Supriya Lifescience IPO fully booked in under 2 hours; should you subscribe? Here’s what brokerages suggest

The initial public offer of Supriya Lifescience Ltd received enthusiastic response from investors, especially retail ones, on Thursday as the offer was fully subscribed under the first two hours of bidding

Supriya Lifescience IPO
The price band for Supriya Lifescience IPO, which is open for subscription till 20 December, has been fixed at Rs 265-275 apiece

The initial public offer of Supriya Lifescience Ltd. received enthusiastic response from investors, especially retail ones, on Thursday (15 December) as the offer was fully subscribed under the first two hours of bidding. The IPO has been subscribed 1.59 times, so far. It received bids for 2.31 crore equity shares against the offer size of 1.45 crore equity shares. Retail investors bought 8.13 times shares of the portion reserved for them, and the allotted quota of non-institutional investors was subscribed 43%. Qualified institutional portion is yet to receive any bids. The price band for the IPO, which is open for subscription till Monday (20 December), has been fixed at Rs 265-275 apiece. Investors can bid for a minimum of 54 equity shares and then the multiples of 54 thereof. The issue consists of fresh equity shares worth Rs 200 crore while promoter Satish Waman Wagh will offload shares worth Rs 500 crore.

Should you subscribe? Here’s what brokerages suggest

Angel One Ltd: SUBSCRIBE

Supriya Lifescience Ltd is one of the key Indian manufacturers and suppliers of active pharmaceutical ingredients (APIs). On the valuation side, based on FY2021 numbers, the IPO is priced at an EV/EBITDA of 11.2 times and price to earnings of 16.2 times at the upper price band of the IPO. Supriya Lifescience Limited focuses on research & development and having a diversified niche product portfolio of API’s. Companies 77.5% of revenue comes from the Export market, companies’ key markets are USA, Europe, China and India. We believe that the company’s new manufacturing unit and product launch will be growth drivers for the company in future. Hence, we are assigning a “SUBSCRIBE” recommendation to the Supriya Lifescience Limited IPO.

Motilal Oswal Financial Services Ltd: SUBSCRIBE

We like Supriya Lifescience Ltd given its niche product portfolio in diverse therapeutic segments, backward integrated business model with advanced manufacturing and R&D capabilities, extensive global presence with strong clients’ relation and robust financials. It is well placed to tap opportunity in the pharma API market given its strong pipeline focused on further diversification. The issue is reasonably valued at 17.8x FY21 P/E (post issue basis) v/s its peers (available at avg. P/E of 22.8x), while it enjoys a similar growth trajectory. Hence we recommend ‘Subscribe’.

Choice Broking: SUBSCRIBE

Supriya Lifescience Ltd has de-risked its business model with wide geographical presence, diversified product portfolio, catering to diverse therapeutic areas. Also the company has demonstrated a healthy profitable business growth with stable operating cash flows. Since inception, it has reported a positive operating cash flow. At the higher price band of Rs 274, SLL is demanding a P/E multiple of 17.8x (to its FY21 earning of Rs. 15.4), which is at discount to the peer average of 31.4x. Thus the issue seems to be attractively priced, therefore we assign a “SUBSCRIBE” rating for the issue.

Marwadi Shares and Finance Ltd: SUBSCRIBE

Considering the FY21 adjusted EPS of Rs 15.39 on a post-issue basis, the company is going to list at a P/E of 17.81x with a market cap of Rs 22,052 mn while its peers namely Divis Laboratories Ltd and Aarti Drugs Ltd is trading at a P/E of 56.3x and 25.5x. We assign a “Subscribe” rating to this IPO as the company has a significant scale with a leadership position across key & niche products. Also, it is available at a reasonable valuation as compared to its peers.

Nirmal Bang Securities Pvt Ltd: SUBSCRIBE

The company has grown revenues at a CAGR of 22% between FY18-21 in-line with industry average however EBITDA has grown at 97% during the same period, double the industry average. SLL has strong return ratios. We have compared Supriya with almost all the leading listed API players and found it quite attractive. Given the strong leadership in selected niche regions along with the healthy financials and attractive valuations, we recommend “Subscribe”.

Hem Securities Ltd: SUBSCRIBE

The company is bringing the issue at price band of Rs 265-274 per share at p/e multiple of 17x on post issue annualized H1FY22 eps. Company with significant scale & leadership position across key & niche products has backward integrated business model & advanced manufacturing and research and development
capabilities. Also company has shown consistent financial performance due to de-risked business model & has experienced senior management team and qualified operational personnel. Hence, looking after all above we recommend “Subscribe” on issue for both listing gain & long term purpose.

Supriya Lifescience Limited focus on research and development along with this company focus is on diverse therapeutic areas and niche products. Company has niche product offerings of 38 APIs focused on diverse therapeutic segments such as antihistamine, analgesic, anaesthetic, vitamin, anti-asthmatic and anti-allergic. Company exports to 86 countries to 1296 customers including 346 distributors. Companies manufacturing plant located at Maharashtra, which is spread across 23806 sq. mt.

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