Akums Drugs shares list at 7% premium over IPO price

Shares of Akums Drugs and Pharmaceuticals made a positive debut on the stock exchanges on Tuesday, in sync with the broader market. The shares of the Delhi-based pharma company listed at ₹725 on the BSE and NSE, a premium of 6.7% over the IPO price of ₹679 per equity share.

Post listing, Akums shares surged as much as 15.5% to hit a high of ₹ 784.65 on the BSE, while the market capitalisation of the company rose to ₹ 11,958 crore.

The debut of the country’s largest contract development and manufacturing organisation (CDMO) was in line with the Street expectations as the stock was commanding a grey market premium (GMP) of ₹43 apiece in the unofficial market, signaling the listing to be around ₹722 per share, up 6.3% over the issue price. The GMP has fallen sharply from its peak of ₹211 on July 29, 2024.

“While the IPO received a strong subscription of 63.44 times and the initial market buzz was positive, the actual listing fell short of expectations, likely influenced by the prevailing market volatility,” says Shivani Nyati, Head of Wealth, Swastika Investmart Ltd.

Nyati further says that the company's strong fundamentals and market position offer potential for long-term growth, but investors should carefully assess the risks and market volatility. “Investors with a long-term view may hold their position by keeping a stop loss at its issue price.”

Mehta Equities in its pre-listing view says that Akums Drugs could make a decent debut with a gain in the range of 10-15% on the issue price, despite pressure in the market. “Considering healthy subscription demand, especially from QIB (90x) and unique business matrix, we continue to believe and hold our long term positive outlook in the India’s largest CDMO player by revenue, production capacity and client base,” says Prashanth Tapse, Senior VP (Research), Mehta Equities.

The brokerage recommended allotted investors to “HOLD” Akums Drugs shares for a long term perspective, citing anticipated growth in the Indian CDMO market, along with the company’s expanding global footprint and strategic move into API manufacturing. “Post listing, we believe the market can give Akums a premium multiple towards its leadership position which may result in delivering healthy post listing gains on its issue price,” says Tapse.

Promoted by Sanjeev Jain and Sandeep Jain, the CDMO raised ₹1,857 crore via IPO at market capitalisation of ₹10,687 crore, which received a strong response from investors, with the issue subscribing by 63.44 times. The public issue of the drug maker was a combination of a fresh issue of equity shares worth ₹680 crore and an offer-for-sale (OFS) of 1.73 crore shares worth ₹1,177 crore by promoters and an existing investor. The price band for the IPO was ₹646-679 per share and the lot size was 22 shares and in multiple thereafter. 

Segment wise, the issue was subscribed 20.8 times in the retail category, while the portion set aside for qualified institutional buyers (QIB) and non-institutional investors (NII) received 42.10 times and 90.09 times bids, respectively. The employee quota was booked 4.14 times. The company had reserved 75% of the issue size for QIBs, 15% for NIIs, and the remaining 10% for retail investors. This offer includes a reservation of shares worth up ₹15 crore for eligible employees, which were offered at a discount of ₹64 per equity share.

Ahead of the IPO, the company raised secured ₹828.78 crore in investments from 50 anchor investors by issuing 1.22 crore equity shares to anchor investors at the upper end of the IPO price band of ₹679 per equity share.

The company intends to use IPO proceeds from fresh equities to repay debt of the company and its subsidiaries - Maxcure Nutravedics and Pure and Cure Healthcare. A part of the fund will be used to meet working capital requirements, and acquisitions for inorganic growth, and for general corporate purposes.

Established in 2004, Akums has manufactured 4,025 commercialised formulations across over 60 dosage forms. During the financial year 2023, it manufactured formulations for 26 of the leading 30 pharmaceutical companies in terms of sales in India, as per F&S report mentioned in the DRHP. The company counts Alembic Pharma, Alkem Lab, Cipla, Dabur India, Dr. Reddy’s, Ipca Lab, Mankind Pharma, MedPlus Health Services, Micro Labs, Mylan Pharmaceuticals, Natco Pharma, Sun Pharma, UCB, and The Mom’s Co, among its key clients for CDMO business.

For the financial year ended March 31, 2024, Akums reported profit after tax (PAT) at 0.79 crore versus ₹97.82 crore profit in FY23 and ₹250.87 loss in FY22. However, revenue rose by 13.8% to ₹4,212.21 crore from ₹3,700.93 in FY23 and ₹3,694.52 crore in FY22. The company generated around 75% of its revenue from CDMO business, 20% from branded and generic formulations, and around 5% from API business.

(DISCLAIMER: The views and opinions expressed by investment experts on fortuneindia.com are either their own or of their organisations, but not necessarily that of fortuneindia.com and its editorial team. Readers are advised to consult certified experts before taking investment decisions.)