Akums Drugs IPO Hits 2.03x Subscription on Day 2; Check GMP Today
The initial public offering (IPO) of Akums Drugs and Pharmaceuticals Limited, which opened for public subscription on July 30, has already been oversubscribed. As of 11:09 am on the second day of bidding on Wednesday, the 1,856.74-crore IPO received a 2.03 times subscription, garnering bids for 3,07,26,960 shares against 1,51,62,239 shares on offer.
Subscription Status and Investor Categories
The retail quota received a remarkable 5.10 times subscription, indicating strong interest from individual investors. The non-institutional investors category achieved a 3.18 times subscription. The qualified institutional buyers (QIB) category received a 44 per cent subscription.
Price Band and Important Dates
The price band of the Akums Drugs and Pharmaceuticals IPO, which will close on August 1, has been set at Rs 646-Rs 679 per share. The allotment is likely to be finalized on August 2, while the listing will occur on both BSE and NSE on August 6.
Grey Market Premium (GMP) Analysis
Current GMP Status
According to market observers, unlisted shares of Akums Drugs and Pharmaceuticals Ltd are trading Rs 177 higher in the grey market compared to their issue price. The Rs 177 grey market premium (GMP) suggests an expected 26.07 per cent listing gain from the public issue. It is important to note that the GMP is based on market sentiments and is subject to change.
Understanding Grey Market Premium
The grey market premium reflects investors’ willingness to pay more than the issue price for unlisted shares. This premium often serves as an indicator of the stock’s expected performance upon listing.
Analysts’ Recommendations
Anand Rathi’s IPO Note
Most analysts have recommended subscribing to the Akums Drugs and Pharmaceuticals IPO. In its IPO note, brokerage Anand Rathi points out that Akums Drugs is the largest India-focused contract development and manufacturing organization (CDMO) in terms of revenue, production capacity, and number of clients for the fiscal year 2023. Its client base spans pharmaceutical companies, nutraceutical firms, cosmo-derma businesses, wellness companies, e-commerce platforms, healthcare providers, and government agencies.
Anand Rathi also noted that recent contract adjustments required by GAAP standards reflected a lack of additional funding support. Although the issue price might appear high based on the restated financial data, this perspective shifts when excluding such accounting provisions.
Stoxbox’s IPO Note
Another brokerage, Stoxbox, noted that the company has demonstrated robust growth and delivered superior returns due to its large scale in capacity, formulation capability, and R&D competency. These factors enable it to capitalize on segment growth as pharmaceutical sponsors seek companies with the scale to ensure a reliable supply of large quantities.
“Excluding adjusted put-call liabilities, the IPO is priced at a reasonable P/E ratio of 29.7x. Thus, we advise a SUBSCRIBE rating for the issue,” Stoxbox commented.
IPO Structure and Minimum Investment
Fresh Issue and Offer for Sale (OFS)
The IPO is a combination of a fresh issue of 1 crore shares aggregating to Rs 680 crore and an offer for sale (OFS) of 1.73 crore shares aggregating to Rs 1,176.74 crore.
Minimum Investment
Investors are required to apply for at least 22 equity shares, and in multiples of this amount. As a result, the minimum investment for retail investors would be Rs 14,938, calculated as 22 shares (lot size) multiplied by Rs 679 (upper price band).
Key Sellers in OFS
The shares being sold in the OFS are from Sanjeev Jain, Sandeep Jain, and Ruby QC Investment Holdings Pte Ltd.
Utilization of IPO Proceeds
Funds raised from the issue will be used to:
- Repay debt.
- Fund working capital requirements of the company.
- Pursue inorganic growth initiatives through acquisition.
- General corporate purposes.
Company Overview: Akums Drugs and Pharmaceuticals Ltd
Foundation and Growth
Founded in 2004, Akums Drugs and Pharmaceuticals Ltd is a pharmaceutical contract development and manufacturing organization (CDMO). The company provides a wide array of pharmaceutical products and services both in India and internationally.
Key Clients
As of September 30, 2023, the company’s key clients for its CDMO business include:
- Alembic Pharmaceuticals
- Alkem Laboratories
- Cipla
- Dabur India
- Dr Reddy’s Laboratories
- Hetero Healthcare
- Ipca Laboratories
- Mankind Pharma
- MedPlus Health Services
- Micro Labs
- Mylan Pharmaceuticals
- Natco Pharma
- Sun Pharmaceutical Industries
- Amishi Consumer Technologies (The Mom’s Co)
Lead Managers
ICICI Securities, Axis Capital, Citigroup Global Markets India, and Ambit Pvt Ltd are the running lead managers for the issue.
Market Capitalisation Post-Issue
Brokerage firms have estimated the company’s market capitalization to be Rs 10,697 crore after the issue.
Conclusion: A Worthwhile Investment
The Akums Drugs and Pharmaceuticals IPO presents a compelling investment opportunity, supported by strong subscription figures, a reasonable grey market premium, and positive analyst recommendations. With its significant market presence and robust growth prospects, Akums Drugs and Pharmaceuticals Ltd is well-positioned for success.
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