Innova Captab IPO: A Comprehensive Analysis

Innova Captab Ltd (ICL) takes centre stage in the pharmaceutical landscape, primarily serving leading companies in India through its CDMO division. This detailed analysis unveils its market position, financial performance, strengths, risks, and considerations for potential investors.

Innova Captab IPO Timeline & Details: Everything You Need To Know

• Innova Captab IPO Price: The company has set a price band of Rs 426 to Rs 448 per share for its IPO.
• Innova Captab IPO Opening Date: Subscriptions for the IPO commenced on Thursday, December 21.
• Innova Captab IPO Size: The firm aims to raise Rs 570 crore through its initial public offer, comprising a fresh issue of Rs 320 crore and an offer for sale (OFS) of Rs 250 crore.
• How to Apply for Innova Captab IPO: Prospective investors can bid in lots, with each lot comprising 33 shares of the company. To participate in the IPO, the minimum investment is set at Rs 14,784.
• Allotment Timeline: As per the IPO schedule, the Innova Captab IPO share allotment is expected to be finalized on December 27.
• Innova Captab IPO Listing Date:* The public offer is anticipated to debut on BSE and NSE on December 29, 2023.
• Innova Captab IPO GMP: According to market observers, Innova Captab IPO is commanding a grey market premium of Rs 211 (a premium of 47% over the IPO price) as of today.

Innova Captab Subscription Status

The IPO of ICL was subscribed 1.41 times on the first day of bidding. The issue received bids of 1,27,60,473 shares against the offered 90,78,010 equity shares, according to the data available on the stock exchanges.

The Retail Portion saw maximum subscription at 2.13 times, the Non-Institutional Investors Portion 0.96 times, and the Qualified Institutional Buyer Portion 0.44 times. The issue will close on Tuesday, December 26, 2023.

A day prior to the opening of the issue, ICL had raised Rs 171 crore from anchor investors. Some of the notable Foreign and Domestic Institutions who participated in the anchor round were ICICI Prudential MF, Kotak Mahindra MF, SBI Life Insurance, Canara Robeco MF, Aditya Birla Sun Life Insurance, Edelweiss MF, and ITPL-Invesco MF, among others.

About Innova Captab Ltd

Founded on January 3, 2005, ICL operates as a comprehensive pharmaceutical enterprise, engaged in research, development, production, drug distribution, marketing, and international trade. With a threefold business structure, ICL's CDMO division serves other pharmaceutical companies in India, alongside segments dedicated to the domestic and international branded generics markets.

Strengths

• Market Leadership: ICL holds a prominent position in India's pharmaceutical sector, being the third-largest in finished tablet and capsule production capacity. As per a CRISIL Report, in FY22, it was among the top Indian formulation CDMO companies, ranking third in operating revenue and net profit margin, and second in both operating profit margin and return on capital employed.
• Robust Financial Growth: ICL demonstrated remarkable growth from FY21 to FY23, achieving a Compound Annual Growth Rate (CAGR) of 50% in Revenue, 48% in EBITDA, and 40% in Net Profit.
• Superior Returns: In FY23, ICL recorded an outstanding Return on Capital Employed of 22.61% and a Return on Net Worth of 24.58%, exceeding the performance of its competitors.
• Prestigious Clientele: ICL’s CDMO business boasts an esteemed clientele, including notable names such as Cipla, Glenmark, Lupin, Mankind Pharma, and Wockhardt.

Risk Factors

• Dependence on Key Clients: For FY23, ICL's top 10 clients constituted 56% of its CDMO business revenue. A loss or reduced business from any of these major customers could substantially impact the company's financial health.
• Subpar Operating Margins: ICL's operating margins, averaging between 12-14%, align with those of its close competitor, Windlas Biotech. However, this margin is lower than the average of ~20% seen across its broader peer group.
• Requirement for Extensive Working Capital: Operating in the pharmaceutical sector, ICL needs significant working capital for continued growth. This is due to the extended time between acquiring raw materials and selling the finished products. As of October 2023, the firm had an outstanding working capital facility amount of Rs 158.55 crore. Failing to maintain adequate working capital could adversely affect operational performance.
• Risks Associated with Subsidiary: ICL’s subsidiary, Sharon, faces operational challenges, including suspension from trading on Stock Exchanges. Additionally, Sharon has not yet received approval for the delisting of its shares from the Stock Exchanges, which is a part of its corporate insolvency resolution plan.

Final Verdict: Subscribe for Listing gains

ICL primarily serves leading pharmaceutical companies in India through its CDMO division. The firm has demonstrated an impressive performance over the last three years, with significant growth in revenue and profits, and robust return ratios.

Regarding its valuation, the stock appears to be fully priced, with a PE multiple of 36.4x based on the forecasted earnings for FY24. Nonetheless, the grey market premium indicates a potential for a strong debut on the stock market.

While the recent acquisition of Sharon Bio Pharma and the expansion of operations in Jammu open doors to new markets and promise increased volume growth, concerns about limited pricing power and a demanding valuation are noteworthy.

Considering these factors, investors are advised to subscribe to the IPO for potential listing gains. Long-term investors, however, should closely observe the company's performance in the upcoming quarters to evaluate its long-term viability and growth prospects before committing to further investments.

Unlock a world of financial opportunities with Liquide, the ultimate app for the modern investor. Featuring advanced tools like LiMo, India's pioneering AI co-pilot for stock investing, Liquide empowers you with insights that can guide your financial journey. Stay updated with thorough market analysis, expert recommendations, and real-time information. Download the Liquide app today from the Google Play Store or Apple Appstoree and embark on a journey of informed and successful investing. Take advantage of the powerful features that can shape your financial future.