Retail investors miss rally in Gland Pharma; stock up 118% over IPO price

At the time of its IPO, retail investors bid for only 24 per cent or 0.24 times of the shares set aside for them

Retail investors on Dalal Street have missed the rally in Gland Pharma as the stock of the drug firm hit a new high of Rs 3,266, up 7 per cent on the BSE, in intra-day trade on Wednesday. In the last two days, the scrip has surged 17 per cent after the company reported a healthy 34 per cent year-on-year (YoY) rise in its consolidated net profit to Rs 260.4 crore in the March 2021 quarter (Q4FY21) on robust sales.

The company’s revenue from operations grew 40 per cent YoY at Rs 887.70 crore from Rs 635.2 crore in the year-ago quarter. However, earnings before interest, taxes, depreciation, and amortization (EBITDA) margin during the quarter under review declined to 40 per cent from 42 per cent in the previous year quarter.

The management said new product launches, volume growth in the company’s existing portfolio, along with geographic expansion has led to strong business growth across all markets. The new vaccine business is expected to accelerate the company’s long-term strategy of entering into the Biosimilar space, the management added.

With the past two days' rally, the stock has more than doubled and appreciated 116 per cent against its initial public offer (IPO) price of Rs 1,500 per share. Gland Pharma had made the stock market debut on November 20, 2020.  In the past two months, the stock has gained 32 per cent after the company entered into an agreement with the Russian Direct Investment Fund (RDIF) to supply up to 252 million doses of Sputnik V COVID-19 vaccine.

In November 2020, Gland Pharma had raised around Rs 6,500 crore through IPO,  the biggest ever offering in the Indian pharmaceutical sector, but was subscribed only 2.06 times, and that too on the back of a good response from the Qualified Institutional Buyers (QIBs).

The issue had received bids for 62.2 million shares as against the issue size of 30.2 million shares. The portion reserved for QIBs was subscribed 6.4 times. Retail investors bid for only 24 per cent or 0.24 times of the shares set aside for them while non-institutional investors’ portion was subscribed 51 per cent or 0.51 times.

Individual shareholders, which held a 3.86 per cent stake in Gland Pharma at the time of its listing, reduced their stake by more than 1 percentage point post the company's debut on bourses. Their holdings in drug company had declined by 107 basis points (bps) to 2.79 per cent at the end of the December quarter. However, in the January-March quarter, they further increased their stake by 51 bps to 3.3 per cent, the shareholding pattern data shows.

Analysts at Motilal Oswal Securities said they remain positive on the stock and reiterated ‘buy rating on the back of niche pipeline, enhanced offerings, adding newer geographies in the RoW segment, operating cost efficiency, consistent compliance, and enough war chest to tap inorganic opportunities.

“We raise our FY22E/FY23E EPS estimate by 5 per cent/4 per cent to factor in the addition of newer markets, increased reach in the RoW segment, Covid-led Remdesivir business opportunity, and new launches in core markets,” the brokerage firm said in results update. The stock was trading close to its target price of Rs 3,280 per share.