The initial share sale of Blue Jet Healthcare opened for public subscription on Wednesday, October 25. The three-day bidding process will close on October 27. Ahead of the issue opening, the company raised ₹252.08 crore from anchor investors.

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Shares of Maharashtra-based pharma company Blue Jet Healthcare are commanding a premium of ₹85 in the grey market today.

It is important to note that grey market premiums are just an indicator of how the company's shares are stacked up in the unlisted market and are subject to change rapidly.

What should investors do?

Analysts have mostly given a 'subscribe' rating to the IPO considering the company's strong business prospects, healthy return ratios, and promising industry outlook.

"At the upper price band of ₹346, BJHL is available at a P/E (price-earning) of 34 times (FY24E annualised EPS), which appears to be fully priced," said Geojit in its IPO note.

Considering its strong business prospects, healthy return ratios, forward integration, greenfield expansion plans and promising industry outlook, the brokerage has assigned a 'Subscribe' rating to the issue on a medium- to long-term basis.

"On the upper price band, the issue is valued at a P/E of 37.5 times based on FY2023 earnings, which we feel is fairly valued. We, therefore, recommend a 'Subscribe' rating for the issue," said Prathamesh Masdekar, research analyst at Stoxbox.

According to Masdekar, the growth in the company's CDMO model, robust financial performance and expanding production capacity are expected to drive its performance going ahead.

Mehta Equities believes the IPO of Blue Jet Healthcare gives investors an opportunity to invest in a speciality pharmaceutical company which offers niche products to innovator pharmaceutical companies. "Due the company's presence in niche product segment and no immediate peers to compare, the issue may fetch demand on first mover advantage due to which there could be a decent listing gains expected."

"Long term investors should look at offer with 100% OFS issue, which is an area of concern for new investors. Hence, we recommend investors to 'Subscribe with risk' in Blue Jet IPO offer with a decent listing gain perspective," the brokerage noted.

Blue Jet Healthcare has fixed a price band of ₹329-346 per equity share for its maiden public offer. Investors can bid for a minimum of 43 equity shares and in multiples thereafter.

The company plans to raise about ₹840 crore at the upper end of the price band.

Purpose of IPO

The IPO consists of only an offer for sale (OFS) of ₹840 crore wherein the selling shareholders will divest up to 2.43 crore equity shares. Although

the company will not receive any proceeds from this offer, yet the prime purpose of the issue is to achieve the benefits of listing shares on stock exchanges.

Under the OFS, promoters Akshay Bansarilal Arora and Shiven Akshay Arora will offload the shares.

About 50% of the IPO has been kept aside for qualified institutional buyers, 35% for retail investors and the rest 15% for non-institutional investors.

Key risks

- A significant portion of revenue (78% in Q1FY24) is derived from European markets.

- Customer Concentration risk - 73% of total revenue from operations in Q1FY24 is derived from the top 5 customers.

- Dependent on a limited number of raw material suppliers (54% of raw material is sourced from outside India in Q1FY24). However, the company intends to produce contrast media intermediate (Key starting materials) in-house starting from FY24, thereby eliminating dependencies on imports.

Financials

The company's revenue and profit after tax rebounded in the first quarter of FY24, led by increased sales volume and decrease in raw material prices and normalisation of receivables.

The EBITDA margins were healthy at 36% (3-year average), and the return ratios such as three-year average RoE and RoCE were at 33% and 46%, respectively, over FY21–23.

Established in December 1968, Blue Jet Healthcare is a speciality pharmaceutical and healthcare ingredients and intermediates firm that focuses on unique products tailored for innovator pharmaceutical and multinational generic pharmaceutical companies.

They develop and supply speciality pharmaceutical and healthcare ingredients and intermediates under a contract development and manufacturing organisation (CDMO) business model.

Over the last three years, BJHL has issued invoices to more than 400 customers in 39 different countries. Furthermore, the company operates three manufacturing facilities located in Maharashtra.

Kotak Investment Banking, ICICI Securities and JP Morgan are the book-running lead managers to the IPO, while Link Intime India is the registrar.

Blue Jet Healthcare is expected to finalise its IPO allotment by November 1, and the tentative listing date is set as November 6. The equity shares of the company are proposed to be listed on both NSE and BSE.

(Edited by : Amrita)

First Published:Oct 25, 2023 10:11 AM IST