Big bull Rakesh Jhunjhunwala's RARE Enterprises-backed Concord Biotech will be the second public issue in the mainboard segment, opening for subscription this week after SBFC Finance.
Here are 10 key things to know before subscribing to the offer:
1) IPO Dates
Bidding for the offer by the biotechnology company will start from August 4, while the closing would be on August 8. The anchor book will open for a day on August 3.
2) Price Band
The price band for the offer has been fixed at Rs 705-741 per share.
3) IPO Size
The Ahmedabad-based pharma company is planning to raise Rs 1,550.59 crore from the public issue of over 2.09 crore equity shares or 20 percent of paid-up equity, at the upper price band.
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The issue comprises only an offer-for-sale (OFS) by Helix Investment Holdings Pte Limited, which is backed by Quadria Capital Fund LP, a healthcare-focused private equity fund in Asia.
The IPO will give exit to Helix. The average cost of acquisition of 2.09 crore equity shares by Helix was Rs 227.14 per share. If we consider this, then the profit may be Rs 514 per share for Helix, i.e. amounted to around Rs 1,075 crore against buying at Rs 475.3 crore.
The offer also included reservation of 10,000 equity shares for employees, who will get those shares at a discount of Rs 70 per share.
Also read: Concord Biotech IPO: A differentiated API portfolio to play the China+1 opportunity
4) Objective of the Issue
The main objective of the issue is to carry out this offer for sale of 2.09 crore equity shares by Helix, while the company will not receive any money from the issue.
5) Lot Size
The minimum bid by investors can be made for 20 equity shares and in multiples of 20 shares thereafter. Accordingly, the retail investors can make minimum investment of Rs 14,820 for single lot and their maximum investment would be Rs 1,92,660 for 13 lots (260 shares) at upper price band, as they can invest up to Rs 2 lakh in the IPO.
Also read: SBFC Finance IPO opens | 10 things to know before buying shares
The minimum investment by high networth individuals in the category of Rs 2 lakh to 10 lakh would be Rs 2,07,480 for 14 lots (280 shares) and Rs 9,92,940 would be the maximum (67 lots - 1,340 shares).
The company has reserved half of the offer size for qualified institutional buyers including anchor book, 15 percent for high networth individuals, and the remaining 35 percent for retail investors.
6) Company Profile
Concord Biotech claimed to be one of the leading global developers and manufacturers of select fermentation-based APIs across immunosuppressants and oncology in terms of market share, based on volume in 2022. The company supplies products to over 70 countries including regulated markets.
It had a market share of over 20 percent by volume in 2022 across identified fermentation-based API products, including mupirocin, sirolimus, tacrolimus, mycophenolate sodium and cyclosporine.
With three manufacturing facilities in Gujarat (India) and two DSIR-approved R&D units, the company manufactures bio-pharmaceutical APIs through fermentation and semi-synthetic processes, across the therapeutic areas of immunosuppressants, oncology and anti-infectives; and formulations, which are used in the therapeutic areas of immunosuppressants, nephrology drugs and anti-infective drugs for critical care. By March 2023, it had 23 API products.
Formulations refer to drug products that are used by patients, such as tablets, capsules or injections, while immunosuppressants are drugs that are typically used by patients undergoing organ transplants, and also used for the treatment of autoimmune disorders.
Its API customers include Intas Pharmaceuticals and Glenmark Pharmaceuticals, while it had had an average of eight years of relationships with 10 largest customers by revenue in FY23.
7) Financials
Concord Biotech has registered healthy financial numbers for the last financial year ended March FY23, with the profit rising 37.2 percent to Rs 240 crore compared to the previous year, driven by topline and operating performance. And the revenue from operations increased by nearly 20 percent to Rs 853.2 crore during the same period.
Also read: Yudiz Solutions to launch Rs 44-crore public issue on August 4
On the operating front, EBITDA (earnings before interest, tax, depreciation, and amortisation) grew by 25.6 percent to Rs 343.3 crore with margin expansion of 190 bps at 40.2 percent for FY23.
The return on equity jumped to 26.55 percent in FY23, up from 16.64 percent in FY22, while the return on capital employed also jumped to 28.54 percent from 20.55 percent during the same period.
Concord, which trades at a P/E of 32.3x on FY23 financials, compares itself with Divis Laboratories (at P/E of 54.15x), Suven Pharmaceuticals (30.08x), and Laurus Labs (23.70x), while its return on equity was better than peers.
8) Promoters and Management
Promoters and promoter group including Sudhir Vaid and Ankur Vaid hold 44.08 percent shareholding in the biotech company, while the remaining 55.92 percent stake is held by public including Helix (20 percent), RARE Trusts (through three trusts in the name of Rakesh Jhunjhunwala's three children Aryaman, Aryavir, Nishtha - 24.09 percent) and Ontario (5.39 percent).
Sudhir Vaid is the Chairman and Managing Director, while Ankur Vaid is the Joint Managing Director and Chief Executive Officer on the board.
Lalit Sethi is the Chief Finance Officer of the company, while Prakash Sajnani is the Company Secretary and Compliance Officer, and Assistant Vice President (Finance).
9) Risk Factors
Here are key risk factors:
a) Any manufacturing or quality control issues may attract regulatory action, which could adversely affect the business.
b) A slowdown or shutdown in manufacturing or research and development operations, which all located in Gujarat could adversely affect the business.
c) Company depends on a limited number of customers for a substantial portion of revenues.
d) It is subject to extensive government regulations
e) It is subject to risks arising from exchange rate fluctuations.
f) The pharmaceutical industry is highly competitive.
g) Delay or failure in the performance of its contracts may adversely affect the business.
h) The company is exposed to government price controls that may change from time to time
10) Allotment and Listing Dates
The finalisation of basis of allotment of IPO shares will take place on August 11, and then accordingly, the company will transfer equity shares to demat accounts of eligible investors by August 17. Unsuccessful investors will get refunds in their bank accounts by August 14.
Concord will make its debut on the BSE and NSE on August 18.
Its IPO shares were available at around 20-25 percent premium in the grey market, over the upper price band of Rs 741 per share, analysts said on anonymity. The grey market is an unofficial platform where the IPO shares can be bought and sold till the listing.
Kotak Mahindra Capital Company, Citigroup Global Markets India, and Jefferies India are the merchant bankers to the offer, while Link Intime India is acting as the registrar to the issue.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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