Entero Healthcare lists with 2.3% discount: Should you buy more, hold, or sell the stock?

Entero Healthcare Solutions IPO: The shares opened at Rs 1,228.7 on NSE and Rs 1,245 on BSE against the issue price of Rs 1,258

The Entero Healthcare Solutions stock disappointed investors, listing at a 2.3 percent discount to the IPO price on February 16. The shares opened at Rs 1,228.7 on the NSE and at Rs 1,245 on the BSE against the issue price of Rs 1,258.

The listing missed analyst expectations of a 2 percent premium as the IPO had failed to attract attention with the issue getting subscribed only 1.53 times, the lowest subscription number since HMA Agro Industries IPO, which was bought 1.62 times in June 2023.

Ahead of the debut, the stock’s grey market premium was wiped off completely. However, the stock was commanding a 5 percent premium when the IPO opened on February 9. The grey market is an unofficial ecosystem where shares start trading before the allotment in the IPO and until the listing day. Most investors track the GMP to get an idea of the listing price.

“Entero, which is one of the largest and fastest-growing healthcare product distributors, is expected to grow from 8-10 percent in FY23 to 20-30 percent by FY28,” said an analyst. The improvement in operational performance is anticipated to be driven by a wide range of products offered, operations aimed at providing high fill rates to customers, technology-driven inventory management, and customer order-placing mechanisms.

Also Read: Entero Healthcare Solutions IPO: 10 things to know about the Rs 1,600-crore issue

“At the current juncture, we advise investors to exit and subsequently consider investing in the company after evaluating its quarterly performance in the near term,” said Prathamesh P Masdekar, research analyst at StoxBox.

During February 9-13, qualified institutional buyers supported the issue, buying 2.28 times the allotted quota, followed by retail investors, who picked 1.33 times the portion set aside for them. Non-institutional investors (high net-worth individuals) seemed to be less interested in the issue as they bought 22 percent shares of the reserved portion.

The company has raised Rs 1,000 crore through its fresh issue and Rs 600 crore from the offer-for-sale component. The price band for the offer was Rs 1,195-1,258 crore. Prabhat Agrawal, Prem Sethi, and OrbiMed Asia III Mauritius are the promoters of the company.

“Despite a potentially high valuation based on annualised FY24 earnings, we advise investors not to hold the stock or buy after listing as we are not expecting it to go higher,” said Amit Goel, co-founder and chief global strategist at Pace 360.

Also Read: Entero IPO: Should investors pop the flotation pill?

In FY23, the loss narrowed to Rs 11.1 crore, from Rs 29.4 crore in the previous year. Revenue from operations grew by Rs 30.85 percent to Rs 3,300 crore during the same period. However, it turned profitable in the six months ended September FY24, with a net profit at Rs 11.64 crore against a loss of Rs 10.86 crore in the corresponding period of the last fiscal, backed by healthy operating numbers. During the same period, revenue from operations increased by 19.7 percent to Rs 1,895.5 crore.

Entero is a healthcare product distributor in India. Utilising a technology-driven platform, the company offers distribution services to pharmacies, hospitals, and clinics across the country. It operates 73 warehouses in 37 cities in 19 states and Union Territories, serving a customer base that includes over 81,400 pharmacies and 3,400 hospitals in 495 districts as of March 31, 2023, providing extensive access to healthcare product manufacturers.

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