Ami Organics IPO: Grey market premium soars, issue fully subscribed day 1; should you invest?

By: |
September 01, 2021 2:36 PM

Ami Organics' Rs 570-crore IPO has been subscribed 1.37 times so far on the first day of the bidding.

amiorg ipo, ami organics, ami organics ipo, ami organics gmp, ami organics grey market premiumAmi 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 has been subscribed 1.37 times so far on the first day of the bidding. Investors have put in bids for 89.23 lakh equity shares against 65.42 lakh shares on offer. On Wednesday, the grey market premium in Ami Organics surged to Rs 155 from Rs 122. Ami Organics shares were seen trading at Rs 765 apiece, a premium of 25.4 per cent, over the upper end of IPO price band, according to the people who deal in unlisted shares of the companies.

Ami Organics raised Rs 171 crore from 20 anchor investors ahead of the opening of its IPO. The company after consultation with merchant bankers has finalised allocation of 28.01 lakh equity shares to anchor investors at a price of Rs 610 per share, the upper price band. Investors including SBI Mutual Fund, Nippon Mutual Fund, Malabar India Fund, Kuber India Fund, UTI MF, IIFL Asset Management, Sundaram MF, Elara India Opportunities Fund, and Carnelian Capital Compounder Fund participated in the anchor book. Among others, SBI Life Insurance, Aditya Birla Sun Life Insurance, Kotak Mahindra Life Insurance, and Max Life Insurance also invested through the anchor book.

Motilal Oswal Financial Services
Rating: Subscribe for listing gains

Motilal Oswal Financial Services likes Ami Organics given its wide product portfolio in PIs, diversification efforts into other specialty chemical space, strong clients’ relations across geographies and robust financials. It is well placed to tap opportunity in the fast-growing specialty chemical market by leveraging its strong R&D and expanding product portfolio. The issue is reasonably valued at 41.2x FY21 P/E on post issue basis (avg. peer FY21 P/E of 45x), while it enjoys higher growth. The brokerage firm believes that the market would like to give premium valuation to such niche stories.

Choice Broking
Rating: Subscribe

At a higher price band of Rs 610, Ami Organics is demanding a P/E multiple of 41.2x (to its FY21 EPS of Rs 14.8), which is at discount to the peer average of 48.3x. Anticipating lower profitability in the medium term, Choice Broking feels that the issue is reasonably priced. Considering the dominant market positioning of the company in the manufacturing of pharma intermediates for certain high-growth high-margin therapeutic areas, business growth from the specialty chemicals and lower debt levels post-IPO, it has assigned a ‘subscribe’ rating for the issue.

Marwadi Financial Services
Rating: Subscribe

Considering the FY21 adjusted EPS of Rs.14.82 on a post issue basis, the company is going to list at a P/E of 41.16 with a market cap of Rs 22,227 mn while its peers namely Aarti Industries and Hikal are trading at a P/E of 54.20 and 46.13 respectively. The brokerage firm assigned 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 a reasonable valuation as compared to its peers.

HDFC Securities
Rating: Not Rated

Ami Organics manufacture and market advanced pharmaceutical intermediates used for manufacturing of APIs and NCEs in select therapeutic areas such as anti-retroviral, anti-inflammatory, antipsychotic, anti-cancer, anti-Parkinson, antidepressant and anti-coagulant. This pharmaceutical intermediates business has high entry barriers inter alia due to: (a) a long gestation period to be enlisted as a supplier with the customers, particularly with the customers in US and European countries, which requires suppliers to adhere to strict compliance requirements, leading to a high regulatory gestation period; and (b) the involvement of complex chemistries in the manufacturing process, which is difficult to commercialize on a large scale.

Kotak Securities
Rating: Not Rated

The company manufactures and markets advanced pharmaceutical intermediates used for manufacturing of APIs and NCEs in select therapeutic areas. This pharmaceutical intermediates business has high entry barriers inter alia due to: (a) a long gestation period to be enlisted as a supplier with the customers, particularly with the customers in US and European countries, which requires suppliers to adhere to strict compliance requirements, leading to a high regulatory gestation period; and (b) the involvement of complex chemistries in the manufacturing process, which is difficult to commercialize on a large scale.

(The stock recommendations in this story are by the respective research analysts and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)

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