The initial public offering (IPO) of Akums Drugs and Pharmaceuticals continued to attract strong response from investors during the second day of the bidding process. The issue, which kicked-off for bidding on Tuesday, July 31, sailed through on the first day and ended day one with more than 1.35 times subscription.
The New Delhi-based Akums Drugs & Pharmaceuticals is selling its shares in the price band of Rs 646-679 apiece. Investors can apply for a minimum of 22 shares and its multiples thereafter. It is looking to raise Rs 1,,856.74 crore via IPO, which includes a fresh share sale of Rs 680 crore and an offer-for-sale (OFS) of 1,73,30,435 equity shares.
According to the data, the investors made bids for 4,53,00,992 equity shares, or 2.99 times, compared to the 1,51,62,239 equity shares offered for the subscription by 2.40 pm on Wednesday, July 31. The three-day bidding for the issue will conclude on Thursday, August 1.
The allocation for retail investors was subscribed 7.22 times, while the portion reserved for non-institutional investors (NIIs) saw a subscription of 5.32 times. Employees' portion was booked 1.94 times. However, the quota set aside for qualified institutional bidders (QIBs) quota saw bids for 44 per cent as of the time.
Akums Drugs and Pharmaceuticals is a pharmaceutical contract development and manufacturing organization (CDMO) which offers a comprehensive range of pharma products and services in India and overseas. It is engaged in the manufacture and sale of branded drugs and active pharmaceutical ingredients (APIs).
The grey market premium of Akums Drugs & Pharma has taken a hit following the bidding for the first day. Last heard, the company was commanding a premium of Rs 175-180 in the unofficial market, suggesting a listing pop of about 26 per cent for the investors. However, the premium in the grey market stood around Rs 210-215 on the first day of the bidding.
Brokerage firms are mostly positive on the issue suggesting investors to subscribe to it for a long term citing experience management, strong business model, growth potential, reasonable valuations and solid leadership in the domestic markets. On the other hand, they are skeptical of low margins, regulatory scrutiny and financials of the API business.
"At the upper price band, Akums is available at a P/E of 29.8 times (FY24) and Mcap-to-sales of 2.6 times (FY24), which appears to be fully priced. However, considering its leading position in the industry, prestigious clientele in domestic and global markets, strong growth prospects and excluding the accounting provisions, we assign a 'subscribe' rating," said Geojit Financial Services.
Ahead of its IPO, Sanstar raised Rs 828.78 crore from 12 anchor investors as it allocated 1,22,05,912 shares at a price of Rs 679 apiece. Akums Drugs and Pharma reported a profit of 0.79 crore with a revenue of Rs 4,212.21 crore for the year ended on March 31, 2024. The company clocked a net profit of Rs 97.82 crore with a revenue of Rs 3,700.93 crore in the financial year 2022-23.
The manufacturing units are subject to periodic inspections and audits by regulatory authorities and clients any kind of breach or disapproval may adversely affect the operations of the company. The company has incurred losses in the past. The business is highly capex driven, lack of funds or capex may slow down the growth of the company, said the IPO note from Sushil Finance.
"Accordingly, the issue is priced at a P/E of 30, based on FY24 financial data and with a P/BV ratio of 13.69 times, calculated using its net asset value (NAV) of Rs 49.59 as of March 31. The industry average PE is 49.14 times. Looking at all the factors, risks, opportunities and valuation, Cash rich investors may subscribe for the issue with a medium to long-term view," it said.
Akums Drugs and Pharma has reserved shares worth Rs 15 crore for its eligible employees, who will get a discount of 64 per share. 75 per cent of the net offer has been reserved for the qualified institutional bidders (QIBs), while non-institutional investors (NIIs) will get 15 per cent of the net offer. Remaining 10 per cent of the net offer shall be allocated for retail investors.
Axis Bank, ICICI Securities, Citigroup Global Markets India and Ambit are the book running lead managers of the Akums Drugs and Pharmaceuticals IPO, while Link Intime India is the registrar for the issue. Shares of the company shall be listed on both BSE and NSE, with August 06, Tuesday.
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