Closing Today: Should You Subscribe to Senores Pharma IPO?

Senores Pharmaceuticals Ltd (SPL) launched its initial public offering (IPO) on December 20, 2024, with bidding set to close on December 24. The IPO, carrying a grey market premium (GMP) of 59%, has received a solid response from investors.

However, one should get a clear understanding of both potential rewards and risks before subscribing. This IPO analysis provides a comprehensive review to help make an informed decision.

Senores Pharmaceuticals IPO Details

• Issue Details: Mainstream
• Issue Size: Rs 582.11 crore 
• Fresh Issue: Rs 500 crore
• OFS: Rs 82.11 crore
• Price Band: Rs 372 – Rs 391
• Lot size: 38 shares
• Listing Date: December 30, 2024

Senores Pharmaceuticals IPO Subscription Status

The IPO of Senores Pharmaceuticals has seen significant demand, achieving a total subscription rate of 20.01 times by 11 a.m. on December 24, the final day for bids. 

Retail investors have led the surge, oversubscribing their quota by 50.43 times. Non-institutional investors also showed strong interest, subscribing 38.59 times their allocated portion, while qualified institutional buyers (QIBs) were yet to make their mark, subscribing only 0.37 times their reserved portion.

Overview of Senores Pharmaceuticals Ltd

SPL is a global, research-focused pharmaceutical company involved in the development and manufacturing of a broad spectrum of pharmaceutical products. The company operates in various therapeutic categories and dosage forms.

The core of its business is concentrated in the regulated markets of the United States, Canada, and the United Kingdom. Additionally, SPL has a significant presence in Emerging Markets, spanning 43 countries. It also specializes in producing critical care injectables and Active Pharmaceutical Ingredients (APIs).

Senores Pharmaceuticals Key Strengths

• Exceptional Financial Growth: SPL has exhibited remarkable growth, with operational revenue and net profit seeing substantial compounded annual growth rates (CAGRs) of 289%, and 475%, respectively, from FY22 to FY24.
• Profitability Margins: SPL maintains robust profitability, evidenced by an EBITDA margin of 20.7% and a PAT margin of 15.25% as of FY24.

Senores Pharmaceuticals Risk Factors

• Cash Flow Issues: SPL has experienced negative cash flows from operating activities over the past three fiscal years. Continued negative cash flow could negatively impact the firm’s business and operations.
• Geographic Risks: A significant portion of SPL's operating revenue, 66% in FY24, comes from the United States. Any decrease in demand within this region could negatively influence its overall business and financial health.
• Brief Operating History: Incorporated in 2017, SPL recently expanded by acquiring two subsidiaries in 2023 and merging with another company in 2024. This limited consolidated operating history makes it challenging to assess its performance. Future success depends on the effective integration and management of these new entities.

Conclusion: Should You Subscribe to Senores Pharmaceuticals’ IPO?

From FY22 to FY24, SPL recorded an average Return on Equity (ROE) of 16.5% and a Return on Capital Employed (ROCE) of 8.9%. During this timeframe, the firm’s annual revenue and profit after tax surged by 289% and 475%, respectively.

At the upper end of the price band, the stock's P/E ratio stands at 55.1x, and its P/BV ratio is at 2.3x. 

Benefiting from increased global pharmaceutical spending and market presence in both regulated and unregulated markets for off-patent drugs, SPL presents a promising long-term investment opportunity in its upcoming IPO. The firm benefits from rising global pharmaceutical expenditure and market penetration, operating in both regulated and unregulated markets for off-patented drugs.

Given these factors, Investors may consider subscribing to the IPO with a long-term perspective.

For a deep dive into other IPOs, explore: IPO Corner on Liquide