The shares of Advanced Enzyme Technologies, one of the world’s largest enzyme makers, gained as much as 39 per cent during its stock market debut on Monday. The stock ended at Rs 1,172 a share, up Rs 276 or 30.8 per cent, on the NSE, compared to its issue price of Rs 896 apiece. It touched a high of Rs 1,244 and a low of Rs 1,168.
The stellar listing follows huge demand for the company’s Rs 412-crore Initial Public Offering (IPO), which saw 100 times demand than the shares on offer. Demand was particularly strong from institutional investors and high net worth individuals.
Advanced Enzyme is the 13th IPO to list (on the main exchanges) this year. Barring four companies, the rest have made gains over the IPO price on the day of listing. The average ‘day one’ return for IPOs in 2016 is 13 per cent.
According to analysts, Advanced Enzyme’s business model and attractive valuations drew investors towards the IPO. “The company has a specialised business model, with high entry barriers and a sticky customer base, which reduces the risk of volatile earnings, ensuring strong margin profile and healthy return ratios,” domestic brokerage Emkay had said.
At the IPO price, the company was priced at 25 times its 2015-16 earnings, which, according to Emkay, was at a discount to its peers.
Advanced Enzyme Technologies is the largest in the segment dealing in 400 proprietary products, developed from 60 indigenous enzymes. The company had clocked impressive earnings growth in the past few financial years. Analysts, however, believe the firm’s operations are relatively small, limiting its growth potential.
“Advanced Enzyme has reported a strong compounded annual growth rate (CAGR) of 23.9 per cent in net profit in spite of the 14.4 per cent CAGR in sales during FY2012-16, helped by high entry barriers, which also enables the company to get high margins. However, we believe the company’s scale of operations is small in comparison to its global peers and its business is dependent on a few products,” Angel Broking had said in a recent note.
“Advanced Enzyme is a very exciting and unique story with high entry barriers. The fact that the company has been able to maintain its dominant position in the enzyme industry with consistent healthy operating margins has attracted high investor interest in the public offering. The extraordinary oversubscription is a testimony of the faith reposed by the investors in novel, R&D backed companies,” said Ajay Saraf, Executive Director, ICICI Securities, one of the bankers to the IPO along with Axis Capital
