The initial public offering of Eris Lifesciences Ltd began on a slow note on Friday even as the drugmaker attracted a bunch of marquee anchor investors including Abu Dhabi Investment Authority (ADIA), the Gulf emirate’s sovereign wealth fund.
The issue of 15.95 million shares–excluding the anchor investors’ portion–was subscribed 12% on the first day after receiving bids for nearly 1.85 million shares, stock-exchange data showed.
Retail investors led the bidding as the portion reserved for them was subscribed 41%. The quota of shares reserved for institutional buyers was subscribed nearly 7%. The portion set aside for non-institutional investors, such as corporate houses and wealthy individuals, was covered just 6%.
Ahead of the IPO, Ahmedabad-based Eris raised roughly Rs 780 crore ($120 million) from the anchor investors by selling 12.92 million shares at Rs 603 apiece, the upper end of the Rs 600-603 price band.
Apart from ADIA, the anchor investors included Boston-based investment firm Eaton Vance Management, The Master Bank of Japan, FIL Investment (Mauritius), Morgan Stanley, Goldman Sachs, Merrill Lynch Singapore and Integrated Core Strategies (Pte) Singapore.
ADIA bought about 1.17 million shares and Goldman Sachs purchased 1.06 million shares. FIL Mauritius and Merrill Lynch each acquired almost a million shares.
The Indian anchor investors were SBI Life Insurance Co and Tata AIA Life Insurance as well as asset managers DSP BlackRock, Kotak Mutual Fund, SBI Mutual Fund, IDFC Mutual Fund, Tata Mutual Fund, Birla Sun Life Mutual Fund and Motilal Oswal Mutual Fund.
Anchor investors are institutional investors who accept a one-month lock-in period for a sizeable allocation of shares and support a public offering. Their participation highlights investors’ confidence in an IPO and sets a benchmark for the investor community at large.
The branded formulations company is seeking a valuation of as much as Rs 8,291.25 crore ($1.28 billion) through the IPO, which closes on 20 June. The IPO size is pegged at Rs 1,741.16 crore at the upper end of the price band for a 21% stake dilution on a post-issue basis.
The IPO comprises a secondary offering by founders and other shareholders including private equity backer ChrysCapital. The PE firm’s investment arm Botticelli is selling its entire 16.25% stake through the IPO and will get around there-fourths of the proceeds.
The PE firm is set to reap a bountiful harvest from its almost six-year-old investment by taking home Rs 1,360 crore with 6.9 times return on its Rs 195 crore investment in September 2011. It translates into an internal rate of return (IRR) of 39% in rupee terms, as per VCCircle estimates. Private equity firms typically chase an IRR of 20-30% in India.
The company was founded in 2007 by Amit Bakshi, a sales professional-turned-entrepreneur. Bakshi holds a 39.97% stake, and has opted to sell a 0.5% stake. Other selling shareholders include Rakesh Shah, Rajendra Patel, Kausal Shah and Inderjeet Negi.
Eris had filed its draft red herring prospectus on 8 February. It received approval for its IPO from the Securities and Exchange Board of India on 8 May. Axis Capital, Citibank and Credit Suisse are the financial advisers for the IPO.
The company will join a clutch of pharmaceutical companies that have either gone public over the past couple of years or have been planning to do so.
Syngene International Ltd, the contract research services arm of Bengaluru-based biopharmaceutical company Biocon Ltd, went public in July 2015 with its Rs 550-crore IPO. Alkem Laboratories Ltd, India’s fifth-largest drugmaker as per local sales, tapped into primary markets in December 2015 with a Rs 1,350-crore IPO. Warburg Pincus-backed Laurus Labs went public in November 2016.
A clutch of companies in the broader healthcare sector have also gone public in the past 18 months. These include diagnostics companies Dr. Lal PathLabs Ltd and Thyrocare Technologies Ltd, and hospital chains Narayana Hrudayala Ltd and Healthcare Global Enterprises Ltd.