Mankind Pharma IPO subscribed 21% on day 2 so far

The Rs 4,326 crore initial public offering (IPO) of Mankind Pharma saw some strong interest from HNI investors as the non-institutional investors led the bidding on Wednesday, the second day of the bidding. The issue was off the mark on Tuesday, April 25.

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. The three-day book-building process closes on Thursday, April 27.

According to the data from BSE, investors made bids for 59,48,306 equity shares, or 21 per cent compared to 2,80,41,192 equity shares on offer by 12.00 noon on Wednesday, April 26. The quota for non-institutional investors (NIIs) and retail bidders was booked 52 per cent and 16 per cent, respectively. Allocations to qualified institutional bidders (QIBs) were booked only 8 per cent.

On the first day, the issue of Mankind Pharma was overall subscribed 14 times, with strong bidding from NII investors, whose quota was booked one-third. Retail portion was subscribed 10 per cent, while QIBs portion saw 8 per cent bidding.

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.

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 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.

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.

Hem Securities like the company due to its domestic-focused business of scale with potential for growth. Also, the company's domestic sales are growing at 1.3 times the growth rate of the Indian pharmaceutical market between Financial Year 2020 and MAT December 2022 which looks decent. The company has several products in its portfolio with a strong brand recall.

The company has Pan-India market and distribution coverage with a focus on affordability and accessibility along with 25 manufacturing and four research and development facilities with capabilities across key therapeutic areas and a professional management team with industry experience and backed by private equity investors, it said with a 'subscribe' rating on the issue.

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