Analysts on Dalal Street gave a ‘Subscribe’ rating to the initial public offering (IPO) of Supriya Lifescience which opened for subscription on December 16. The company has fixed a price band of Rs 265 to 274 for the initial share sale. The issue will close on December 20.
Shares of the company were available at a premium of Rs 250 per share in the unlisted market, according to IPO Watch. This means that the grey market is projecting that shares of the company to list at Rs 524 per share.
Supriya Lifescience is one of the key Indian manufacturers and suppliers of active pharmaceutical ingredients, with a focus on research and development. As of October 31, 2021, the company has niche product offerings of 38 active pharmaceutical ingredients (APIs) focused on diverse therapeutic segments such as antihistamine, analgesic, anaesthetic, vitamin, anti-asthmatic and antiallergic.
Brokerage Marwadi Shares and Finance has given a ‘Subscribe’ rating to the issue. “We assign a “Subscribe” rating to the IPO as the company has a significant scale with a leadership position across key and niche products. Also, it is available at a reasonable valuation as compared to its peers,” it said.
Considering the FY21 adjusted earnings per share (EPS) of Rs 15.39 on a post-issue basis, the company is going to list at a price-to-earnings ratio (P/E) of 17.81 times with a market cap of around Rs 2,205.2 crore.
On the other hand, Anand Rathi Share and Stock Brokers advised investors to ‘Subscribe’ the issue for the long term. “The company has high-profit margins, strong balance sheet and reported return on net worth (RoNW) of 46.04 per cent in FY21. However, the IPO is fully priced and demanding rich valuations - hence we give the IPO a “Subscribe (Long Term)” rating,” it said.
The company’s customers include global pharma companies such as Syntec Do Brasil LTDA, American International Chemical Inc and AT Planejamento E Desenvolvimento De Negocios Ltda, with whom it has business relationship for over nine years, and Suan Farma Inc, Acme Generics LLP, Akum Drugs Ltd and Mankind Pharma with whom it has business relationship for over four years.
Motilal Oswal Financial Services is also bullish on the public offer. It believes that the company generates strong free cash flow and would become debt-free post IPO.
“We like Supriya Lifescience given its niche product portfolio in diverse therapeutic segments, a backward integrated business model with advanced manufacturing and R&D capabilities, an extensive global presence with strong clients’ relations and robust financials. The issue is reasonably valued against its peers, while it enjoys a similar growth trajectory. Hence, we recommend ‘Subscribe’,” Motilal Oswal Financial Services said.
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