Laurus Labs Ltd’s initial public offering was covered 29% on the first day of the issue on Tuesday, as the drugmaker tries to attract investors at a time the government’s demonetisation drive has triggered a severe cash crunch in the economy.
Institutional investors led the subscription, with their quota of shares covered almost 71%, stock-exchange data showed.
The non-institutional portion comprising corporate bodies and wealthy individuals received bids for 16% the shares reserved. The retail investors’ category was covered about 10%, the data showed.
The Hyderabad-based company, which makes generic bulk drugs for therapeutic areas of antiretroviral and Hepatitis C, is striving to become the second company after Sleepwell brand mattress maker Sheela Foam Ltd to successfully conclude its IPO after the government’s 8 November decision to scrap high-value banknotes.
Sheela Foam’s share sale was covered five times, overcoming worries related to cash crunch after the IPO of GreenSignal Bio Pharma Ltd became the first casualty of the government’s demonetisation drive.
Laurus Labs on Monday raised Rs 395.4 crore (around $58 million) by selling shares to anchor investors including Goldman Sachs AMC, HBM Partners, Nomura and a bunch of domestic institutional investors such as mutual funds.
The anchor book is that portion of the IPO which bankers can allot to institutional investors on a discretionary basis. Subscription for the anchor book opens a day before the launch of an IPO and indicates institutional investors’ interest.
The company issued shares to anchor investors at the upper end of the Rs 426-428 price band.
In the grey market, Laurus Labs’ shares were quoting at a premium of Rs 27-29 to its price band, said two dealers on the condition of anonymity.
The grey market is an over-the-counter market where IPO shares are traded before officially listing on a stock exchange.
IPO price, valuation, financials
Laurus Labs is seeking a valuationof as much as Rs 4,521 crore ($660 million) through the IPO that will close on 8 December.
The total size of the offering is about Rs 1,360 crore. This comprises Rs 300 crore to be raised through a fresh issue of shares and the remaining via a sale of shares by existing shareholders. Private equity firms Warburg Pincus and Eight Roads Ventures (formerly Fidelity Growth Partners) will partially exit while Welsh Carson Anderson & Stowe will sell its entire stake in the offering.
Laurus Labs filed its IPO proposal with the Securities and Exchange Board of India in August. It received regulatory clearance for the IPO in October.
Kotak Mahindra Capital, Citigroup Global Markets, Jefferies and SBI Capital Markets are managing the Laurus Labs IPO.
The firm aims to use the IPO money to repay term loans and for general corporate purposes.
The company registered consolidated revenue from operations of Rs 1,783.77 crore in 2015-16 compared with Rs 1,326.59 crore the year before. It reported consolidated net profit of Rs 132.65 crore for 2015-16 compared with Rs 68.36 crore the previous year.
Laurus Labs is seeking to join a string of healthcare companies that have made successful debuts on stock markets over the past year. Diagnostics chains Dr Lal PathLabs Ltd and Thyrocare Technologies Ltd as well as hospital chain Narayana Hrudayalaya Ltd are among the companies that have successfully gone public over the past year.
Hospital chain operator Aster DM Healthcare Ltd filed documents for an IPO in June while eye-care chain New Delhi Centre For Sight has received SEBI approval for its public issue.
Healthcare has been one of the best performing sectors in terms of share price movement after listings. Drugmaker Alkem Laboratories Ltd, which went public last December, is trading at a 60% premium to its IPO price.
The IPO market in India picked up pace after four years of slow activity in mid-2014 when the BJP-led government took over. In 2015, 21 companies raised about Rs 14,000 crore, as per stock-exchange data. So far this year, 27 companies have tapped primary markets, collectively raising more than Rs 21,000 crore, the data showed.
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