Mankind Pharma IPO subscribed 2% during initial two-hour bidding process on Day 1

The initial public offering (IPO) of Mankind Pharma was off the mark on Tuesday but the issue saw a muted response from the investors during the initial two-hour of the book-building process. The three-day book-building process closes on Thursday, April 27.

Mankind Pharma is selling its shares in the range of Rs 1,026-1,080 apiece with a lot size of 13 equity shares with a face value of Re 1 each. The issue of Mankind Pharma is entirely an offer for sale (OFS) of up to 4,00,58,844 equity shares, aggregating to Rs 4,326 crore at its upper limit of the price band.

According to the data from BSE, investors made bids for 6,21,946 equity shares, or only 2 per cent compared to 2,80,41,192 equity shares on offer by 12.00 noon on Tuesday, April 25, 2023. The quota for retail bidders and non-institutional investors was booked 3 per cent, each, while allocations to qualified institutional bidders were not even off the mark at the same time.

A day before its IPO, Mankind Pharma raised Rs 1297.90 crore by allotting 1,20,17,652 equity shares at a price of Rs 1.080 per share to 77 anchor investors, including 16 domestic mutual funds through a total of 41 schemes, a circular on BSE said.

Being entirely an OFS, the net proceeds from the issue will go to the selling shareholders and the company will not receive any proceeds from the issue. Promoters Ramesh Juneja, Rajeev Juneja and Sheetal Arora along with shareholders including Cairnhill CIPEF, Cairnhill CGPE, Beige and Link Investment Trust will participate in the OFS.
 

A majority of the brokerage firms are positive on the issue and suggest investors subscribe to the issue on a long-term basis, citing the dominant market position, strong financials, defensive sector and robust growth outlook. However, some analysts have raised red flags over rich valuations and the complete OFS nature of the issue, capping room for any stellar upside.

The Company has a substantial share of Domestic Sales in Class II-IV cities and rural markets, said Palka Arora Chopra, Senior Vice President, Mastertrust. "After the recent year’s financial performance, there is a good runway for growth. Investors can consider investing in this IPO from a long-term perspective," she said.
 

Kotak Mahindra Capital Company, Axis Capital, IIFL Securities, Jefferies India and JP Morgan India are the book-running lead managers to the issue, while KFin Technologies has been appointed as the registrar to the issue. Shares of the company will be listed as both BSE and NSE.

The issue is valued at a P/E of 30.2x based on FY2022 earnings which we feel is richly valued, as it is higher than the industry's major players such as Sun Pharma, Cipla and Dr Reddy’s. We, therefore, recommend an 'avoid' rating for the issue, said BP Equities, which is now known as Stoxbox.

They are the category leaders in the male condom category, the pregnancy detection kit category, and the emergency contraceptives category. Further, the company has a track record of sustained growth in revenues and profitability. The company grew its revenue at a CAGR of 14.2 per cent during the FY20-22 period, read the brokerage firm's IPO note.

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