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Initial Public Offers (IPOs) of equity by two entities in the burgeoning health care sector drew strong response from investors on Thursday.
Alkem Laboratories, a leading pharmaceutical company, and Dr Lal PathLabs, a prominent diagnostics chain operator, saw bids worth Rs 57,000 crore, for the less than Rs 2,000 crore on offer.
Alkem’s was Rs 1,350 crore and Dr Lal’s IPO was Rs 630 crore, at the top end of the band. Both issues were Offers for Sale from existing shareholders and didn’t involve issue of new shares.
The IPOs saw robust demand from all investor segments, in contrast with the recent marquee offerings of InterGlobe Aviation and Coffee Day Enterprises, given a miss by retail (small) investors.
Alkem’s nine-million share offer was subscribed 57 times in the qualified institutional buyer (QIB) category, 130 times in the high net worth individual (HNI) segment and nearly three times in the retail portion. Dr Lal’s 8.1-mn share offer saw its QIB portion getting subscribed 63 times, the HNI segment 61 times and retail nearly four times.
“We saw strong participation both from foreign and domestic investors. Investors were attracted towards Dr Lal’s unique story and consumer focus,” said V Jayashankar, head of equity capital markets, Kotak Investment Banking.
“The strong response was seen as money was to be made on these IPOs,” said S Subramanian, managing director and head of investment banking, Axis Capital. “Both are leading players in the segments they operate in.”
Alkem, with 3.6 per cent market share, is the country’s fifth largest pharma company by domestic sales. Dr Lal, with a 12 per cent share, is one of the two top diagnostics entities. Experts said investors were betting on a rise in demand for health care services, with the rise in incomes.
The strong demand was despite weakness in the secondary market due to selloffs by foreign investors, ahead of next week’s US Federal Reserve meet, where it is widely expected to increase its policy rate.
Brokers said the recent dip in the markets also failed to make a dent for the two IPOs, as they operate in the health care segment, an outperformer in the latest fall.
The BSE health care index is down around two per cent, as against a 3.5 per cent decline in the benchmark Sensex this month. Fund raising through IPOs this year is a little around Rs 11,000 crore, around nine times more than the Rs 1,330 crore raised last year. This is despite the benchmark indices declining nearly eight per cent.
Another leading name in the health care sector, Narayana Hrudayalaya, plans to launch a Rs 613-crore IPO next week.
