Healthcare products distributor Entero Healthcare Solutions is likely to see muted listing performance on February 16 despite healthy equity market conditions. The final issue price has been fixed at Rs 1,258 per share.
The tepid response to its initial public offering and weak earnings performance in the past financial years, though it turned into black in the six months period ended September FY24 are some of reasons for muted listing, experts said.
The Rs 1,600-crore public issue was subscribed just 1.53 times during February 9-13, the lowest subscription numbers since HMA Agro Industries IPO, which was bought 1.62 times in June 2023.
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 networth individuals) seemed to be less interested in the issue as they bought 22 percent shares of the reserved portion.
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"Entero Healthcare Solutions, a prominent and rapidly expanding healthcare product distributor in India, incurred losses from FY21 to FY23 but showed a turnaround in H1 of FY24. Despite a potentially high valuation based on annualized FY24 earnings, we anticipate a subdued listing and do not foresee the stock surpassing its initial listing price," Amit Goel, co-founder and chief global strategist at Pace 360 said.
The Mumbai-headquartered company has turned profitable in the six months ended September FY24, with net at Rs 11.64 crore against loss of Rs 10.86 crore in corresponding period of last fiscal, backed by healthy operating numbers. Revenue from operations during the same period increased by 19.7 percent to Rs 1,895.5 crore.
In the last fiscal year FY23, it had posted loss of Rs 11.1 crore, narrowing from loss of Rs 29.4 crore in previous year. Revenue from operations grew by Rs 30.85 percent to Rs 3,300 crore during the same period. The loss in FY21 was at Rs 15.35 crore on revenue of Rs 1,779.7 crore.
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"We expect the stock to list at a premium of around 2 percent to the issue price of Rs 1,258 per share," Prathamesh P Masdekar, research analyst at StoxBox said.
Its IPO shares could not attract any premium even in the grey market, the market observers said. The grey market is an unofficial market wherein the IPO shares bought and sold till the listing.
Entero, founded in 2018 by Prabhat Agrawal, and Prem Sethi, has built pan-India, technology driven and integrated healthcare products distribution platform. Its 77 warehouses across the country enables healthcare product manufacturers to make their products available to a wide range of customers including pharmacies, hospitals and clinics. As of September 2023, it has supply relationships with over 1,900 healthcare product manufacturers.
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In the pharmaceutical distributor space, Entero competes with Hiveloop Technology, while in the retail space, Apollo Pharmacies, Axelia Solutions, Medplus Health Services, Netmeds Marketplace, Tata 1mg Healthcare Solutions and Wellness Forever Medicare are its competitors.
The company has raised Rs 1,000 crore through its fresh issue and Rs 600 crore via offer-for-sale component. The price band for the offer was Rs 1,195-1,258 crore.
Majority of its fresh issue money will be spent for repaying debts, long term working capital requirements, and inorganic growth initiatives through acquisitions.
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