Tatva Chintan IPO oversubscribed 17 times: Last day of bidding today, grey market premium strong

Tatva Chintan Pharma’s Rs 500-crore IPO has been subscribed 17.22 times by investors, with the last day of bidding still on.

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Tatva Chintan Pharma’s Rs 500-crore IPO has been subscribed 17.22 times by investors, with the last day of bidding still on. The specialty chemical manufacturer has attracted strong interest from all pockets of investors after having the issue was oversubscribed within the initial two hours of sale last Friday. Shares of the company have also impressed in the grey market, trading at a strong premium over the issue price. Investors can bid for the issue till today evening in the price band of Rs 1,073 – Rs 1,083 per share in a bid lot of 13 shares.

So far, qualified institutional buyers (QIB) have bid for 27.59 lakh shares against 9.31 on offer, subscribing to their portion of the IPO 2.96 times. Non-institutional investors have subscribed their portion of issue 16.01 times, bidding for 1.03 crore shares so far. Retail investors have bid for the maximum number of shares so far, subscribing to their portion 25.89 times. Overall investors have bid for 5.61 crore shares against the 32.62 lakh on offer, translating to a 17.22 times subscription rate.

The issue is a mix of an offer for sale by existing investors and a fresh issue of equity shares by the company. While Rs 275 crore from the issue will go to selling shareholders, Rs 225 crore will be used by Tatva Chintan Pharma to fund the expansion plans of their Dahej facility and to upgrade the R&D facility at Vadodara. Promoter shareholding in the company will come down from 100% to 79.17% after the IPO, while public shareholding will increase to 20.83% from 0%.

In the grey market, Tatva Chintan Pharma’s shares were trading at a premium of nearly Rs 760 per share over the IPO price of Rs 1,083 apiece, according to people dealing in the unlisted space. The premium has steadily increased over the last week. Tatva Chintan Pharma net profit has grown at a compound annual growth rate of 62% between the financial year 2018 and 2021. In the previous fiscal year the company reported a net profit of Rs 52.3 crore. Revenue has grown at a rate of 30.3%.

“We like Tatva Chintan Pharma due its leadership position, wide product portfolio, strong client relationship and high entry barriers. The company is expected to witness strong growth for the next 2-3 years given its expansion plans,” said analysts at Motilal Oswal in a pre-IPO note. “The issue is valued at 45.9x FY21 P/E on a post-issue basis, which appears reasonable compared to peers (avg. P/E of 59x), as it enjoys higher earnings growth,” they added. The brokerage firm has a ‘subscribe’ rating to the issue. Similarly, pinning a ‘subscribe’ rating on the issue, analysts at Choice Broking believe the IPO is priced at a discount to peer average of 57.2x. 

Tatva Chintan Pharma will join peers such as PI Industries, Aarti Industries, Atul, Deepak Nitrite, Vinati Organics, SRF, among others on the stock exchanges on successful listing. 

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