Emcure Pharmaceuticals IPO: High Investor Demand and Promising Listing Prospects
Emcure Pharmaceuticals Limited, a prominent player in the pharmaceutical industry, recently concluded its main board IPO, comprising a fresh issue of ₹800.00 crore and an offer for sale (OFS) of ₹1,152.03 crore. The IPO received a robust subscription of 67.87 times, highlighting the strong investor confidence in the company.
Subscription Details and Investor Response
The IPO witnessed an overwhelming response from various investor categories, particularly:
- Qualified Institutional Buyers (QIB): 191.24 times
- Non-Institutional Investors (NII): 49.32 times
This high level of interest from institutional investors indicates a likely premium listing for Emcure. However, the IPO did not attract as many retail investors, primarily due to its higher price band. Historically, IPOs priced between ₹100 to ₹300 tend to garner more interest from retail investors. This could result in a higher likelihood of retail investors securing allocations.
Financial Performance and Market Position
Emcure Pharmaceuticals has shown solid financial performance and market presence:
- Borrowings: Reduced from ₹2,102.19 crore in March 2022 to ₹2,091.94 crore in March 2023.
- Assets: Increased from ₹6,063.47 crore to ₹7,806.16 crore during the same period.
- Return on Equity (ROE): 16.90%
- Debt/Equity Ratio: 0.67, which is below the industry red flag threshold.
- Pre-IPO Price-to-Earnings (PE) Ratio: 34.55
- Post-IPO PE Ratio: 36.07, compared to the pharmaceutical sector’s average PE of 36.80.
These financial indicators suggest that Emcure is in a strong position within its sector, and the IPO is priced on par with its sector’s valuation. With a premium listing, the stock is expected to surge significantly.
Revenue and Profit Analysis
Between the financial years ending March 31, 2023, and March 31, 2024:
- Revenue: Increased by 11.33%
- Profit After Tax (PAT): Decreased by 6.1%
- Net Worth: Grew from ₹1,987.55 crore to ₹2,952.28 crore
Market Share and Geographical Presence
Emcure holds a significant market share, ranking 13th in domestic sales and fourth in its covered markets for FY24. It is the largest pharmaceutical company in the gynecology and HIV antivirals therapeutic areas in terms of domestic sales for MAT FY2024. The company operates in 70 countries, with revenue distribution as follows:
- India: 48.28%
- Europe: 21.38%
- North America: 13.94%
- Others: 16.4%
Emcure also has exclusive agreements with Sanofi India and Sanofi Healthcare, enhancing its market reach and credibility.
Utilization of IPO Proceeds
The proceeds from the IPO will primarily be used for debt repayment and general corporate purposes. However, the lack of a clear allocation for business expansion could be a concern. Despite this, the company’s strong financials and market position provide a positive outlook.
Notable Endorsements and Publicity
Emcure Pharmaceuticals gained additional popularity due to Namita Thapar, a prominent figure from Shark Tank India, who played a role in planning the IPO. This media exposure has further bolstered investor interest.
Listing Expectations and Recommendations
Emcure Pharmaceuticals is set to list on Wednesday, July 10, 2024. The Grey Market Premium (GMP) suggests a premium of ₹358 over the upper band of ₹1,008. Based on the strong subscription data and investor interest, a listing gain of 40% to 48% is anticipated.
Retail investors who secure an allotment are advised to hold their shares, as there is a potential for the stock to achieve up to 2x its IPO price within 3 to 9 months. A suggested stop loss is 10% to 12% below the IPO’s lower price band.
Conclusion
Emcure Pharmaceuticals’ IPO has garnered significant interest from institutional investors, indicating strong confidence in the company’s financial health and market potential. Despite some concerns regarding fund utilization and a decline in PAT, the overall outlook remains positive. Investors can expect substantial listing gains, and holding the stock post-listing could yield significant returns.
Suggested by VLA Ambala, SEBI Registered Research Analyst>
Vijay Laxmi aka VLA Ambala is SEBI registered Research Analyst and her research and view are being published in various media platforms as well- Check here – https://smtstockmarkettoday.com/pr-and-media/
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