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Two IPOs seek to raise Rs 2,465 crore on Dalal Street: Which one should you bet on?

In August, some IPOs listed weakly and are still trading at a significant discount to their issue price. Experts are worried and feel companies and merchant bankers should do a better job pricing IPOs.

August 31, 2021 / 10:27 AM IST
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The flood of initial public offerings (IPOs) will continue in September with two more set to hit Dalal Street this week to raise Rs 2,465 crore cumulatively. Both IPOs — Ami Organics and Vijaya Diagnostic Centre — will open on September 1 and close on September 3.

Experts are mixed in their opinion, especially after the weak listings of Aptus Value Housing Finance, Car Trade Tech, Nuvoco Vistas Corporation, Chemplast Sanmar and Windlas Biotech in August. One expert advised against investing in either IPO, another recommended Ami Organics, while a third batted for Vijaya Diagnostic Centre.

The initial public offering of Vijaya Diagnostic Centre, which is backed by private equity firm Kedaara Capital, is a complete offer for sale by selling shareholders — the promoter (Dr S Surendranath Reddy) and investors (Kedaara Capital and Karakoram). The price band has been set at Rs 522-531 per share and the company plans to raise Rs 1,895 crore through the IPO.

Speciality chemical firm Ami Organics’ public offer comprises a fresh issue of Rs 200 crore and an offer for sale of up to 60,59,600 equity shares by 20 selling shareholders, including Parul Chetankumar Vaghasia, Girishkumar Limbabhai Chovatia, Kiranben Girishbhai Chovatia, and Aruna Jayantkumar Pandya. The price band for the offer has been fixed at Rs 603-610 crore, with the company hoping to raise Rs 570 crore.

Vijaya Diagnostic Centre


“Both are undervalued because their EPS is below the industry average, but if we had to pick one IPO, it would be Vijaya Diagnostic Centre, based on its financials and future growth potential in the domestic market,” said Gaurav Garg, Head of Research at CapitalVia Global Research.

Garg added: “The price/earnings ratio based on basic and diluted EPS for Vijaya diagnostics at the higher end of the price band for FY21 is 64.29, whereas the average industry peer group price/earnings ratio is 90.80. And for Ami organics, the basic and diluted EPS is 35.59, compared to the industry average of 48.91."

With over 80 state-of-the-art centres spread across 13 cities, Vijaya Diagnostic Centre is India’s largest comprehensive diagnostic network. It reported strong results in FY21, with PAT up 37 percent at Rs 84.90 crore from Rs 62 crore in FY20, and revenue up 9.7 percent at Rs 388.5 crore from Rs 354 crore in FY20.

“Due to the pandemic, demand for diagnostic centres has increased significantly, and demand for the healthcare industry will continue to increase in the future," he said.

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Ami Organics

Speciality chemical companies’ IPOs, which are also attracting investor attention, have received a large number of subscribers in recent IPOs. “There are five IPOs in the speciality chemicals sector in this calendar year, but the recent listing of Chemplast Sanmar at a discounted price may influence Ami Organics’ subscriptions,” Garg said.

According to Prashanth Tapse, VP Research at Mehta Equities, of the two offers, retail investors can subscribe to Ami Organics for decent listing gains as well as long-term growth.

“Based on the ask (upper price band) valuation, Ami Organics seems to be reasonably priced when compared to its listed peers and its long-term prospects also look promising. We are optimistic towards Ami Organics’s diversified business model, which caters to pharma intermediates, speciality chemicals and custom manufacturing,” Tapse reasoned.

Development and manufacturing of advanced pharmaceutical intermediates for regulated and generic active pharmaceutical ingredients (APIs) and New Chemical Entities (NCE), as well as crucial starting material for agrochemical and fine chemicals was Ami Organics’s main focus. In FY21, these intermediates accounted for 88.41 percent of its total revenue, with exports accounting for 51.57 percent of total revenue.

Vijaya Diagnostic will be the second IPO in the diagnostic lab chain space to hit the market in less than a month. The offer being entirely an offer for sale (OFS), Tapse has a neutral outlook as the ask valuation seems to be fully priced in compared to its listed peers.

“Krsnaa Diagnostics trading below its issue price with a poor performance despite healthy subscription demand has disappointed investors’ expectations, which signals the market response towards such businesses. Hence, on a first-cut analysis, investors may consider parking their funds only with a long-term perspective and not for listing gains,” he said.

Negative view

Rishabh Shah, Research Analyst at BP Wealth, felt that investors should avoid both IPOs, citing expensive valuations.

“We believe that Ami Organics is highly priced on the basis of chemical stocks being in the limelight and thus its valuations may not be justified. Besides, the superior margin growth posted in FY21 will be difficult to sustain. Rising competition and geographical revenue concentration in Telangana and Andhra Pradesh raises concerns. Also, on the valuation front, based on the upper price band and FY21 earnings, the company is valued at 64.3x price/earnings and 31.5x EV/EBITDA, which doesn’t justify our valuation metrics,” he explained.

Caution for IPOs

After disappointing listings in August, experts are worried about IPOs and they feel companies and merchant bankers, henceforth, should conduct proper analysis for pricing of IPOs.

“Investors should also remain careful as the recent IPOs in August saw poor demand and weak listing gains. The steep fall in small and midcap stocks had led to a decline in enthusiasm and thus weakness in recent IPOs. Therefore, a high amount of interest may not be seen in each and every upcoming IPO,” Shah said.

Tapse of Mehta Equities feels that merchant bankers and promoters should rework expected valuations in upcoming IPOs. “Going forward, with more liquidity in the market and increasing interest for returns, IPOs could continue to gain traction in the second half of FY2021 but ask price valuations will be a key factor before subscribing,” he said.

In August, Aptus Value Housing Finance, Chemplast Sanmar, Windlas Biotech, CarTrade Tech and Nuvoco Vistas Corporation had a weak start on the bourses. Currently, Nuvoco Vistas Corporation, CarTrade Tech, Krsnaa Diagnostics, Windlas Biotech and Glenmark Life Sciences, which listed in August, are trading at a significant discount to their issue price.

Disclaimer: The views and investment tips expressed by investment expert on are his own and not that of the website or its management. advises users to check with certified experts before taking any investment decisions.
Sunil Shankar Matkar
first published: Aug 31, 2021 10:27 am
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