IPO corner | Rolex Rings versus Glenmark Life Science: Which one should you subscribe?

Each Zomato share of face value of Rs 1 was sold at Rs 76. It got listed around Rs. 116 and is now above Rs 140. (Representative image)

It appears that the tide in the primary market is far from an ebb as there is a long list of companies that have expressed their intent to enter the Street soon.

This week, the IPO of two companies - Glenmark Life Sciences and Rolex Rings - opened for subscription.

Glenmark Life Sciences, the subsidiary of Glenmark Pharma, opened its IPO for subscription on July 27 till July 29, with a price band of Rs 695-720 per share. The company is planning to raise Rs 1,513.6 crore through its public issue.

Automotive components manufacturer Rolex Rings also opened its offer on July 28 and will close on July 30, comprising a fresh issue of Rs 56 crore and an offer for sale of up to 75 lakh equity shares by Rivendell PE LLC.

Considering the sentiment in the primary market, we can anticipate that the IPOs may see healthy responses from retail investors.

Also read: Tatva Chintan IPO share allotment expected today, check your application status here

"Despite concerns on stretched valuations and inflation, the Street currently seems to be obsessed with IPOs. The subscriptions have hit the roof at pricey multiples. ‘Seize the present day opportunity’ appears
to be the axiom guiding retail participants," Nirali Shah, Head of Equity Research, Samco Securities, underscored.

Analysts tilt towards Glenmark Life

Even though both companies cater to different sectors, analysts seem to be in favour of Glenmark owing to its place in the active pharmaceutical ingredients (API) business.

"Both belong to different sectors. Rolex Rings is a play towards the auto industry whereas Glenmark Life Sciences is a pure-play on pharma along with CDMO. In my view, Glenmark should be subscribed owing to the strong parent capabilities and constant growth over the longer period of time," said Ashish Chaturmohta, Director Research, Sanctum Wealth Management.

Glenmark Life Sciences is a leading developer and manufacturer of select high-value, non-commoditized APIs in chronic therapeutic areas, including cardiovascular disease central nervous system disease, pain management and diabetes.

Also read: 10 things to know before the Glenmark Life Sciences IPO opens

It also provides contract development and manufacturing operations (CDMO) services to a range of multinational and specialty pharmaceutical companies.

On the other hand, Rolex Rings has the fifth largest forging capacity in India with 60 customers across 17 locations. The company supplies its products to domestic as well as international automotive companies.

"I believe Glenmark Life science IPO might give an edge over Rolex Rings. The company specializes in developing and manufacturing APIs, with a total of 120 different APIs. I think business has strong international ties with big pharma companies and exports globally," said Gaurav Garg, Head of Research at CapitalVia Global Research.

Ajit Mishra, VP - Research, Religare Broking believes Glenmark Life Sciences is well-placed in the API business (as it earns nearly 90 percent of revenue from this segment) with a product portfolio of 120 products.

"The company plans to diversify the customer base by increasing geographic market coverage, grow the CDMO business along with API and improve operating efficiency. On the financial front, its performance has been strong. We have a positive view of the company from the long-term perspective," Mishra said.

Brokerage firm Angel Broking pointed out Glenmark has a ROCE (return on capital employed) of 46.7 percent which is better than its peers like Divi's Labs. At an upper price band of Rs 720, the company is priced at the PE (price-earnings ratio) of 22.38 which is better than all the API manufacturing companies.

"Overall, the company's valuations are very attractive and we expect very good listing gains of around 25- 35 percent. We have a positive outlook on Glenmark Life science IPO," said the brokerage firm.

As for Rolex Rings, the revenues for most listed peers and the company have declined over the past four years but the company has generated better ROEs on account of better asset turnover, Angel Broking pointed out.

The company has a long-standing relationship with existing clients and with newer products, it should be able to increase the market share.

At a price band of Rs 960-970, the company is seeking PE of nearly 42 times without considering the deferred tax credit of Rs 25 crore, which is reasonable given its strong return ratios.

"Nearly 55 percent of revenue comes from outside India and considering potential rebound in demand from user industries, we have a positive outlook on Rolex Rings IPO," Angel Broking said.

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