Delhi-based Mankind Pharma is likely to debut on the bourses with a double-digit premium on May 9, said market observers. This is largely attributed to the strong demand seen from qualified institutional buyers (QIBs) to the initial public offering (IPO) and healthy market conditions.
The IPO was subscribed 15.32 times during May 25-27, with QIBs applying for 49.16 times the allotted quota of shares. The portion set aside for high networth individuals (HNIs) was subscribed 3.8 times and the retail investor part was booked 92 percent.
The IPO was entirely an offer for sale by promoters and investors. Hence the entire money has been received by selling shareholders, and the company did not get money from the share sale.
"We expect the company to open 8-10 percent higher on listing day, as fundamentals of the company look good from a long-term perspective including the domestic focus of the business, strong distribution network and good products at affordable prices," said Prathamesh Masdekar, research analyst at Stoxbox.
Profitable listing
Astha Jain, a senior research analyst at Hem Securities, also expects Mankind Pharma to list at a 10 percent premium to the issue price of Rs 1,080 a share.
Anubhuti Mishra, an equity research analyst at Swastika Investmart, too, anticipates a profitable listing, adding that the success of the IPO listing will ultimately depend on the overall market sentiment.
The rising grey market premium in the last few days, especially after improved equity market conditions, also signals a strong debut.
Mankind Pharma IPO shares traded at 8-11 percent in the grey market, analysts said. The grey market is an unofficial trading platform for IPO shares and generally, investors look at the grey market premium to get an idea of the expected listing premium.
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Favourable market conditions
The equity market recorded a strong performance with the Nifty50 rising more than 700 points and the BSE Sensex climbing over 2,200 points in the last fortnight or so, with expectations of an end to the interest rate hike cycle and increasing foreign institutional investor (FII) inflow, and given that broadly, the earnings season has been in line with estimates.
The fourth-largest domestic pharmaceutical company's domestic sales grew at 1.3 times the rate of the Indian pharmaceutical market between the financial year 2020 and December 2022 which looks decent, Hem Securities’ Jain said.
The domestic market contributed 97.60 percent to the company's revenue from operations in FY22, growing at a 12 percent compound annual growth rate between FY18 and FY22 and 15 percent in FY20-FY22, while the consumer healthcare products business accounted for 10 percent of domestic sales.
The company has several products in its portfolio that rank in the top 10 across key therapeutic areas along with established and differentiated brands in the consumer healthcare business in the condoms, pregnancy detection, emergency contraceptives, antacid powders, vitamins and mineral supplements, and anti-acne preparations categories.
Mankind Pharma recorded a 20 percent year-on-year decline in consolidated profit at Rs 996.4 crore for the nine-month period ended December 2022, with a nearly 13 percent drop in earnings before interest, tax, depreciation and amortisation (EBITDA) at Rs 1,484 crore and EBITDA margin falling 598 basis points compared to the corresponding period last fiscal, but consolidated revenue grew 10.6 percent year-on-year to Rs 6,697 crore in the same period.
Fiscal 2021-22 performance was better, though there was a contraction in the operating margin. Profit for FY22 rose 13.3 percent to Rs 1,433.5 crore and revenue by 25.2 percent to Rs 7,782 crore over the previous year, while EBITDA for the year at Rs 1,989.35 crore was 20.7 percent higher, but operating margin dropped 96 basis points to 25.56 percent compared to FY21.
"The growth runway looks impressive for the company. We expect the company’s strong set of brands, focused approach to its chronic portfolio via recent acquisitions, launches and differentiated pipeline products to be key positives," said Narendra Solanki, head of equity research, Anand Rathi Share and Stock Brokers.
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