Active pharmaceutical ingredients manufacturer Supriya Lifescience, the 64th listing in 2021, is expected to debut with around 50 percent premium on December 28.
Experts cited attractive valuations, strong financial track record with maximum income from exports, increasing growth potential in the pharma space and healthy return ratios for the expectations of the healthy listing.
The initial public offering of Supriya Lifescience received a stellar response from investors, as the issue was subscribed 71.51 times during December 16-20.
The allotted quota of non-institutional investors was subscribed 161.22 times, followed by retail investors' 56.01 times. Qualified institutional buyers also showed strong interest in the public issue, as the portion set aside for them was subscribed 31.83 times.
Click Here To Read All IPO Related News
The company has mopped up Rs 700 crore through its public issue, which comprised a fresh issue of Rs 200 crore and an offer for sale of Rs 500 crore by promoter Satish Waman Wagh.
"We expect a robust listing for Supriya Lifescience since it was a reasonably priced offer. We expect a listing premium of 50 percent or more. At the same time, it is still a small cap company, so it will need to demonstrate solid growth to command a premium multiple," said Abhay Agarwal, Founder and Fund Manager at Piper Serica.
Swapnil Shah, Head of Research of BP Wealth also expects Supriya Life to list at a 45-50 percent premium.
"The promoter's technical expertise in the sector has enabled the company to diversify its product portfolio and gain a strong foothold in the domestic and international markets. The issue is attractively priced at the upper end of the price band at a 16.2 P/E (based on FY 21 earnings), significantly discount to its listed peers with similar return and margin profile," Shah said.
"Even if the issue opens at a 50 percent listing gain, it would be valued at 24 times P/E (based on FY21 earnings), which we believe is still attractive," he added.
Shares of Supriya Lifescience were available at Rs 414-424 per share, a massive 51-55 percent or Rs 140-150 premium over the issue price of Rs 274 per share in the grey market, as per IPO Watch and IPO Central.
The company recorded healthy growth in earnings with profit rising 69 percent on year to Rs 123.83 crore in FY21. Revenue in the same period surged nearly 24 percent to Rs 385.36 crore.
It reported profit of Rs 65.95 crore on revenue of Rs 224.8 crore for six-month period ended September 2021.
Growth has been led by strong traction in key APIs and favourable price scenario. Notably, EBITDA margins have expanded from 23.3 percent in FY19 to 43.4 percent in FY21 due to higher operating leverage and price-led growth for its key APIs.
"Supriya Life hints at a listing gain of around 50 percent based on grey market premium. It is an export oriented manufacturer of pharma APIs, and an attractive stock in the pharma sector," said Sonam Srivastava, Founder at Wright Research.
"Its revenue and profitability has been growing well over the past few years, which makes it extremely attractive in a IPO market that loves profitable companies. The Indian pharma sector has started picking up pace and showing momentum," she added.
Surpriya Lifescience is one of the leading manufacturers and suppliers of APIs with a niche product basket of 38 APIs across therapeutic segments such as antihistamine, analgesic, anti-asthamatic etc.
The company has an established track record of exporting Chlorpheniramine Maleate and Ketamine Hydrochloride from India, contributing to 45-50 percent and 60-65 percent, respectively, of the API exports from India. It is among the largest exporters of Salbutamol Sulphate in India, contributing to 31 percent of the API exports from India in FY21 in volume terms.
More than 75 percent of the revenue comes from outside India, with the share of regulated markets increasing year-on-year to 49 percent in H1FY22. It exports to more than 85 countries, to 1,296 customers including 346 distributors.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.