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Gland Pharma's premium picks up momentum in the grey market

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India's biggest pharma IPO, Gland Pharma attracted a muted response from retail investors during the bidding process, but it got reversed after the festive occasion of Diwali. 

Gland Pharma's premium picks up momentum in the grey market
India's biggest pharma IPO, Gland Pharma attracted a muted response from retail investors during the bidding process, but it got reversed after the festive occasion of Diwali. The shares is now available at Rs 120 in the grey market as on November 17, compared to the IPO price of Rs 1,500, Moneycontrol reported.
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The premium currently has recovered from Rs 70, quoted as on November 13.
The injectable-focused company fixed its price band at Rs 1,490-1,500 per share. The issue will hit bourses on Friday (November 20).
According to Moneycontrol, the IPO had seen a premium of Rs 150 on November 2, which increased up to Rs 170 on November 4, but then gradually started falling up to Rs 25 on November 11.
Most analysts believe that the company's business and overall performance remains promising and healthy, however, higher-than-expected price band, tepid response from investors and Chinese parentage were the key reasons behind the volatility of the issue in the grey market.
Sudip Bandhopadhyay from IndiTrade said that the only reason the IPO sailed through was due to qualified institutional buyers (QIBs). Weak response from retail investors and HNIs was one of the reasons behind the falling grey market premium.
Unlike previous IPOs, Gland Pharma witnessed a lacklustre response and was oversubscribed by only 2.05 times.
"Gland Pharma could see some interest building up post-listing because the business and the fundamentals look good. It has never received a negative US FDA report and has about 7 manufacturing facilities in India which is positive. It's predominantly into B2B and have 60 percent business is based in the US. Overall, it's a good story," Bandhopadhyay explained.
Gland Pharma has a high ownership (74 percent) by Fosun Pharma, which is a concern given the border tensions between India and China. Valuation-wise, the company is again richly-valued as compared to large Indian pharma players, he added further.
According to Binod Modi of Reliance Securities, the grey market premium began to fall the day they released the issue price. The large exposure to other foreign companies is another overhang, however, the company has sound fundamentals. The price will be discounted post-listing which is an opportunity for the investors to grab it.
The company raised Rs 6,480 crore via public issue, the second largest IPO after SBI Cards and Payment Services (Rs 10,355 crore) in 2020.
Gland Pharma will utilise net proceeds from its fresh issue for funding incremental working capital requirements, funding capital expenditure requirements and general corporate purposes, while the promoter and selling shareholders received offer for sale money.
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