Hyderabad-based pharma company Laurus Labs launched its initial public offer (IPO) on Tuesday to raise Rs 1,330 crore from the primary markets. The company has fixed a price band of Rs 426-428 for the 3.11 crore shares on offer. This IPO, which will close on December 8, 2016, can be subscribed in lot sizes of 35. The company has already raised Rs 395 crore from anchor investors.
Here are 5 things to know:
1) Laurus Labs' Rs 1,330 crore IPO consists fresh issue of Rs 300 crore while remaining shares are offered by its existing investors like Aptuit (Asia), Bluewater Investment, Fidelity India Principals. Post the IPO, promoter's holding in the company will drop to 31 per cent from 58 per cent. The company plans to repay its existing term loans using the fresh issue of Rs 300 crore.
2) Laurus Labs is an active pharmaceutical ingredient (API) manufacturer in the therapeutic areas of anti-retrovirals (anti-AIDS) and Hepatitis C. The company also manufacturers APIs for oncology and other therapeutic areas. Its client base includes companies like Cipla, Natco, Mylan etc. APIs contribute 92 per cent of its revenue while the remaining 8 per cent comes from synthesis and ingredient business. Currently, 80 per cent of its revenue comes from exports. Laurus Labs also plans to make a foray into the US market in FY2019.
3) Laurus Labs had reported a net profit of Rs 77 crore on revenues of Rs 930 crore in the first half of the current fiscal. The company's profitability has been rising over the last three years, with operating margin (EBITDA margin) rising to 21.2 per cent in FY2016 from 18 per cent in FY2014.
4) At the upper price band of Rs 428, Laurus Labs' shares are valued at 32 times its FY16 earnings per share of Rs 13.4, which looks expensive, says Angel Broking. "Considering Laurus' high client concentration, low pricing power, asset heavy model and high valuation, we rate this IPO as neutral," the brokerage wrote in a note. Meanwhile, ICICI Securities says Laurus's valuation looks fair looking at its "growth prospects."
5) Laurus Labs' top 10 and top 3 clients contribute 80 per cent and 40 per cent of its revenues respectively, which is a risk, says Angel Broking. High product concentration, asset-heavy business model and currency risk are other key concerns in the business of Laurus Labs, say analysts.