Akums Drugs IPO opens today: GMP up; should you bid? Check brokerage calls

The three-day subscription window of the Akums Drugs & Pharmaceuticals IPO opens today. Should You Subscribe to the public issue? Here's what brokerages recommend

The three-day subscription window for the initial public offering (IPO) of Akums Drugs & Pharmaceuticals opens for public subscription today, July 30, 2024.  The unlisted shares of the company are commanding a strong grey market premium (GMP) on the first day of the IPO. According to several websites that track grey market activities, the Akums Drugs IPO GMP is around Rs 211, translating to a premium of over 31% over the upper end of the public issue's price band of Rs 646-679.

Akums Drugs IPO details

Akums Drugs aims to raise Rs 1,856.74 crore from the public issue at the upper end of the issue price. Ahead of its opening, Akums Drugs raised Rs 828.78 crore from anchor investors on Monday, July 29, 2024.  The IPO comprises a fresh issue of 10,014,727 shares worth nearly Rs 680 crore and an offer for sale of 17,330,435 shares worth approximately Rs 1,176.74 crore. The Akums Drugs IPO is available in a lot size of 22 shares, and investors can bid for a minimum of 22 shares and in multiples thereof. The minimum amount required by a retail investor is Rs 14,938.

 

Link Intime India Private Ltd is the registrar for the Akums Drugs IPO, while Citigroup Global Markets India, ICICI Securities Limited, Axis Bank Limited, and Ambit Private Limited are the book-running lead managers for the issue.

Akums Drugs IPO allotment, listing date

The basis of allotment for Akums Drugs shares is scheduled for Friday, August 2, 2024, and shares are likely to be credited into demat accounts by Monday, August 5, 2024. The expected listing date of Akums Drugs shares is Tuesday, August 6, 2024. The company's shares will list on both the BSE and NSE.

Akums Drugs financials

Akums Drugs & Pharmaceuticals Limited is a pharmaceutical contract development and manufacturing organization (CDMO) offering a comprehensive range of pharmaceutical products and services. The company's revenue jumped to Rs 4,212.21 crore in the fiscal year 2024 from Rs 3,700.93 crore reported in FY23. The company's revenue was reported at Rs 3,694.52 crore in FY22. Akums Drugs & Pharmaceuticals' profit after tax (PAT) fell to Rs 0.79 crore in FY24 from Rs 97.82 crore reported in FY23.

Akums Drugs IPO objectives

Akums Drugs intends to use the net proceeds from the IPO for the payment of indebtedness of the company and its subsidiaries. The remaining proceeds will be used for funding incremental working capital requirements, pursuing inorganic growth initiatives through acquisitions, and general corporate purposes.

Should You Subscribe to the Akums Drugs IPO?

Several brokerage firms, including Anand Rathi Research Team, Geojit, and Swastika Investmart, have shared mostly positive outlooks on the public issue:

Anand Rathi Research Team - Subscribe for Long Term  

According to the Anand Rathi Research Team, Akums Drugs is the largest India-focused CDMO in terms of revenue, production capacity, and the number of clients served during FY23. The company's put-call liabilities for recent new contracts were mandated under GAAP measures due to a lack of additional funding support.  

"Based on restated financial data, although the issue pricing seems aggressive, this perception changes if we exclude such accounting provisions. The company's P/E ratio is 27.2 times based on its FY24 earnings, with a market capitalization of Rs 1,06,855 million after the issuance of equity shares and a market cap-to-sales ratio of 2.52 times its FY24 earnings. Considering these factors, we recommend a 'Subscribe – Long Term' rating for the IPO," said the brokerage.

Geojit - Subscribe

Geojit notes that Akums is available at a P/E of 29.8x (FY24) and a market cap-to-sales ratio of 2.6x (FY24), which appears to be fully priced. "Considering its leading position in the industry, prestigious clientele in domestic and global markets, strong growth prospects, and excluding the accounting provisions (put option liability), we assign a 'Subscribe' rating on a medium to long-term basis," said the brokerage.

Swastika Investmart - Subscribe with Caution 

While the company has demonstrated top-line growth, its profitability has been impacted by non-operational factors such as fair value adjustments. However, the company's long-term prospects are supported by its established market position and growth potential, said Shivani Nyati, Head of Wealth, Swastika Investmart. Nyati highlights key risks, including geographic concentration, potential manufacturing or quality control issues, and regulatory scrutiny.  

"Excluding adjusted put-call liabilities, the IPO is valued at a reasonable P/E of approximately 28x. Given the company's market leadership, growth prospects, and valuation, we recommend a cautious approach to the IPO, with investors carefully assessing the aforementioned risks before making an investment decision," said Nyati.