Glenmark Life Sciences, the subordinate of Glenmark Pharmaceuticals, is predicted to check out the listing premium of 10-15 per cent over its final issue price of Rs 720 based on the sturdy subscription retrieved from the investors, reasonable stock valuation, rising API, and positive market state, as per the experts.
The Rs 1,513.6-crore company’s public issue experienced heavy demand from the investors, with a subscription intensity of 44.17 times during July 27-29, 2021. The qualified group of institutional investors had offered bids 36.97 times more than their reserved portion, while the non-institutional investors’ subscription rate was 122.54 times, and a portion of retail investors oversubscribed by 14.63 times.
“As per the growing trend in the grey market premium, one can predict listing gains of around 10 per cent to 15 per cent,” Akhilesh Jat, Pharma Analyst at CapitalVia Global Research said.
Prashanth Tape, VP Research at Mehta Equities said, “Glenmark Life has well planned to list its IPO encasing on the fancy demand of pharma segment amidst pandemic with extreme bullishness in the sector which argues for a decent listing gain candidate.”
Grey Market Premium
Glenmark Life Sciences shares were trading at a premium scale of Rs 90 in the grey market, as per the IPO Watch and IPO Central data. This ensued a trading rate of Rs 810 in the grey market, which is comparatively higher than the issue price of Rs 720. However, the premium was reduced from Rs 150 levels to Rs 200 levels before the opening of the public issue.
Glenmark Life Sciences is a major developer and manufacturer of rich value, non-commoditized active pharmaceutical ingredients (APIs) with a portfolio of 120 products (10 products in laboratory model; four products for validating lab and 106 products for commercialization) ranging across an array of cardiovascular, central nervous system disease, diabetes, anti-infectives and other areas.
“Based on the forecasted FY24E earnings, the demanded valuation comes out to be 11.4x, which seems to be attractive for a company generating a return on equity of around 20 per cent,” added Choice Broking which had recommended a subscribe rating for the issue.
“On financial grounds, Glenmark Life has developed as a business growth with absolute profitability margins”, said Choice Broking. The increased sales of APIs in FY’19 led to operating revenue of 45.8 per cent and EBITDA margin of 341bps for FY19-21 and 31.4 per cent for FY21. The profit after tax spiked by 34.1 per cent CAGR to Rs 351.6 crore in FY21.
“Bottomline will be boosted by lower finance costs, which in turn resulting from the utilization of IPO proceeds to lower the related parties financial liabilities,” the brokerage asserted.