Ami Organics and Vijaya Diagnostic Centre will debut on the bourses on September 14 after closing public issues earlier this month. They have fixed final issue prices at Rs 610 and Rs 531 per share respectively.
Specialty-chemicals company Ami Organics is expected to make healthy listing gains, considering its stellar IPO subscription, strong financials and huge export growth potential, but south India based diagnostic chain Vijaya Diagnostic Centre may see a flat-to-discounted listing, given lower-than-expected IPO subscription and high competition in the overcrowded space, analysts told Moneycontrol.
"Considering the strong demand from QIB & HNI for critical active pharmaceutical ingredients (API) and speciality chemicals business, we can expect healthy listing around Rs 750+, which translates to 23 percent premium over the upper end of the IPO price Rs 610 per share," said Prashanth Tapse, VP Research at Mehta Equities.
He says healthy listing gains seem justified as Ami Organics stands well in the high-growth, high-margin business with huge export potential, and the issue was fairly priced to new investors compared to listed peers.
Gaurav Garg, Head of Research at CapitalVia Global Research also expects a possible listing price of about Rs 765 on the upper band of the issue which suggests a 25 percent gain on the day of listing.
But Astha Jain, Senior Research Analyst at Hem Securities expects a lower listing premium. "We are expecting Ami Organics to list at premium between 10-20 percent over issue price."
The Rs 570-crore public issue of Ami Organics had seen a stellar subscription of 64.54 times during September 1-3 with healthy response from non-institutional investors (154.81 times) and qualified institutional buyers (86.64 times). Retail investors also had a strong support to the issue with putting in bids 13.36 times their reserved portion.
It traded at a premium of Rs 150 i.e. a price of Rs 760 per equity share in the grey market against final issue price of Rs 610 per share, the IPO Watch and IPO Central data showed.
"Being in the high-growth, high-margin therapeutic segment, Ami Organics enjoys superior return ratio compared to peers with return on capital employed (ROCE) of 25 percent and return on equity (ROE) of 32 percent in fiscal 2021. Further, with the debt reduction planned post the IPO money comes in and healthy business opportunities with new acquisitions, we see healthy topline and earnings growth in the coming years. This makes holding Ami Organics for the long term fruitful," said Prashanth Tapse.
Ami Organics has an experience of over 15 years of developing, manufacturing and commercialising advanced pharma intermediates used for manufacturing API and new chemical entities (NCE) in India and overseas. It has developed and commercialised over 450 pharma intermediates across 17 key therapeutic areas since inception and NCE, which are being supplied to over 150 customers in India and 25 countries overseas.
Vijaya Diagnostic Centre
Vijaya Diagnostic Centre raised Rs 1,895 crore through its public issue which was subscribed 4.54 times during September 1-3. Qualified institutional buyers strongly supported the public issue as their reserved portion was subscribed 13.07 times, while that of non-institutional investors was subscribed 1.32 times. The retail portion was subscribed 109 percent and employees 98 percent against the portion set aside for them.
It was a complete offer for sale by the promoter and investors, so that might have impacted the subscription figures of the issue, experts feel.
"The grey market premium of Vijaya Diagnostic is at a discount of 15 which suggests a possible listing price of Rs 515 or Rs 516 at the upper price band of Rs 531 per share," said Gaurav Garg of CapitalVia. "Although, the grey market premium suggests a discount, the financials of the company look good. The company has been consistently growing revenue from operations and net profit after tax from FY19 to FY21, the operating cash flows have also been increasing over the said period."
"Post Krsnaa Diagnostics listing performance which was relatively disappointing even after witnessing healthy subscription demand, the listing of Vijaya Diagnostic listing is under test," said Prashanth Tapse of Mehta Equities.
"Considering lower-than-expected subscription demands to its initial public offering (IPO), we expect a subdued listing as the ask valuation was fully priced in when compared to its listed peers. Lower than expected listing would be seen on the back of the segment getting over crowded post-pandemic and creating high competition going forward," he added.
Vijaya Diagnostic will be the second IPO in the diagnostic lab chain space to list in the market in less than a month. "Investors always remain cautious in IPOs that have a large offer for sale book as most of the money raised is going to the exit shareholders instead of getting reinvested in growth of the business which is the cause of concern for new investors. As a result, we have seen muted subscription figures," said Tapse.
Astha Jain of Hem Securities expects a flat listing of Vijaya Diagnostic.
It is the largest integrated diagnostic chain in southern India, by operating revenue, and also one of the fastest-growing diagnostic chains by revenue for fiscal year 2020. It offers a one-stop solution for pathology and radiology testing services to its customers through the company's extensive operational network, which consists of 81 diagnostic centres and 11 reference laboratories across 13 cities and towns in the states of Telangana and Andhra Pradesh and in the National Capital Region and Kolkata as on June 30, 2021.
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