Following a strong response to the initial public offering (IPO) of Concord Biotech, shares of late ace investor Rakesh Jhunjhunwala's RARE Enterprises-backed company are expected to list at a premium of 15-18 percent on the exchanges on Friday, August 18.

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Shares of Concord Biotech are commanding a premium of Rs 122 in the unlisted market, which could fetch investors moderate listing gains on debut, according to market observers. Considering the upper price band of Rs 741, the shares are likely to list at a premium of 16 percent.

However, 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.

Should investors book profits post listing?

The upcoming listing of Concord Biotech is expected to be at a premium of around Rs 122 (16.46 percent) per share, based on the current GMP. This would mean that the shares could list at a price of around Rs 863 per share, said Anubhuti Mishra, Equity Research Analyst at Swastika Investmart.

"Concord Biotech is a leading API company with a proven track record. But its international operations expose it to various complex risks. Additionally, the industry has been facing margin pressure recently. It is also worth noting that this IPO was purely an OFS," Mishra said.

All these factors and current market sentiment, as per Mishra, somewhere made an impact on its subscription rate as well, where it got subscribed to only 3.78 times in the retail category, but it received a great response from QIBs with 67.67 times subscription. "Thus, we can expect moderate listing gains from this IPO, and investors are advised to consider booking profits post-listing," the analyst said.

According to Prashanth Tapse of Mehta Equities, the issue will likely see a decent listing gain of around 15-18 percent, considering the subscription demand and market sentiments. Listing price would be in the range of Rs 850-870 per share, Tapse said.

"We advise a conservative allotted investor to book profits on listing, while a risk taker can hold and add more on the listing day for healthy returns on long term. We like Concord's business mix which is well placed in niche pharma space with leading market share in complex product portfolios along with strong customer’s relationship over 70 countries in both APIs and formulations with high entry barriers. We would continue to remain optimistic on long term business dynamics," he noted.

About the offer

The Rs 1,551 crore IPO of the R&D-driven biopharma company received a strong response from the investors during the three-day bidding process, thanks to a robust bidding from the institutional investors.

The issue was overall subscribed 24.87 times. The quota for qualified institutional bidders was booked 67.67 times, while the category for non-institutional investors, retail investors and employees were booked 16.99 times, 3.78 times and 24.48 times, respectively.

The IPO is entirely an offer for sale (OFS) of up to 2.09 crore equity shares by its selling shareholder Hellix Investment Holdings, backed by private equity firm Quadria Capital. Concord Biotech will not receive any net proceeds from the issue.

The Ahmedabad-headquartered biotechnology company is backed by Quadria Capital Fund and Rare Enterprises, which was set up by Rakesh Jhunjhunwala, along with his wife Rekha. The ace stock market investor passed away in August 2022.

Kotak Mahindra Capital, Jefferies India, Citigroup acted as the book-running lead managers to the issue, while Link Intime India was the registrar.

Company overview

Concord Biotech posted an 18 percent compound annual growth rate (CAGR) in revenue over FY21-23 with the EBITDA margin of 40 percent. The company's return ratios are healthy with RoE/RoCE of 20 percent and 19 percent and it generated free cash flow over the last two years with FCF/EBITDA at 29 percent.

The company is one of the leading global manufacturers of select fermentation-based APIs (F-APIs) across immunosuppressants and oncology with market share of over 20 percent by volume in 2022.

First Published:Aug 17, 2023 1:23 PM IST