Innova Captab listed at 2% over its issue price:
Innova Captab, a pharmaceutical company specializing in contract development and manufacturing (CDMO) services for Indian formulation pharma companies, recently made its debut on Dalal Street. Despite analysts’ expectations of a substantial premium, the stock listed at a modest 2% over its issue price of ₹448. This unexpected debut has raised eyebrows in the market, especially considering the company’s strong brand recognition, long-term relationships, and active engagements with distributors.
Market Expectations vs. Reality:
Analysts anticipated a premium of around 25%, attributing it to Innova Captab’s robust fundamentals. The company boasts a record of sustained consolidated revenue, a focus on branded generic products, and a resilient financial performance. Masdekar highlighted the company’s expansion efforts through product offerings and geographic reach. However, the market reality defied these optimistic projections, with the stock listing at a mere 2% premium.
Listing Details and Market Reaction:
On the BSE, Innova Captab’s shares were listed at ₹456.10, a premium of 2% over the issue price. Meanwhile, the NSE witnessed a listing at ₹452.10, representing a premium of 0.92%. The subdued market response was in stark contrast to the stock’s premium in the grey market, where it was trading at approximately 7.14% above the issue price just before listing. This discrepancy in valuation signals a shift in investor sentiment from the pre-listing enthusiasm seen in the grey market.
Grey Market Dynamics:
The grey market serves as an unofficial platform for trading shares before their official listing. Investors often track the Grey Market Premium (GMP) as an indicator of the potential listing price. In the case of Innova Captab, the GMP experienced a decline from a 7.14% premium to a meager 2% on the listing day. This shift in sentiment suggests changing market dynamics and a reevaluation of the company’s perceived value.
IPO Subscription and Fund Utilization:
The IPO, open for bidding from December 21 to December 26, witnessed a robust response, with oversubscription reaching 55.26 times at the close. Qualified institutional bidders (QIBs) led the pack with a subscription rate of 116.73 times, followed by non-institutional investors at 64.95 times. Retail investors also showed significant interest, booking their portion 17.15 times. The company successfully raised ₹570 crore through a combination of a fresh share sale and an offer-for-sale (OFS).
Innova Captab outlined its plans for utilizing the net proceeds from the IPO. The funds are earmarked for purposes such as repayment of outstanding loans, investment in subsidiary UML for debt repayment, meeting working capital requirements, and addressing general corporate needs. This strategic allocation of funds underscores the company’s focus on financial stability, expansion, and overall business sustainability.
Company Overview and Operations:
Innova Captab Ltd operates as an integrated pharmaceutical company in India, specializing in CDMO services for Indian formulation pharma companies. Additionally, the company manufactures and markets branded generic products for both domestic and international markets. The diverse product portfolio includes oral solids, oral liquids, dry syrups, injectables, sustained-release formulations, and products utilizing advanced technologies such as Nano technology.
The company’s branded generics business encompasses the development, manufacture, and distribution of generic formulation products marketed under its own brand names. These products are made available through various channels, including online and offline platforms, catering to both the Indian and international markets.
Financial Performance and Growth:
In the fiscal year 2023, Innova Captab reported a notable 16% YoY growth in revenue from operations, reaching ₹926 crore. Despite economic challenges, the company demonstrated resilience in its financial performance. The profit after tax saw a marginal increase, reaching ₹67.9 crore. These financial indicators reflect the company’s ability to navigate market fluctuations and sustain growth in a competitive pharmaceutical landscape.
Book-Running Lead Managers and Registrar:
ICICI Securities and JM Financial played pivotal roles as the book-running lead managers for Innova Captab’s IPO. Their expertise in managing the IPO process and market dynamics contributed to the successful fundraising and oversubscription. KFin Technologies served as the registrar, ensuring a smooth process of share allotment and tracking investor information.
Way Ahead:
Innova Captab’s IPO debut, though muted compared to market expectations, provides valuable insights into the evolving dynamics of the pharmaceutical sector. Despite the initial market response, the company’s fundamentals, strong brand presence, and strategic fund utilization suggest a potential for long-term growth. Investors and market analysts will keenly observe how Innova Captab navigates post-listing challenges and capitalizes on its strengths to emerge as a key player in the pharmaceutical industry.
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