IPO listed on 6 Aug'24
Akums Drugs and Pharmaceuticals Ltd
Minimum Investment
₹ 14,938 / 22 shares
Grey market premium
₹ 211 (31% premium)
Issue price
₹ 679
Listing price
₹ 725
Listing day %
17%
Listing on
Aug 6, 2024
Our Verdict:
Subscribe
- Akums Drugs and Pharmaceuticals Ltd (ADPL) has previously faced financial losses affecting its operational and financial metrics, primarily due to accounting adjustments related to put option liabilities. These liabilities were linked to a buy-back obligation for exit rights granted to Ruby QC Investment. With the buyback agreement annulled in May 2024, the put-option liability is no longer applicable.
- Excluding these adjustments, FY24 net profit stands at approximately Rs 358 crore. With this, the EPS for FY24 works out to approximately Rs 24, resulting in a P/E ratio of 28. Moreover, IPO proceeds are earmarked to pay off nearly Rs 387 crore of debt, which will significantly lighten the balance sheet.
- ADPL is also venturing into therapeutic segments like neurology, psychiatry, and orphan diseases, broadening its market reach and diversifying its portfolio. Given these aspects, investors may consider subscribing to the issue from a long-term perspective.
About the company
Founded in
19 Apr'04
Managing director
Sanjeev Jain
- ADPL primarily functions as a pharmaceutical contract development and manufacturing organization (CDMO). Additionally, it is involved in the business of branded and generic formulations and ventured into the Active Pharmaceutical Ingredients (API) sector in FY20-21.
- ADPL operates 4 research and development (R&D) facilities and 10 manufacturing plants, boasting an annual formulations production capacity of 49.2 billion units as of FY24. The firm maintains partnerships with approximately 1,524 Indian and multinational pharmaceutical and wellness companies through its CDMO business.
STRENGTHS
- Strong Market Position: ADPL holds a prominent global standing in the CDMO and other pharmaceutical sectors, with a particular emphasis on the Indian market. Its domestic market share has increased from 26.7% in FY21 to 30.2% in FY24.
- Financial Growth: ADPL has demonstrated consistent financial growth, with a Compound Annual Growth Rate (CAGR) of 7% in operational revenue and 10% in Adjusted EBITDA (excluding put-option liability) from FY22 to FY24.
- Reliable Client Relationships in CDMO: Over the last five years, ADPL has retained 38 of its top 50 clients by revenue as of March 31, 2024. It has maintained long-standing relationships, with 26 of its largest 50 clients having partnered with it for more than ten years, highlighting the firm’s consistency, reliability, expertise, and cost-effectiveness.
- Marquee Clientele: ADPL’s impressive roster of long-term clients includes leading names like Alkem Laboratories, Cipla, Dabur India, Dr. Reddy’s, Mankind Pharma, MedPlus Health, IPCA Laboratories, and Sun Pharmaceutical in India. Internationally, key clients include Allegens, Olainfarm, Caferma, and Pharma Apex.
RISK FACTORS
- Volatile Earnings: The losses ADPL suffered in previous years have significantly affected its financial and operational indicators. As a result, its EBITDA margin, PAT margin, Return on Equity, and Return on Capital Employed have shown considerable variability over the last three years. However, as discussed earlier, these issues were primarily due to put-option liabilities associated with a buy-back obligation, which no longer exists.
- Cash Flow Concerns: ADPL has encountered negative cash flows from investing and financing activities during FY24. Persistent negative cash flows, or substantial short-term deficits, could jeopardize its operational capabilities and growth strategies.
- Geographical Concentration Risks: ADPL's manufacturing facilities and R&D centres are predominantly located in Haridwar, Uttarakhand. This concentration heightens its vulnerability to disruptions—whether social, political, civil, or economic—within Haridwar or the wider region of Uttarakhand.
- Legal Risks: ADPL, along with certain promoters, subsidiaries, and directors, is involved in ongoing legal proceedings, including criminal cases. An adverse outcome in any of these proceedings could negatively impact the company’s business operations and reputation.
Financials
Issue details
Issue type
Mainstream
Issue size
₹ 1,856.74 crore
Fresh Issue
₹ 680 crore
OFS
₹ 1,176.74 crore
Price range
₹ 646 - 679
Lot size
22 shares
Issue Objective
ADPL plans to utilise the net proceeds from the fresh issue for the following purposes:
- Repayment/ prepayment of certain borrowings;
- Funding its incremental working capital requirements;
- Pursuing inorganic growth initiatives through acquisitions; and
- General corporate purposes.
Dates
Bidding open
30 Jul'24
Bidding close
1 Aug'24
Allotment date
2 Aug'24
Refund date
5 Aug'24
Listing
6 Aug'24
IPO Reservations
Qualified institutional buyers
>75%
Non-institutional investors
<15%
Retail individual investors
<10%
Read the Offer Document
© 2024 by Liquide Solutions Private Limited, SEBI Registered Research Analyst (Registration number - INH000009816)
This document has been issued by Liquide Solutions Private Limited for information purposes only. It does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this document. Investors should seek personal and independent advice regarding the appropriateness of investing in any of the funds, securities, other investment or investment strategies that may have been discussed or referred herein and should understand that the views regarding future prospects may or may not be realized. In no event shall Liquide Life Private Limited and / or its affiliates or any of their directors, trustees, officers and employees be liable for any direct, indirect, special, incidental or consequential damages arising out of the use of information / opinion herein.