Innova Captab makes quiet debut at 2% premium; strengthens post listing

Innova Captab made a quiet debut on Friday with its shares listing just 2 per cent higher at Rs 456 against the issue price of Rs 448 on the BSE. The stock of the pharmaceutical company listed 1 per cent higher at Rs 452 on the National Stock Exchange (NSE).

However, soon after the listing, Innova Captab gained steam and moved to Rs 502, up 12 per cent over its issue price on the BSE. It hit a low of Rs 452 in intra-day trade. A combined around 7.3 million equity shares had changed hands on the NSE and BSE.

The initial public offer of the integrated pharmaceutical company Innova Captab was subscribed 55.26 times. The category for Qualified Institutional Buyers (QIBs) received 116.73 times subscription. The category for Non-Institutional Investors (NII) was subscribed 64.95 times; while the quota of the Retail Individual Investors (RIIs) received 17.75 times subscription.

Innova Captab is an integrated pharmaceutical company with a presence across the pharmaceuticals value chain, including research and development, manufacturing, drug distribution, marketing, and exports.

The company services and products includes commercial large-scale manufacturing of generic products in multiple product forms such as oral solids, oral liquids, dry syrups, and injectable and more complex delivery forms such as sustained release and tablets in capsules. The company also has products using new technology such as Nano technology.

It is considered to be the third largest in terms of revenue generated and net profits margin generated in FY22 as per CRISIL among the contract development and Manufacturing (CDMO) players. It has 14 of the top 15 Indian pharma companies as its customers for its CDMO services. Its branded generics business is also growing at a strong pace in line with increased demand for branded generics products in India and overseas markets as well as its increased capacity for the same.

The company has acquired 100 per cent of the Sharon Bio – Medicine under the corporate insolvency resolution process (CIRP) under the Insolvency and Bankruptcy Code (IBC) in Q1FY24 for Rs 195.4 crore.

The acquired company is into API and intermediates and finished dosages manufacturing and CDMO services, largely exporting with 75.3 per cent of revenue coming from it for FY23. The acquisition has been made at 12.5x of Sharon’s EBITDA for FY23, which looks slightly expensive. But given the likely synergies, incremental revenue and profitability is likely, said analysts at KRChoksey Shares in an IPO note.

The CDMO segment growth of 14-16 per cent is expected to be driven by strong demand from outsourcing of development and manufacturing of new products by big pharmaceutical companies including both Indian and multinational and global companies. The increased expansion over the next 2 years envisaged an increase in demand and leveraging the customer relationships for domestic branded generics; international generics growth in Sharon Bio Medicine and taxation benefits from the new plant will boost earnings over the next few years, said analysts at Reliance Securities.