraction and recovery facility in Satpur, Nashik; and one
blending, mixing and formulation facility in Chino, California, the US. It also operates four R&D facilities, three of which
are based in Thane and Sinnar, Maharashtra and one in Chino, California.
AETL has received a number of industry awards including the Most Innovative Exporter award by Dun and Bradstreet in
2012, Bio-Excellence award by the Government of Karnataka in 2010 (in the bio-industrial category) and was one of the
recipients in fastest growing mid-sized business award by India Inc.
The company is promoted by Mr Vasant Laxminarayan Rathi and Mr Chandrakant Laxminarayan Rathi.

AETL: Corporate structure

Promoters and promoter
group

Individuals

Non-Institutions

Chandrakant Rathi Finance and

Investment Company Private Limited
17.9%

Advanced Enzyme Far

East Limited (100%)

Advanced Enzyme USA

(100%)
Advanced Enzyme
Europe B.V. (100%)

Source: DRHP

Subsidiaries in which the company holds

majority stake

Advanced Enzytech
Solutions Limited (100%)

Bodies corporate

Atharva Capital Ventures Private Limited

4.8%

Advanced Bio-Proteins
Limited (100%)
Advanced Bio-Agro Tech
Limited (60%)

28.1%

Advanced Enzymes
Technologies Limited

Advanced Supplementary
Technologies Corporation
Step-down
subsidiaries

Private Equity Investor

49.2%

Cal India Foods

International

Key milestones
Year

Events

1989

Incorporated as Advanced Biochemicals Pvt. Ltd

1991

Launched its first fermentation facility in Sinnar, Maharashtra

1992

Converted from a private company to a public company

1996

First application research facility in Thane, Maharashtra started operating

2001

R&D centers in Thane and Sinnar were recognised by the Department of Scientific and Industrial Research,
Ministry of Science and Technology, Government of India

2005

Name changed to Advanced Enzyme Technologies Ltd

2008

Won the British Biological Honors for outstanding vendor

2010

Won the Emerging India Awards for 2010 in the Life Science - Pharmaceuticals & Chemicals segment. The
event was organised by ICICI Business Banking and CNBC TV-18

Won the Bio-Excellence Award in the Industrial Biotech category for 2010, awarded by the Department of
Information Technology, Biotechnology and Science and Technology, Government of Karnataka

2011

Acquired Cal India Foods International (specialty enzymes and biotechnologies), to get a direct presence in the
US

2012

Kotak India Venture Fund I, Kotak Employees Investment Trust and Kotak India Venture (Offshore) Fund made
private equity investments in the company

2013

Acquired Advanced Supplementary Technologies Corporation to consolidate its presence in the US

Declared the first runner-up for the Most Innovative Exporter Dun& Bradstreet, for 2012

Among the recipients of the fastest growing mid-sized business award given by Inc. India

Source: DRHP

Issue details
Type of issue

Fresh issue and offer for sale

Fresh issue offered to public

Not available

Offer for sale

Up to 3.7 mn shares

Fresh shares offered as per cent of

Not available

post issue equity (dilution)

Object of the issue

Expansion of the manufacturing facility in Indore

Establishment of R&D centre in Nashik

Establishment of R&D and innovation centre in Thane

Investment in step-down subsidiaries

Acquisition and other strategic initiatives

General corporate purposes

Amount proposed to be raised

2,000 mn from the fresh issue

Price band

Not available at the time of grading

Lead managers

ICICI Securities Ltd, SBI Capital Markets Ltd

Source: DRHP

CRISIL IPOGradingRationale
Use of IPO proceeds
Particulars

Deployment of IPO proceeds ( mn)

Phase-III expansion of the manufacturing facility in Indore

430

Establishment of R&D centre in Nashik

430

Establishment of R&D and innovation centre in Thane

370

Investment in the step-down subsidiaries (Cal India Foods International and

Advanced Supplementary) in the US for setting up of manufacturing and R&D

210

facilities
Acquisitions and other strategic initiatives

100

General corporate purposes

NA

Issue-related expenses

NA

Source: DRHP

Shareholding pre- and post-issue

Pre-issue

Post-issue

Category of equity shareholders

No. of equity shares (mn)

No. of equity shares (mn)

Promoters and promoter group (A)

16.8

77.3

NA

NA

Institutional investor (B)

1.0

4.8

NA

NA

Non-institution

3.9

17.9

NA

NA

Total (A+B+C)

21.8

100%

NA

NA

Source: DRHP

Detailed Grading Rationale

A. Business Prospects
Enzymes are a sustainable alternative for the future
Enzymes are sustainable alternatives to hazardous chemicals used in many industrial bio-chemical processes.
Enzymatic processes can occur under moderate conditions, including normal temperature and with minimal use of water,
leading to reduced energy consumption and elimination of costs associated with maintaining extreme environments necessary for many chemical-led reactions. This decline in energy consumption also benefits the environment by
reducing greenhouse gas emissions.
As chemical-induced reactions lack specificity, they are required in larger volumes and can lead to toxic by-products
which are difficult to dispose of. On the other hand, since enzymes react specifically and are biodegradable, they are
required in smaller amounts and minimise the production of toxic by-products. In fact, some enzymatic reactions create
end-products which can be treated and used as fertilisers.
Thus, replacing chemicals with industrial enzymes can lead to cost and time savings for manufacturers and can help
them comply with various environmental norms. With higher emphasis on energy conservation and more stringent
environmental laws, enzyme demand from various industries is likely to witness rapid growth.

AETL is the largest domestic player in the Indian enzymes industry

AETL is the largest manufacturer and exporter of enzyme products in India, and second in market share after Denmarkbased Novozymes. In 2012-13, the company had nearly 30% share of the Indian enzymes industry. AETLs activities
include R&D, commercial-scale manufacturing of enzymes (including seed preparation, fermentation, filtration and
formulation processes), marketing enzyme products and developing customised solutions. It has a strong R&D focus and
has been adding capacity to its existing manufacturing facilities.
The company has a strong presence in the nutraceutical enzymes market in the US through its group companies.
Currently, it is planning to expand to other lucrative markets including Europe.

Global demand for enzyme products is poised for growth

Based on the type of end-user industries, the global enzyme industry can be categorised into two segments - industrial
and specialty enzymes. The industrial enzymes segment includes enzymes which cater to F&B, detergents, bio-fuel,
animal feed, textile and other industries; the specialty enzymes segment consists of products which cater to
pharmaceuticals, research and biotechnology, diagnostics and biocatalysts.
Both the industrial and specialty enzymes segments are expected to grow over the next few years. Global enzyme
demand is forecast to grow at a CAGR of 6.9% to $11.3 bn from $5.8 bn over 2010-20. Specialty enzymes are likely to
witness a CAGR of 7.5%, higher than the forecast of 6.5% CAGR for industrial enzymes. Growth in the specialty
enzymes segment is likely to be driven by diagnostic and research and biotechnology enzymes, which in turn will be
fuelled by an increase in the number of people gaining access to medical facilities in developing nations and healthcare
reforms in the US. Demand for industrial enzymes is expected to be bolstered by the animal feed segment and the F&B
segment.

CRISIL IPOGradingRationale
Demand for enzyme products likely to grow
100%

(US$ bn)

5%
4%
6%

5%
4%
6%

6%
5%
7%

19%

21%

23%

20%

19%

45%

43%

41%

2010

2015F

90%

12.0

80%
10.0

70%
5.0

60%

8.0

21%

50%
40%

3.5

6.0

30%
2.4

4.0

20%

6.3
2.0

10%

4.5

3.3

0%

0.0
2010

2015F

Industrial Enzymes

2020F
Specialty Enzymes

Source: DRHP, CRISIL Research

2020F

North America

Western Europe

Asia/Pacific

Central and South America

Eastern Europe

Africa and Middle East

Source: DRHP, CRISIL Research

Demand from key segments of the industrial and specialty enzymes sectors expected to increase
(US$ bn)

(US$ bn)

3.0

2.5

2.5

2.0

2.0
1.5

1.5
2.5
1.0
0.5

2.2

1.0

1.6

1.8
1.2
0.8

1.1

1.4
0.5 0.6

0.5

0.9
0.4 0.5

0.8
0.4 0.5

1.1

0.8

0.7

0.7

0.0

1.6

1.2

0.4

0.6

0.0
Food &
Beverage
2010

Cleaning
Product

Biofuel
2015F

Source: DRHP, CRISIL Research

Animal
Feed
2020F

Other
Markets

Pharmaceutical
2010

Research &
Biotechnology
2015F

Diagnostics

0.2

0.2

0.4

Biocatalyst
2020F

Source: DRHP, CRISIL Research

At present, North America is the largest enzyme market worldwide. In 2010, it accounted for ~45% of the global enzyme
demand, followed by Western Europe (21.2%) and Asia Pacific (APAC, 18.8%). Demand for enzyme products in APAC
and other emerging markets has been increasing over the past decade and is expected to continue to rise. By 2020,
APAC is forecast to surpass Western Europe to become the second largest enzyme market in the world with a share of
23.2%. North America is expected to remain the largest market. Demand for enzymes is expected to witness the fastest
growth in the Central and South American markets, although from a small base.

Indian enzyme industry is at a nascent stage estimated to grow

Currently, the Indian enzymes industry is at a nascent stage and penetration across end-user industries is low. Several
factors such as price-sensitivity and lack of awareness among end-user industries, and the governments failure to strictly
implement environmental laws have impeded the industry from fully realising its growth potentials.
At present, there are approximately 17 players in the Indian enzyme market. Most of these companies focus on
producing value-added enzyme products based on simpler formulations. However, the entry of foreign manufacturers has
led to availability of quality products in the domestic market, which provides clients with a choice of more innovative
solutions. The domestic industry is increasingly eyeing the international markets - most of the enzyme products
manufactured in the country are exported, and some of the major players are establishing base in foreign markets.

Pharmaceuticals, textile, detergent, F&B, and leather and paper industries are the primary consumers of enzyme
products in India. Each segment is at a different stage of growth. The pharmaceutical segment is at a nascent stage.
Leather and textile processing segments are relatively mature, whereas the detergent segment is growing.
The bio-Industrial (primarily enzyme products) market in India was worth 7.7 bn in 2013. The industry has registered
15.1% CAGR over 2004-13. The industry is expected to continue to grow to $295 mn in 2020 from $96 mn in 2010 at a
CAGR of 12%.

Indian enzymes industry to grow at a CAGR of 12% over 2010-20

( bn)

(%)
28.0

9.0
8.0

7.0
17.2

6.0

350

25.0

300

20.0

250

15.6

5.0

11.0

4.0
6.4

5.3

2.0

11.2

10.9

200

15.0

150

10.0
3.8

295

100

170

4.0

2007

2006

2005

2004

4.1

5.6

6.3

7.0

7.7

50

96

Bio-Industrial market in India

2013

3.8

2012

3.2

2011

2.5

2010

5.0

1.0

2008

3.0

(US$ mn)

30.0

0
2010

YoY Growth (RHS)

2015F

2020F

Enzyme demand in India

Source: Association of Biotechnology Led Enterprises Source: DRHP, CRISIL Research

(ABLE)

Indian enzyme industry demand from user segments

Detergent
20%
Textiles
20%

Food and Animal

Feed
5%

Pharmaceuticals
50%

Leather and
Paper
5%

*Note: Approximate values

Source: Industry, CRISIL Research

CRISIL IPOGradingRationale
F&B segment is expected to drive growth for industrial enzymes
Enzymes used in F&B processing currently account for the largest share (over 20%) of the overall demand for industrial
enzymes. Along with animal feed, the F&B segment is likely to drive the demand for industrial enzymes in the coming
years. With a CAGR of 8.4% over 2010-20, the animal feed segment is estimated to be the fastest growing among all
segments within the enzymes industry, followed by the F&B segment which is expected to grow at a CAGR of 7.5% over
2010-2020.
The F&B industry is estimated to grow to $2.7 trillion by 2020 from $1.8 trillion in 2010 at a 4.1% CAGR over the period.
Developing countries are expected to drive this growth. Increasing disposable income and rising living standards in these
nations are leading to greater per capita F&B consumption, and increasing demand for high quality processed foods. In
developed nations, increased consumption of ready-to-eat products and organic foods is expected to propel growth.
Enzymes have a variety of applications across dairy, starch processing, baking, malting and other industries within the
F&B segment. With the growth in F&B consumption, increasing emphasis on food quality and demand for organic foods,
the need for enzymes from this segment is expected to grow significantly.

World F&B and tobacco consumption to grow

(US$ trillion)

Developing nations to lead F&B consumption

(US$ trillion)

3.0

1.4

1.2

2.5

1.0
2.0
0.8
1.5
2.7

1.0

1.3

0.6
1.0

2.2

0.4

1.8

0.7

0.2

0.5

0.2 0.3

0.3

0.2 0.2 0.2

0.1

0.2

0.2

0.0
0.0

Asia-Pacific
2010

2015F

World food, beverage and tobacco MVA

Source: DRHP, CRISIL Research

2020F
2010

Central and
South America
2015F

Eastern
Europe

Africa/Middle
East
2020F

Source: DRHP, CRISIL Research

In India, robust economic growth, expansion in middle class population and increase in health awareness have led to
demand for high quality food. This has fuelled growth of the food processing industry, which is forecast to grow at a
CAGR of 5.8% over 2007-15. With expanding growth, the industry is likely to become more organised, which is expected
to contribute to steady demand for enzyme products.

Indian food processing industry to grow; become more

organised
( trillion)
7.0

40.0%
36.0%

6.0

45.0%
40.0%
35.0%

5.0

27.0%

30.0%

4.0

25.0%

3.0

20.0%
15.0%

2.0

10.0%

1.0
3.7

4.8

6.6

2007

2011

2015F

0.0

5.0%
0.0%

Food Processing Industry

Share of organized sector in food processing industry (RHS)

Source: ASSOCHAM, CRISIL Research

Demand for specialty enzymes likely to be driven by clinical diagnostic testing market
Demand from all the four segments (pharmaceuticals, research and biotechnology, diagnostics and biocatalyst) of the
specialty enzymes market is expected to witness rapid growth, with the diagnostic enzymes segment outpacing the other
three. This segment is expected to grow to $840 mn by 2020 from $350 mn in 2010 at a CAGR of 9.1%. This growth is
estimated to be driven by increased focus on preventive medicine, self-treatment, surgical and diagnostics procedures,
and rising use of new techniques such as DNA sequencing and molecular diagnostics. As enzymes have a range of
applications in these clinical diagnostic tests, growth in these procedures should boost demand for enzymes.
In India, better access to medical facilities and growing affordability due to rise in income levels are estimated to drive
growth for the pharmaceutical and diagnostic segments. Additionally, India has a strong biotechnology sector which is
likely to fuel demand for specialty enzymes.

AETL has strategically shifted its focus to more attractive global markets
Realising the potential offered by the global markets, particularly North America and Europe, AETL has gradually shifted
its focus from the domestic to international markets. Export sales accounted for 59% of consolidated gross sales in FY13,
significantly higher from 8.3% in FY09.
To set up a base in North America, the company acquired two US-based companies (Advanced Supplementary
Technologies and Specialty Enzymes and Biotechnologies), which were owned by the same promoters. The acquisition
improved AETLs sales and marketing network in North America, strengthened its product portfolio and added new clients
in the region. The company has also set up subsidiaries in Europe and Hong Kong to establish a presence in those
markets.
As a result of these strategic efforts, AETL now has clients across 45 countries and over 30 distributors in India and
overseas. The company now plans to acquire small companies or establish joint ventures to enter the growth markets of
South America and Asia Pacific, and expand to target business verticals such as baking, brewing and fruit juice
processing. CRISIL Research believes if these expansion plans are executed properly, AETL may be able to leverage its
geographical reach to take advantage of the growing global enzymes industry.

CRISIL IPOGradingRationale
AETL derives a large share of its revenues from export sales
Consolidated sales

Standalone sales

100%

100%

90%

90%
37.9%

80%

80%

41.2%

70%

70%

60%
50%

60%

86.2%

88.6%

91.7%

74.9%

72.6%

25.1%

27.4%

FY09

FY10

53.8%

58.1%

46.2%

41.9%

FY12

FY13

50%

40%

40%
62.1%

30%

30%

58.8%

20%

20%

10%

0%

61.4%

8.3%

11.4%

13.8%

FY09

FY10

FY11

10%

38.6%

0%
Export sales

FY12

FY13

Domestic sales

Export sales

Source: Company, CRISIL Research

FY11

Domestic sales

Source: Company, CRISIL Research

AETLs product portfolio is focused on key segments within the enzymes industry
The company has developed a portfolio containing over 400 products based on 55 enzymes. This includes several
enzymes in the food and healthcare category. In 2013, the human healthcare segment accounted for nearly 60% of the
consolidated net sales of the company, followed by food (21% share) and animal feed (14% share). CRISIL Research
believes strong exposure to these growing segments is likely to support AETLs growth in the near future.

Segment-wise sales mix

60.0%

50.0%

40.0%

30.0%

59.0%

58.0%

20.0%

10.0%

22.0%

21.0%
15.0%

14.0%
6.0%

5.0%
0.0%
FY 12
Human Healthcare

Food

FY 13
Animal Healthcare

Industrial Processing

Source: Company

Has a few competitive advantages in the domestic market

The enzyme industry is associated with high material and other operational costs as the fermentation process requires
large amounts of power and water, and the risk of contamination increases the consumption of raw materials. High costs
put pressure on margins, which makes it difficult for smaller domestic enzyme companies to engage in end-to-end
manufacturing of enzymes. So these companies focus on importing crude enzyme products and then formulate it to suit
their clients requirements.

10

AETL is one of the few integrated enzyme players in India with in-house fermentation and formulation capabilities. The
company also focuses on R&D, and marketing and distribution of the finished goods. This enables AETL to have better
control over the quality of the products, prepare customised solutions for clients and respond better to volatile demand in
the domestic market. With over two decades of experience, AETL has also developed certain technical know-how, which
provides it with an edge over its Indian competitors.

The domestic market poses substantial challenges

The Indian enzyme market is in a nascent stage and has huge untapped potential. However, the industry has not grown
as expected over the past few decades due to certain structural issues. User industries in India have a lower enzyme
consumption rate compared to that of developed countries such as Japan, North America and Western Europe.
The biggest challenge for the domestic enzyme manufacturers is to make consumers aware of the benefits of using
enzymes. As the initial cost of using enzymes is higher than chemical products, some of the price-conscious companies
are reluctant to use enzymes, not realising that the increase in cost is compensated by incremental cost savings later.
Many of the end-user industries in India, such as baking and food processing, are mostly unorganised and hence it is
difficult for enzyme manufacturers to make these industries realise the value proposition of enzymes.
The environmental laws which govern the manufacturing processes in India are yet to be enforced properly and, thus,
manufacturers are not compelled to adopt green production techniques. Similarly, poor implementation of labour safety
norms means employers are not forced to substitute potentially hazardous chemical ingredients with industrial enzymes.
These factors are also hindering the growth of industrial enzymes in the country.

Competition may intensify in future

At present, both the global and domestic enzyme markets are oligopolistic in nature. Novozymes dominates the global
enzyme market, followed by DSM NV and Du Pont. The growing industry has attracted a number of smaller players
which have positioned themselves as niche players.
Novozymes is also the largest player in the Indian market (AETL is the second largest) in terms of market share. Other
prominent players include Rossari Biotech, Maps Enzymes, Lumis Biotech and Zytex. Other than these, there are several
other smaller players operating in the industry, most of which are primarily into formulation.

Indian enzyme market share (2013)

Global enzyme market share (2009)

Others
26%

Others
26%

Novozymes
A/S
47%

Novozymes
South Asia
44%

DSM NV
6%

Advanced
Enzymes
30%

Danisco/Du
Pont
21%

Source: Association of Biotechnology Led Enterprises Source: Industry, CRISIL Research

(ABLE), CRISIL Research

11

CRISIL IPOGradingRationale
CRISIL Research believes that as the Indian market grows over the years, competition may intensify. High operational
costs and the capital intensive nature of the industry are entry barriers. However, the threat of vertical integration remains
high, as with their existing expertise, companies in related industries (such as bio-pharma and other segments of the
biotechnology industry) may bypass these barriers and enter the enzymes industry. Additionally, international companies
such as Du Pont, DSM NV and others are also likely to ramp up their business in the Indian market if it starts to grow
rapidly. This will change the existing dynamics of the market and will put pressure on existing players including AETL.
Currently, AETL positions itself as a niche player in the global markets and operates in certain segments of the enzyme
industry. However, to achieve the next level of growth in the global market, the company will have to grab market share
from the likes of Novozymes and Du Pont. CRISIL Research believes currently AETL does not have many significant
sustainable competitive advantages over these global players which will enable it to take market share away from them.

12

B. Financial Performance
AETLs consolidated operating income grew to 2.2 bn in FY13 at a CAGR of 26.8% over FY09-13, driven mainly by
strong growth in the exports business. AETL acquired US-based group company Cal India Foods International in FY12
and Advanced Supplementary Technologies Ltd, another group company, in FY13.
However, domestic sales declined marginally to 716.8 mn in FY12 from 718.7 mn in FY09 owing mainly to
discontinued sales of the companys non-core, non-enzyme products and capacity constraints in its Sinnar plant. In
FY13, commercial production commenced at the upgraded Indore plant, which resolved the capacity constraint problem
leading to better realisations. Owing to this, domestic sales recuperated in FY13 to record a healthy 41.4% y-o-y growth.
Growth in EBITDA margin remained flat between FY09 and FY11, despite a strong growth in total sales, as realisations
from the Sinnar plant were stagnant. In FY12, the company acquired Cal India Foods International which is in the
business of formulation and marketing of enzyme products and thus has better margins compared to AETL (in the
fermentation business). The Indore plant, which commenced operations in FY13, has better equipment and lesser
requirement for human intervention, leading to better utilisation of raw materials and lower employee expenses. It also
enjoys a relatively lower power cost as it is based in a SEZ. These factors together improved EBITDA margin to 37.3% in
FY12 and to 41.5% in FY13.
PAT margin reported steady growth during the period due to a number of factors including better price realisation from
higher export sales, foreign exchange gains and lower borrowing costs.
Particulars

FY09

FY10

FY11

FY12

FY13

Operating income (` mn)

852

1,141

1,168

1,719

2,220

EBITDA (` mn)

176

238

235

641

912

EBITDA margin (%)

20.7

20.9

20.1

37.3

41.5

Adjusted PAT( mn)

73

121

168

343

508

Adjusted PAT margin (%)

8.5

10.6

14.4

20.0

23.1

Net worth ( mn)

380

489

645

986

1,649

RoE (%)

20.6

27.7

29.5

42.9

38.6

RoA (%)

7.8

11.9

12.8

13.9

13.7

RoCE (%)

17.9

23.6

17.2

26.9

25.6

Debt-equity ratio (x)

0.92

0.74

1.01

2.10

1.12

Cash from operations

110

98

158

386

357

Note: The financial numbers in this document has been re-classified as per
CRISILs standard, and hence may not match with DRHP numbers.
Source: Company, CRISIL Research

RoE increased to 42.9% from 20.6% during FY09-12 before declining to 38.6% in FY13. This growth is attributable to
better margins and improved asset turnover. However, as the assets were mainly funded by debt, RoCE did not witness
a similar growth. This led to a higher debt equity ratio of 2.1 in FY12. The company increased the equity capital base by
selling stake to private equity investors in FY13 and repaid some debt, which lowered the debt to equity ratio.

13

CRISIL IPOGradingRationale
C. Management Capabilities and Corporate Governance
Management has extensive experience in the enzymes industry
AETL is promoted by Mr Chandrakant Laxminarayan Rathi and Mr Vasant Laxminarayan Rathi; both have over three
decades of experience in the enzymes industry. Mr Chandrakant Rathi serves as the managing director of the company,
and Mr Vasant Rathi heads the international operations. In the past, the promoters have incorporated other companies
with similar businesses, which were eventually merged with AETL. Thus, the promoters have expertise in entrepreneurial
and operational issues.
The other top executives are experienced professionals - Mr Beni Prasad Rauka (CFO), Mrs. Savita Rathi (Director,
Export-Import and HR), Mr Mukund Kabra (Director Factory Operations). Top level management includes
Name and designation

Joining date

Experience

March 2005

Previously worked with Lumis Biotech, an enzyme

manufacturer in India

April 2004

More than eight years of experience in the enzyme industry

February 1996

Over 18 years of research experience on microbial enzymes

and fermentation technology

Mr Sandeep Bijamwar
Business Head Health Care

May 2010

Over 17 years of experience in the pharmaceuticals and

chemical industry, including stints with Cipla Ltd and Ideal
Cures Private Ltd

Ms. Saylee Pradhan

Manager R&D and Head Nutrition

October 1991

More than 22 years of experience in the field of R&D

Mr Kumar Krishnamurty Navile

Business Head Bio-processing Division

February 2012

Over 17 years of experience in the marketing field of

enzymes and chemical industries. Prior employers include
DSM Nutritional Products, Novozymes South Asia and SM
Diagnostics

Ms. Shilpa Risbud

Head Technical Services

March 1996

More than 16 years of experience in the enzymes industry

Mr Dipak Roda
General Manager - Marketing
Mr Piyush Rathi
Head Strategy and Business Development
Dr. Anil Kumar Gupta
General Manager PMD

Source: DRHP

Gained a leading position in the industry

Over the past three decades, AETL has performed commendably to gain a strong position in the domestic enzymes
market in India. As of 2013, the company was the second largest enzyme company in the country in terms of market
share after Novozymes South Asia. The management has also done well to expand in the international markets, where
the company has positioned itself as one of the niche players and develops customised solutions for its clients.

Board composition and independent directors

AETLs board consists of nine directors, of whom three are independent. Mr Chandrakant Rathi, Mr Vasant Rathi, Mrs.
Savita Rathi, Mr Mukund Kabra and Mr Pradip Shah are directors representing the interest of the promoters. Mr K. V.
Ramakrishna is the Chief Investment Officer of the private equity business of Kotak, which owns a 4.75% stake in the
company. The three independent directors have legal, export and banking backgrounds.
Mr Kedar Jagdish Desai joined in 2010 and currently serves as the chairman of the board. He holds a Bachelors degree
in Commerce and a Bachelors degree in Law from the University of Mumbai and has over 15 years of experience in the
field of law. Mr Desai has been associated with Kanga & Co. and with Desai, Desai, Carrimjee & Mulla, Advocates and
Solicitors as a partner.

14

Mr Pavan Kumar Gupta also joined the board in 2010. Mr Gupta holds a Bachelors degree in Law and a Masters degree
in Commerce from Agra University. He has over 37 years of experience in the banking sector. Previously, Mr Gupta was
the chairman and managing director of Union Bank of India and the chairman of National Housing Board of India.
Mr Ramesh Mehta has been a director of the company since 1993. He passed the Intermediate Science Exam from the
University of Bombay. Mr Mehta has experience in the business of diamond exports, jewellery and textiles.

Corporate governance and board processes

The quality of the companys disclosures can be considered good based on the information disclosed in the DRHP,
annual reports and company website. According to the independent directors, no meetings are held without prior notice,
and the board members receive necessary documents well in advance. The management is open to suggestions and the
involvement of independent directors is high. The independent directors rated the companys corporate governance
processes at par with most publicly-listed companies. Based on our interaction with the management, we have found
them fairly open and transparent.
Auditor for the company is Walker, Chandilok & Co., appointed in FY11. The firm is the Indian associate of Grant
Thornton India. The previous auditors M.M.Nissim pulled out willingly as auditors in 2011 and suggested Walker,
Chandilok and Co.

15

CRISIL IPOGradingRationale
Annexure I: AETLs manufacturing facilities
Manufacturing
Facility

Location

Capacity

Operations
An integrated fermentation, recovery and formulation

Unit-I, Nashik

Sinnar Industrial Area,

Nashik, Maharashtra

facility. It is used for manufacturing enzymes through

120 cubic meters

the fermentation of mainly fungi and bacteria. Caters

mainly to the domestic market.

Unit-II, Nashik

Satpur, Nashik Industrial

Area, Maharashtra

A satellite extraction and recovery facility, used for

36 metric tonnes

manufacturing ox bile (non-core product).

Dhar, Special Economic

Unit-III, Indore

Zone, Pithampur, Indore,

A fermentation, recovery and formulation facility.

240 cubic meters

Primarily caters to the international markets.

Madhya Pradesh
Unit-IV, Thane
Unit at SEB,
California

Vashind, Thane,
Maharashtra

2,000 metric tonnes

A satellite blending, mixing and formulation facility. It

produces animal feed products.
A blending, mixing and formulation facility owned by

Chino, California, USA

NA

Specialty Enzymes and Biotechnologies (SEB), the

step-down subsidiary of AETL

Source: DRHP

Annexure II: AETLs international subsidiaries

Subsidiary

Location

Incorporation Date

Advanced Enzymes USA

California, USA

November 1, 2010

Advanced Supplementary Technologies Corporation

subsidiary of Advanced Enzymes USA
Cal India Foods International (operating as Specialty Enzymes
and Biotechnologies) subsidiary of Advanced Enzymes USA

California, USA
California, USA

December 30, 2010; acquired in

October 2012
March 24, 1985; acquired in April
2011

Advanced Enzyme Far East Ltd

Central, Hong Kong

March 11, 2009

Advanced Enzyme Europe B.V.

Hague, Netherlands

June 5, 2012

Source: DRHP

16

Annexure III: Profile of the board of directors

Name

Mr Kedar
Jagdish Desai

Designation

Age Qualification

Chairman, NonExecutive and

41
Independent
Director

Mr Chandrakant Promoter,
Laxminarayan
Managing
Director
Rathi

58

Years of
Directorships / partnership in other
experience entities

Bachelors degree in
Commerce and a
Bachelors degree in
15
Law from the University of
Mumbai

Bachelors degree in
Science (Chemical
Engineering) from
National Institute of
Technology, Rourkela

Over 30

Mr Vasant
Laxminarayan
Rathi

Promoter, NonExecutive and

Non65
Independent
Director

Bachelors degree in
Pharmacy from Nagpur
University and Masters
degree in Science from
University of Hawaii

38

Mr Pradip
Bhailal Shah

Non-Executive
and NonIndependent
Director

59

Bachelors degree in
Commerce from Gujarat
University, studied
management from
California State University

24

Mr Mukund
Madhusudan
Kabra

Executive and
Whole-time
Director

40

Bachelors degree in
Chemical Engineering
17
from Sambalpur University

Other directorships
1. Axis Mutual Fund Trustee Ltd
2. Financial Planning Corporation (India)
Private Ltd
3. Chowgale Industries Private Ltd
4. Financial Planning Standards Board of
India
Partnership
Messrs Desai Desai Carrimjee & Mulla,
Advocates and Solicitors
HUF
Jagdish S. Desai H.U.F
Other directorships
1. Advanced Vital Enzymes Ltd
2. Atharva Capital Ventures Private Ltd
3. Advanced EnzyTech Solutions Ltd
4. Chandrakant Rathi Finance and
Investment Company Private Ltd
5. Source Natural Food and Herbal
Supplements Ltd
6. Advanced Enzyme Far East Ltd
7. Advanced Enzyme USA
8. Advanced Enzyme B.V.
HUF
C.L.Rathi HUF
Trust
Enzymes Association of India
Other directorships
1. Advanced Enzymes USA
2. Advanced Supplementary Technologies
Corporation
3. Cal India Foods International
4. Rathi Property LLC
Trust
Vasant and Prabha Rathi Generation Trust
Other directorships
1. Washington Garment Dyeing Inc. (USA)
2. Advanced Enzymes USA
Other directorships
1. Advanced Vital Enzymes Ltd
2. Advanced Bio-Agro Tech Ltd
HUF
Mukund M. Kabra HUF

17

CRISIL IPOGradingRationale

Name

Designation

Executive and
Whole-time
Director

Mrs Savita
Rathi

Age Qualification

Years of
Directorships / partnership in other
experience entities

52

NA

Non-Executive
and NonIndependent
Director

43

Bachelors degree in
Computer Science and
Engineering from National
Institute
of Technology, Warangal; 20
Post Graduate Diploma in
Management from Indian
Institute of Management,
Bangalore

Other directorships
1. Four Soft Ltd
2. Icomm Tele Ltd
3. Mahindra Aerospace Private Ltd
4. Dynaspede Integrated Systems Private
Ltd
5. Macrocomm Convergence (India)
Private Ltd

Non-Executive
Mr Ramesh
and
Thakorlal Mehta Independent
Director

80

Intermediate Science
Exam from University of
Bombay

NA

None

64

Bachelors degree in Law

and Masters degree in
Commerce from Agra
University; diploma in
International Banking and
Finance from the Indian
Institute of Bankers

37

Other directorships
1. UV Asset Reconstruction Company Ltd
2. PNB Housing Finance Ltd
3. Baroda Pioneer Asset Management
Company Ltd

Mr K.V.
Ramakrishna

Mr Pavan
Kumar Gupta

Non-Executive
and
Independent
Director

23

Other directorships
1. Advanced Vital Enzymes Ltd
2. Advanced EnzyTech Solutions Ltd
3. Atharva Capital Ventures Private Ltd
4. Chandrakant Rathi Finance and
Investment Company Private Ltd
5. Advanced Bio-Proteins Solutions Ltd

Source: DRHP

Annexure IV: Top shareholders on the date of filing the DRHP

Percentage of pre-issue
Sl No.

Name

equity share capital

Mr Vasant Laxminarayan Rathi

88,80,900

40.80%

Chandrakant Rathi Finance and Investment Company Private Ltd

36,21,200

16.64%

Atharva Capital Ventures Private Ltd

2,92,940

11.45%

Mrs. Prabha Rathi

12,83,600

5.90%

Higuchi Inc.

8,73,600

4.01%

Mr Pradip Bhailal Shah

7,50,800

3.45%

Kotak Mahindra Trusteeship Services Ltd

A/c Kotak India Venture Fund I

6,79,900

3.12%

Mr Mukund Madhusudan Kabra

3,81,100

1.75%

Kotak India Venture (Offshore) Fund

3,36,600

1.55%

10

Mr Kishor Laxminarayan Rathi

2,83,200

1.30%

11

Sri Sri Ravi Shankar Trust

2,35,400

1.08%

1,98,19,240

91.06%

Total
Source: DRHP

18

Shares

Our Capabilities
Making Markets Function Better
Economy and Industry Research

Largest team of economy and industry research analysts in India

Coverage on 70 industries and 139 sub-sectors; provide growth forecasts, profitability analysis, emerging
trends, expected investments, industry structure and regulatory frameworks

90 per cent of Indias commercial banks use our industry research for credit decisions

Special coverage on key growth sectors including real estate, infrastructure, logistics, and financial services

Inputs to Indias leading corporates in market sizing, demand forecasting, and project feasibility

Published the first India-focused report on Ultra High Net-worth Individuals

All opinions and forecasts reviewed by a highly qualified panel with over 200 years of cumulative experience

Funds and Fixed Income Research

Largest and most comprehensive database on Indias debt market, covering more than 15,000 securities

Largest provider of fixed income valuations in India

Value more than 53 trillion (USD 960 billion) of Indian debt securities, comprising outstanding securities

Sole provider of fixed income and hybrid indices to mutual funds and insurance companies; we maintain 12
standard indices and over 100 customised indices

Ranking of Indian mutual fund schemes covering 70 per cent of assets under management and 4.7 trillion
(USD 85 billion) by value

Retained by Indias Employees Provident Fund Organisation, the worlds largest retirement scheme covering
over 60 million individuals, for selecting fund managers and monitoring their performance

Equity and Company Research

Largest independent equity research house in India, focusing on small and mid-cap companies; coverage
exceeds 125 companies

Released company reports on 1,442 companies listed and traded on the National Stock Exchange; a global
first for any stock exchange

First research house to release exchange-commissioned equity research reports in India

Assigned the first IPO grade in India

Analytical Contact

Media Contact

Sandeep Sabharwal

Mohit Modi,

Priyadarshini Roy,

Senior Director Capital Markets

Director Equity Research

Communications & Brand Management

Phone: +91 22 4097 8052

Phone: +91 22 4254 2860

Phone: +91 22 3342 1812

Email: sandeep.sabharwal@crisil.com

Email: mohit.modi@crisil.com

Email: priyadarshani.roy@crisil.com

Contact us
Phone: +91 22 3342 3561/ 62
Fax: +91 22 3342 3501
E-mail: clientservicing@crisil.com | research@crisil.com

About CRISIL Limited

CRISIL is a global analytical company providing ratings, research, and risk and policy advisory services. We are Indias leading ratings agency.
We are also the foremost provider of high-end research to the worlds largest banks and leading corporations.

About CRISIL Research

CRISIL Research is India's largest independent and integrated research house. We provide insights, opinions, and analysis on the Indian
economy, industries, capital markets and companies. We are India's most credible provider of economy and industry research. Our industry
research covers 70 sectors and is known for its rich insights and perspectives. Our analysis is supported by inputs from our network of more
than 4,500 primary sources, including industry experts, industry associations, and trade channels. We play a key role in India's fixed income
markets. We are India's largest provider of valuations of fixed income securities, serving the mutual fund, insurance, and ba nking industries.
We are the sole provider of debt and hybrid indices to India's mutual fund and life insurance industries. We pioneered independent equity
research in India, and are today India's largest independent equity research house. Our defining trait is the ability to convert information and
data into expert judgements and forecasts with complete objectivity. We leverage our deep understanding of the macroeconomy and our
extensive sector coverage to provide unique insights on micro-macro and cross-sectoral linkages. We deliver our research through an
innovative web-based research platform. Our talent pool comprises economists, sector experts, company analysts, and information
management specialists.

CRISIL Privacy
CRISIL respects your privacy. We use your contact information, such as your name, address, and email id, to fulfil your request and service
your account and to provide you with additional information from CRISIL and other parts of McGraw Hill Financial you may find of interest.
For further information, or to let us know your preferences with respect to receiving marketing materials, please visit www.crisil.com/privacy.
You can view McGraw Hill Financials Customer Privacy Policy at http://www.mhfi.com/privacy.
Last updated: May, 2013

Disclaimer
A CRISIL IPO Grading is a one-time assessment and reflects CRISIL's current opinion on the fundamentals of the graded equity issue in relation to
other listed equity securities in India. A CRISIL IPO Grading is neither an audit of the issuer by CRISIL nor is it a credit rating. Every CRISIL IPO
Grading is based on the information provided by the issuer or obtained by CRISIL from sources it considers reliable. CRISIL does not guarantee the
completeness or accuracy of the information on which the grading is based. A CRISIL IPO Grading is not a recommendation to buy / sell or hold the
graded instrument; it does not comment on the issue price, future market price or suitability for a particular investor.
CRISIL is not responsible for any errors and especially states that it has no financial liability whatsoever to the subscribers / users / transmitters /
distributors of CRISIL IPO Gradings. For information on any IPO grading assigned by CRISIL, please contact 'Client Servicing' at +91-22-33423561, or
via e-mail: clientservicing@crisil.com.
For more information on CRISIL IPO Gradings, please visit http://www.crisil.com/ipo-gradings

CRISIL Limited
CRISIL House, Central Avenue, Hiranandani Business Park,
Powai, Mumbai 400076. India
Phone: + 91 22 3342 3000 Fax: + 91 22 3342 3001
Email: clientservicing@crisil.com
www.crisil.com
CRISIL Limited. All Rights Reserved.

CRISIL Ltd is a Standard & Poor's company