Mankind Pharma shares managed to attract single-digit premium in the grey market on the day of price band announcement and ahead of the IPO launch. The expensive valuations and only offer for sale portion in the IPO may be reasons for low premium, experts said.
The offer will open for subscription in the coming week on April 25 and the closing date would be April 27, 2023.
The pharmaceutical company on April 19 has fixed price band for its IPO at Rs 1,026-1,080 per share. More than 4 crore shares public issue is completely an offer for sale by promoters and investors, which means the company will not get funds through this offer and the entire amount will go to selling shareholders.
The public issue in total will fetch the company Rs 4,326.35 crore at higher end of price band.
Currently its shares are traded with around 7-8 percent premium in the grey market, analysts said. The grey market is an unofficial trading platform for IPO shares and is generally used by investors to know about expected demand to the issue and listing price.
"The current grey market premium of Mankind Pharma of about 7 percent is not encouraging, considering the size of the IPO at about Rs 4,300 crore," Manish Chowdhury, Head of Research at Stoxbox said.
He expects the grey market premium to dilute further over the period due to expensive valuations, higher borrowings and no use of proceeds for business purposes.
He believes that there are better opportunities in the pharmaceutical space available at attractive valuations if someone is willing to stay invested from a medium-to-long term perspective.
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Mankind Pharma compares itself with most of listed companies including Sun Pharma, Zydus Life Sciences, Cipla, Dabur India, Alkem Laboratories, Ipca Laboratories, Torrent Pharma, GSK Pharma, and Zydus Wellness.
It is engaged in the manufacturing and marketing of a diverse range of pharmaceutical formulations across various acute and chronic therapeutic areas, as well as several consumer healthcare products.
It is focused largely on the domestic market, which contributed to 97.60 percent to its revenue from operations for FY22.
The India’s fourth largest pharmaceutical company in terms of domestic sales and third largest in terms of sales volume comes with market capitalisation of Rs 43,264 crore with a PE(x) of 32 based on annualised earnings. The valuations are at 10 percent premium to the listed players such as Sun pharma, Cipla, and Torrent Pharma hence this could be a reason for single digit grey market premium, said Harshad Gadekar, fundamental analyst at GEPL Capital.
The company has recorded consolidated profit at Rs 996.4 crore for nine-month period ended December FY23, declining 20 percent compared to year-ago period impacted by lower other income, higher employee cost, and weak operating performance.
Consolidated revenue for the nine-month period of FY23 grew by 10.6 percent year-on-year to Rs 6,697 crore. On the operating front, EBITDA (earnings before interest, tax, depreciation and amortisation) dropped nearly 13 percent to Rs 1,484 crore with margin falling 598 basis points compared to corresponding period last fiscal.
For the year ended March FY22, the performance was better but there also we have seen operating margin contraction. Profit for the year grew by 13.3 percent to Rs 1,433.5 crore and revenue increased by 25.2 percent to Rs 7,782 crore compared to previous year.
EBITDA for the financial year 2021-22 at Rs 1,989.35 crore grew by 20.7 percent, but margin dropped 96 bps to 25.56 percent compared to FY21.
This would be the second initial public offering in the current financial year after Avalon Technologies.
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