Ami Organics IPO opens: Reasonable valuation; check grey market premium, should you subscribe?

Ami Organics Rs 570-crore IPO is set to open for subscription on 1 September 2021, along with Rs 1,895-crore Vijaya Diagnostic Centre IPO

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Ami Organics is one of the major manufacturers of pharma intermediates of key APIs having application in high growth therapeutic areas. Image: Amiorganics website

Ami Organics Rs 570-crore IPO is set to open for subscription on 1 September 2021, along with Rs 1,895-crore Vijaya Diagnostic Centre IPO. In the primary market, Ami Organics shares were quoting at a premium of Rs 122 over the issue price. In the grey market on Tuesday, Ami Organics shares were trading at Rs 732 apiece, a premium of 20 per cent, over the upper end of IPO price band, according to the people who deal in unlisted shares of the companies. Upon successful listing, Ami Organics will join the likes of Aarti Industries, Hikal Ltd, Valiant Organics, Vinati Organics, Neuland Organics and Atul Ltd.

Also read: Ami Organics Rs 570-crore IPO opens Sep 1; check grey market premium, price band, lot size, bid details

Ami Organics is one of the major manufacturers of pharma intermediates of key APIs having application in high growth therapeutic areas. Analysts say that the operational metrics look satisfactory with ROCE of 25 per cent and ROE of 32 per cent in fiscal 2021. The capacity utilisation level of the company stood at 63 per cent which is expected to improve owing to utilisations of recently acquired facilities in Ankleshwar and Jhagadia. “The asking P/E multiple post fresh issue is 41.16x which is moderate in terms of pricing. Owing to a strong product portfolio and market share, we may see interest from investors having a long term perspective,” Abhay Doshi, Founder, UnlistedArena.com, dealing in Pre-IPO & Unlisted Shares, told Financial Express Online.

Ami Organics is the major manufacturer of pharma intermediates for certain key APIs, including Dolutegravir, Trazodone, Entacapone, Nintedanib and Rivaroxaban. Some of its domestic customers include Laurus Labs Limited, Cadila Healthcare Limited and Cipla Limited and some of its key export customers include Organike s.r.l.a Socio Unico, Fermion Oy, Fabbrica Italiana Sintetici S.p.A, Chori Co. Ltd., Medichem S.A. and Midas Pharma GmbH. “Considering the FY21 adjusted EPS of Rs 14.82 on post issue basis, the company is going to list at a P/E of 41.16 with a market cap of Rs 22,227 million while its peers namely Aarti Industries and Hikal are trading at a P/E of 54.20 and 46.13, respectively. “We assign subscribe rating to this IPO as the company has a strong and diversified product portfolio supported by strong R&D and process chemistry skills and is available at reasonable valuation as compared to its peers,” said Saurabh Joshi, analyst, Marwadi Shares and Finance.

*This story was first published on 31st August 2021)

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