Eris Lifesciences Ltd, which is backed by private equity firm ChrysCapital, saw its initial public offering cross the three-fourths mark on the second day of the issue with the support of retail and institutional investors.
The issue of 15.95 million shares, excluding the anchor investors’ portion, was subscribed 75.44%, or 12.03 million shares, stock-exchange data showed. The IPO will close on 20 June.
The branded formulations company is seeking a valuation of Rs 8,291.25 crore ($1.28 billion) through the IPO. 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.
Retail investors, whose total bid value cannot exceed Rs 2 lakh, led the process by subscribing 1.67 times the shares reserved for them. The quota of shares reserved for institutional buyers was subscribed 82%. The portion set aside for non-institutional investors, such as corporate houses and wealthy individuals, managed to garner only 3.2% bids.
Eris’ IPO began on a slow note on Friday, with the public issue covering 12% on the opening day, even as the drugmaker attracted a bunch of marquee anchor investors, including Abu Dhabi Investment Authority, a sovereign wealth fund of the United Arab Emirates.
Ahead of the IPO, Ahmedabad-based Eris had raised about Rs 780 crore ($120 million) from anchor investors by selling 12.92 million shares at Rs 603 apiece, at the upper end of the Rs 600-603 price band.
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, were the other anchor investors, which also included a bunch of Indian mutual funds and insurance companies.
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 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 75% of the proceeds.
The PE firm is set to reap a bountiful harvest from its 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.
Eris 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 and received the 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.