Nureca IPO

It is raining IPO's in Indian Stock Market. There is hardly a week without an IPO. The question is, why? What is going on, why is almost every company is rushing to do an IPO and why now? Ideally, in this pandemic situation, when the economy is in a bad shape, companies will avoid doing IPOs. Why are companies doing the exact opposite? All these are valid questions, but not the topic of this article. This article will talk about Nureca and whether I will subscribe to its IPO or not.

Disclaimer: I am not a financial advisor. Neither is this article a piece of financial advice, nor am I qualified to give anyone investment advice. This article is to share my thoughts based on the information that I have gathered and my reasoning. This article is in Q & A format.

Q: What is Nureca and What does it do?

Nureca is a company engaged in the business of home healthcare and wellness products. Nureca enables customers with the appropriate tools, to monitor chronic ailments and other diseases, hence improving their lifestyle. (source: https://www.nureca.com/about). It has products in 5 categories.

(i) Chronic Device Products - This includes products, such as blood pressure monitors, pulse oximeters, thermometers, nebulizers, self-monitoring glucose devices, humidifier and steamers.

(ii) Orthopaedic Products - This category includes rehabilitation products such as wheelchairs, walkers, lumbar and tailbone supports and physiotherapy electric massagers.

(iii) Mother and Child Products - This includes products, such as breast pumps, bottle sterilizers, bottle warmers, car seats and baby carrycots.

(iv) Nutrition Supplements - This includes products, such as fish oil, multivitamins, probiotics, apple cider and vinegar.

(v) Lifestyle Products - This includes products such as smart scales, aroma diffusers and fitness tracker

Q: I have not seen Nureca's products, where does it sell them?

Nureca sells its product mainly online on platforms like Amazon and Flipkart. It has the following brands:-

Dr Trust: It offers products that enable the users to monitor their chronic ailments, to improve their lifestyle.

​Dr Physio: Offers products under orthopaedic categories such as- Electric massagers, wheelchairs and walkers.

​Trumom: It offers products under the Mother and Child Care category.

Q: Who are Nureca's competitors?

Nureca's competitors range from cheap Chinese brands to local unbranded manufactures to established brands like Omron. The market is fragmented, and there is hardly any customer loyalty.

Q: Does the company manufactures its product itself?

No, it outsources its manufacturing. Analysts call it an asset-light business model. I call it a commodity business model. There is no product differentiation, because of which tomorrow anyone can easily replicate their business model. The entry barrier is low.

Q: Are there any strengths?

Yes, Dr Trust is a recognizable brand. I have a pulse oximeter and a yoga mat from the same company. Both the products are of good quality. Hence the company can charge some premium for brand and quality.

Q: Is the business growing?

Yes, the company reported earnings before tax of Rs 48.6 crore in the six months ending September 2020. It is also in a segment where the customers awareness is increasing. The demand for self-monitoring and home-health products is increasing, and the company has been able to take advantage of COVID scenario.

Q: Will I subscribe to Nureca's IPO?

No, I will not.

Q: Why?

I am not a fan of the business model of Nureca. I don't see Nureca having any competitive advantage, and I don't see any moat. The products are commodity products, and manufacturing is outsourced. The only advantage is Dr Trust is easily recognizable. The earnings of 48.6 crores are from time which includes lockdown and demand for its product was at a peak. We don't know if the same numbers can continue.

Q: Why have you not looked at any financial numbers before deciding?

In my investment philosophy, if the business and business model makes sense to me then only will I take a look, at the numbers. If the business model and business fail the litmus test, I don't want to spend more time crunching numbers.

Nureca, in my view, fails the Litmus test and hence I will not apply for its IPO.