Valiant Laboratories IPO opens today: Should you subscribe to the issue?

The Rs 156.5 crore initial public offering (IPO) of Valiant Laboratories kicked off for bidding on Wednesday, September 27 and can be subscribed till Friday, September 29. The drug-maker is offering its shares in the fixed price band of Rs 133-140 apiece with a lot size of 105 equity shares and its multiples. The issue is entirely a fresh sale of 1.08 crore equity shares.

Valiant Laboratories, Incorporated in 1980, is a pharmaceutical ingredient manufacturing company in India. It majorly focuses on manufacturing Paracetamol. Its manufacturing unit is located in Palghar (Maharashtra), spread across 2,000 square meters with an annual total installed capacity of 9,000 MT per annum. It also has an R&D Facility, equipped with a laboratory and infrastructure.

The company intends to utilize the net proceeds from the issue towards the investment in its wholly owned subsidiary, Valiant Advanced Sciences (VASPL) for part-financing its capital expenditure needs, in relation to the setting up a manufacturing facility for specialty chemicals in Bharuch, Gujarat; working capital requirements and general corporate purposes.

Brokerage firms have a mixed view on the company. A few are positive on the issue citing its strong growth, sound balance sheet and positive prospects of growth in the coming years. While others suggest to avoid the issue citing its limited ties with buyers and suppliers and highly regulated business. However, valuations are considered to be reasonable.

Valiant Laboratories has demonstrated high ROCE, positive operating cash flows, strong balance sheet, pursued growth opportunities and better managed unanticipated cash flow variations, which will drive the company's performance going ahead, said Manish Chowdhury from StoxBox in his IPO note.

"The company has a track record of sustained revenue growth, growing at a CAGR of 35.3 per cent during FY 21-23. With strong operational efficiency. On the upper price band, the issue is valued at a P/E of 15.7 times based on FY2023 earnings, which is fairly valued compared to its peers," it added with a 'subscribe' rating for the issue.

Valiant Laboratories mobilised Rs 45.74 crore from four anchor investors by allocating 32,66,970 equity shares at an issue price Rs 140 per equity share. The Triumph Fund, Saint Capital Fund, Astorne Capital VCC - Arven and Negen Undiscovered Value Fund constitute the anchor book.

Valiant Laboratories is a 40-year-old pharmaceutical ingredient manufacturing firm with a main focus on paracetamol. It operates from its only manufacturing unit in Palghar, Maharashtra; however, it is planning to establish a new project in Gujarat through its subsidiary, said Shivani Nyati, Head of Wealth at Swastika Investmart.

"Its financial performance has been improving, and it has the benefit of experienced promoters. But it is a single-product manufacturing company. It is dependent on a limited number of suppliers and customers. There is intense competition with high regulations. The issue is fairly priced, but considering other risks and current market volatility, we will avoid this IPO," she said.

Valiant Laboratories imports the raw material for the manufacture of Paracetamol named para–amino phenol from China and Cambodia. Unistone Capital is the lead-manager to the issue, while Link Intime India is the registrar to the issue. Shares of the company are to be listed on both BSE and NSE.

The Capital Market (CapitalMarket.com) rating for Valiant Laboratories IPO is 37. Their analysis recommends 'do not subscribe' for the IPO. There have been some instances of incorrect filings with the Registrar of Companies and other non-compliances under the Companies Act in the past, which may attract penalties, said Capital Markets.

Valiant Laboratories reported a net profit of Rs 29 crore with a revenue of Rs 338.77 crore for the year ended on March 31, 2023,  However, its profit after tax came in at Rs 27.5 crore with a revenue at Rs 293.47 crore in the financial year ended in March 2023.

Valiant Laboratories has reserved 50 per cent shares for the qualified institutional bidders (QIBs), while the non-institutional investors (NIIs) will have 15 per cent of reservation. Retail investors will get remaining 35 per cent shares reserved for them.


Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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