Valiant Laboratories stock may list at a premium of 15-18 percent over the IPO price, according to analysts. The IPO received a decent subscription and now analysts believe that the stock may open somewhere between Rs 161-168 against the issue price of Rs 140 owing to the paracetamol manufacturer’s improved financial performance and expansion plans.
However, analysts’ key concern is that the company is a single-product manufacturer. “There are some concerns as it is a single-product manufacturing company. Secondly, it is dependent on a limited number of suppliers as well as customers. Also, there is intense competition in this industry. Investors might get a good listing benefit, but they should also be cautious about related risks,” said Shivani Nyati, Head of Wealth, Swastika Investmart Ltd.
Also Read: Valiant Laboratories IPO subscribed 29.76 times on final day
Valiant Laboratories IPO was subscribed 29.76 times with investors buying 22.68 crore shares against the offer size of 76.23 lakh. High networth individuals (HNIs) bought 73.64 times their quota of shares and retail investors 16.06 times the shares allotted to them, data available with exchanges showed. The portion set aside for qualified institutional buyers (QIBs) was subscribed 20.83 times. Fifty percent of the IPO was reserved for QIBs.
“The IPO’s current GMP is favourable, indicating a listing premium of over 15 percent. The company's financial performance has been improving in recent years, and the company plans to expand further. The IPO valuation was also considered fair,” Nyati added.
The Rs 152-crore offer, which opened on September 27 and closed on October 3, was entirely a fresh issue. The price band was fixed at Rs 133-140 a share. Ahead of the IPO, Valiant Labs raised Rs 45.74 crore from anchor investors. Leading Light Fund VCC - The Triumph Fund, Saint Capital Fund, Astorne Captal VCC - Arven, and Negen Undiscovered Value Fund took part in the anchor book.
Prathamesh Masdekar, Research Analyst, StoxBox expects the IPO to open at a premium of around 18 percent due to the sustained revenue growth, growing at a CAGR of 35.3 percent during the FY21-23 period. Further, the paracetamol API industry is expected to clock a 5-7 percent CAGR between FY23 and FY27.
“With strong operational efficiencies, Valiant Laboratories has demonstrated high ROCE, positive operating cash flows, strong balance sheet, pursued growth opportunities and better managed unanticipated cash flow variations, which will drive the company's performance,” Masdekar added.
Also Read: Valiant Lab IPO: 10 things to know about the issue
He remains optimistic on the issue and recommends investors hold shares on the opening day and consider buying on dips from a medium to long-term perspective.
Valiant Laboratories' net profit rose 5.5 percent to Rs 29 crore for the year ended March 2023 from Rs 27.5 crore in the year-ago period. The revenue from operations grew by 14.5 percent to Rs 333.9 crore from Rs 291.5 crore during the same period.
Indian IPOs typically have had higher P/E ratios than global peers recently, but according to Utkarsh Sinha, Managing Director at Bexley Advisors, the trend has now started cooling off, which is good for the IPO buyers. Valiant is also coming in at a ratio lower than Mankind’s listing earlier this year, which means there’s room for a post-IPO pop.
“The pharma ecosystem in India has matured significantly in the past 2-3 decades; far from being a generics manufacturing outpost, we’re beginning to see green shoots of fundamental R&D-based drug discovery. We still have some distance to cover in order to have similar pipelines to global peers, especially when it comes to long development and testing cycle drugs, but strides are being made in the right direction,” Sinha said.
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