What do experts, brokerages say about Claris Life IPO?

1179 Investors following Claris Life. Share this News with them.

0

Like this story, share it with millions of investors on M3

What do experts, brokerages say about Claris Life IPO?

The initial public offering of a sterile injectables pharmaceutical company Claris Lifesciences has opened for subscription. The company aims to raise Rs 300 crore through this IPO.

Post your opinion here

 

0

Tweet

Share on Tumblr

Nifty BSE | NSE 31/05/12 Are Mutual Funds betting on Nifty?

The initial public offering of a sterile injectables pharmaceutical company Claris Lifesciences has opened for subscription. The company aims to raise Rs 300 crore through this IPO, out of which it has already received commitment for Rs 54 crore from four anchor investors on Tuesday.

The price band of the issue, which closes on November 26, is set at Rs 278-293 per share. Claris is one of the largest Indian sterile injectables pharmaceutical companies with a presence in 76 countries worldwide.

Experts' opinions were mixed on the issue while brokerage houses recommended subscribing to the issue. Investment Advisor, SP Tulsian advised to exercise caution. He feels the issue is largely expensive and more so on issues directly affecting its core business. However, Manish Bhatt of Prabhudas Lilladher advised subscribing to the issue.

"At the upper end of the price band, the company is issuing shares at PE multiple of 12 times, which will result in a market cap of Rs 1,800 crore and an EV of Rs 1,965 crore, on listing. This is very high considering the issues (like Kuwait regulator banned products during June-August 2010; recalled products from US, Canada, Denmark, Finland, Australia and New Zealand - all being regulated markets, due to contamination complaints etc) surrounding the company. Also, the income tax holiday which will expire in the next 6 months, will put added pressure on the company's bottomline," Tulsian explained.

Nirmal Bang, KR Choksey and Mehta Equities recommended subscribing the issue.

KRChoksey recommended subscribing the issue on the back of CLL's low cost competitive advantage, having presence in niche segment (sterile injectable), and healthy growth prospects.

"We believe that the company has selected a niche opportunity for itself and has proven its credentials in it. It has 1100 global registrations and is one of the leading players in injectibles segment in emerging markets. It is trying to foray in regulated markets which hold 90% of global injectible market. We believe that despite some hiccups (USFDA regulatory issue) Claris Lifesciences holds a promising future. Further deal with Pfizer boosts the confidence in company's strong product pipeline. Given the high growth market, high margin-low competition scenario and company's focus on profitability than scale, we are positive on the company's outlook," Nirmal Bang said.

Mehta Equities believes Claris has a great opportunity for sustainable growth due to its low cost production base, wide distribution channels and the niche market it caters to. "We consider that injectables industry is characterized by less competitive intensity, low price erosion and higher profit margins business which keeps company on growth track. CLL is well positioned to tap the opportunity as explained in the above rationales. On valuations parse at the higher side of the price band i.e. Rs 293; the issue is available 13x its FY'10 EPS, and while on lower band at Rs 278 the stock trades at 12.3x on FY 10 EPS of Rs 22.5. Hence, we advice investors should subscribe the IPO considering factors like strong product demand, higher operating margins and less competition," Mehta Equities said.

"In the past, Claris has grown at a strong pace with net sales increasing at a CAGR of 26.9% and net profit posting a strong CAGR of 65.6% over CY2005-09. The traction in net sales came on the back of strong exports, which also boosted overall operating margins. At the upper end of price band, the IPO is available at 2.5x EV/Sales and 14.4x earnings CY2009. We recommend Subscribe to the issue given the niche product portfolio and potential to expand in regulated (Europe) and emerging markets," Angel Broking said.