Akums Drugs shares likely to debut with 10-15% gains on August 6

Akums Drugs and Pharmaceuticals IPO listing

Despite selling pressure in the equity markets, Akums Drugs and Pharmaceuticals shares are likely to see 10-15 percent opening gains on August 6 given the strong IPO subscription numbers, experts said.

The Rs 1,857-crore initial public offering was subscribed 63.56 times with maximum support from qualified institutional buyers who had bought 90.09 times the portion set aside for them. Non-institutional investors were at the second spot, bidding 42.21 times the allotted quota, while the part set aside for retail investors was booked 21.3 times.

The IPO was comprised of a fresh issuance of shares worth Rs 680 crore by the company and an offer-for-sale of Rs 1,176.7 crore by promoters Sanjeev and Sandeep Jain, and investor Ruby QC Investment Holdings.

Akums Drugs is a pharmaceutical contract development and manufacturing organisation (CDMO) which offers a comprehensive range of pharmaceutical products and services in India and overseas. The company carries out operations across the pharmaceutical value chain, operating as a CDMO, marketer of formulations, and manufacturer of APIs. Its domestic market share in the CDMO market increased to 30.2 percent by March 2024, from 26.7 percent by March 2021.

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"Based on FY24 adjusted earnings, the IPO is priced at a price-to-earnings ratio of 29.79 which appears aggressively priced. We expect a listing at around Rs 780-800 per share, resulting in a listing gain of around 15-18 percent over the issue price of Rs 679 per share," Amit Goel, Co-Founder & Chief Global Strategist at Pace 360 said.

According to Prashanth Tapse, Senior VP Research at Mehta Equities also, despite pressure in the market, Akums Drugs can list with a decent gains in the range of 10-15 percent on the issue price, while Prathamesh Masdekar, Research Analyst at StoxBox feels the shares may list at a premium of around 16 percent over the issue price.

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Considering healthy subscription demand especially from QIBs (90x) and unique business matrix, Tapse holds its long term positive outlook in the India’s largest CDMO player by revenue, production capacity and client base. He thinks the company's comprehensive product offerings and extensive manufacturing capabilities, along with its strategic presence across the pharmaceutical value chain, provide a solid foundation for sustained growth.

At the upper price band at Rs 679 per share, the company asked for a market capitalisation of Rs 10,687 crore. Its market cap-to-sales ratio stood at 2.52 times its FY24 earnings, while peer Divi's Labs had around 15.9 times and Suven Pharma at 22.8 times.

Narendra Solanki, Head Fundamental Research - Investment Services at Anand Rathi Shares and Stock Brokers also expects the company to list at a premium based on the current grey market price of the company.

In the grey market, an unofficial market for trading in IPO shares till the listing, Akums Drugs shares were available at 8-15 percent premium over the issue price, the market observers said.

However, the financial performance had a bit of volatility. The profit for the year ended March FY24 stood at Rs 0.79 crore, falling from Rs 97.8 crore in the previous year, but revenue from operations during the same period jumped to Rs 4,178.2 crore from Rs 3,654.8 crore. EBITDA plunged 63.6 percent on-year to Rs 123 crore in FY24 with margin down 630 bps at 2.9 percent compared to previous year.

Meanwhile, Akums Drugs is going to utilise its fresh issue proceeds for repaying debts, incremental working capital requirements, and inorganic growth initiatives.

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