Akums Drugs and Pharma IPO opens today: Should you subscribe to the issue?

The Rs 1,856.74 crore-initial public offering (IPO) of Akums Drugs and Pharmaceuticals kicks-off for bidding today, that is, Tuesday, July 30. The pharma player will be offering its shares in the fixed price band of Rs 646-679 apiece, with a lot size of 22 equity shares and its multiples thereafter. The issue is open for bidding till Thursday, August 01.
 

Akums Drugs and Pharmaceuticals is a pharmaceutical contract development and manufacturing organization (CDMO) which offers a comprehensive range of pharma products and services in India and overseas. It is engaged in the manufacture and sale of branded drugs and active pharmaceutical ingredients (APIs).
 

The IPO of Akums Drugs and Pharma includes a fresh share sale component of Rs 680 crore and offer-for-sale (OFS) of up to 1,73,30,435 shares by its promoters and existing shareholders. The net proceeds from the issue shall be utilized towards repayment/prepayment of certain debts; funding working capital requirements; inorganic growth; and general corporate purposes.
 

Akums Drugs and Pharmaceuticals provides end-to-end solutions for product development and manufacturing as well as research and development (R&D) of formulations, preparation and submission of regulatory dossiers in the Indian and global markets and other testing services.
 

Akums Drugs and Pharma manufactures a wide range of dosage forms including tablets, capsules, liquid medicines, vials, ampoules, blow-filled closures, topical preparations, eye drops, dry powder injections and gummy bears, to name a few. The company has produced a total of 4,025 commercialized formulations in over 60 dosage forms.
 

Akums Drugs and Pharma manufactured formulations for 26 of the top 30 pharmaceutical companies in India in terms of revenue in the financial year 2023. For its CDMO business, the company operates 10 manufacturing units with a cumulative production capacity of 49.21 billion units annually.
 

Akums Drugs and Pharma reported a net loss of Rs 154.75 crore with a revenue of Rs 2,166.01 crore for the six months ended on September 30, 2023. The company clocked a net profit of Rs 97.82 crore with a revenue of Rs 3,700.93 crore in the financial year 2022-23.
 

Akums Drugs and Pharma has reserved shares worth Rs 15 crore for its eligible employees, who will get a discount of 64 per share. It has reserved 75 per cent of the net for the qualified institutional bidders (QIBs), while non-institutional investors (NIIs) will get 15 per cent of the net offer. Remaining 10 per cent of the net offer shall be allocated towards the retail investors.
 

ICICI Securities, Axis Bank, Citigroup Global Markets India and Ambit are the book running lead managers of the Akums Drugs and Pharmaceuticals IPO, while Link Intime India is the registrar for the issue. Shares of the company shall be listed on both BSE and NSE, with August 06, Tuesday. Here's' what brokerage firms say about the IPO of Akums Drugs and Pharma:
 

Anand Rathi Research
Rating: Subscribe for long-term/
Akum Drugs is the largest India-focused CDMO in terms of revenue, production capacity, and the number of clients served during FY23. Their client base comprises a wide variety of organizations, including pharma companies, nutraceutical firms, cosmo-derma businesses, wellness companies, e-commerce enterprises, healthcare providers, and more, said Anand Rathi Research.
 

"The company’s put call liabilities for recent new contract adjustments were mandated under GAAP measures due to the lack of additional funding support. Based on restated financial data, although the issue pricing seems aggressive, this perception changes if we exclude such accounting provisions," it added with a 'subscribe' for a long-term rating for the IPO.
 

Swastika Investmart
Rating: Subscribe with caution
Akums Drugs is a leading CDMO in India, boasting a diverse client base, robust R&D capabilities, and a strategic foothold across the pharmaceutical value chain. While the company has demonstrated top-line growth, its profitability has been impacted by non-operational factors such as fair value adjustments, said Swastika Investmart.
 

"Key risks include geographic concentration, potential manufacturing or quality control issues, and regulatory scrutiny. These factors require careful consideration. The IPO is valued at a reasonable P/E of approximately 28 times. Given the company's market leadership, growth prospects, and valuation, we recommend a cautious approach to the IPO," it said.
 

SMIFS
Rating: Subscribe
Akums has a market share of 30 per cent in the CDMO market and is constantly looking to expand its market share by increasing its production capacity. For its CDMO business, Akums has a cumulative formulations manufacturing capacity of 49.23 billion units annually as of FY24 which the company is looking to increase by leveraging five more units in future, said SMIFS.
 

"With the one off expense written off we expect the company’s Ebitda margins to improve in FY25 to 10-12 per cent. It is also almost debt free which will reduce its interest cost thus impacting PAT margins. We recommend to subscribe to the issue as a long term investment, as it has many new capacities to be operational and also the impact of some adjustments," it added.
 

Marwadi Financial Services
Rating: Subscribe
Considering the FY24 sales of Rs 4,178 crore, the company is going to list at a mcap/sales of 2.56 times with a market cap of Rs 10,685 crore, whereas its peers namely Divi’s Labs, Suven Pharma, Gland Pharma, Torrent Pharma, Alkem Labs, Eris Life, JB Chemicals, Mankind Pharma and Innova Captab are trading at mcap/sales of 3-23 times, said Marwadi Financial Services.
 

"We assign 'subscribe' rating to this IPO as the company is the largest CDMO serving the Indian pharmaceutical industry with diverse client base. Also, it is available at reasonable valuation as compared to its peers," it added.
 

StoxBox
Rating: Subscribe
Akums Drugs markets its branded formulations domestically and overseas, as well as the markets trade generics and products under its brand through distributors and alternative channels on a pan-India basis. Operating through subsidiaries, it promotes brands across India and other countries- Southeast Asia, Africa and the Commonwealth of Independent States, said StoxBox.
 

"Akums Drugs' financial performance is driven by leveraging its leadership position to increase market share and consolidate position in the CDMO market, expand global presence through strategic initiatives, scale API business, focus on R&D and strong manufacturing capabilities, all of which have supported robust growth," it added with a 'subscribe' rating.

 

 

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