Eris LifeSciences IPO: Brokerage Views & Runup to IPO

Eris LifeSciences IPO Review
This post on Eris LifeSciences Limited IPO tries to bring out consolidated brokerage views opinions, IPO Review / Analysis, Note/ reports and recommendation of brokerages , Analyst, Business New papers, Management views, information on Anchor investors, Subscription etc on Eris LifeSciences IPO and shall be updated continuously till the closure of the issue. The information collated from various sources and reports in public domain can help investors to decide whether they should subscribe to Eris LifeSciences Limited IPO or not.

Related Posts: Eris LifeSciences IPO Review
Eris LifeSciences IPO: Grey Market Premium etc.

20/06/17 Grey Market Premium : NIL
19/6/17 Grey Market Premium Rs. 20
17/6/17 Grey Market Premium Rs. 30-40
15/6/17 Grey Market Premium Rs. 70 ,  Kostak (Application rate) 

Eris LifeSciences IPO: Subscription Figures 

Subscription: Eris LifeSciences IPO  ( x times)
  QIB NII Retail Total
Day 3  4.68  0.45  3.51  3.29
Day 2   0.82  0.03    1.68 0.75
Day 1  0.07 0.02 0.41   0.12
Complete Anchor List

Eris LifeScienceshas raised Rs 779.43 crore by allotting shares to 21 anchor investors. The anchor investors include Abu Dhabi Investment Authority – Behave, Goldman Sachs India, Morgan Stanley India Investment Fund Inc, SBI Magnum Balanced Fund, SBI Life Insurance, Motilal Oswal Most Focused, Kotak Mahindra Mutual Fund, FIL Investments (Mauritius) Ltd, Merrill Lynch Markets Singapore Pte Ltd and IDFC Premier Equity Fund etc. Click here for Complete Anchor List

Consolidated opinion of Brokerages, Analysts, Business New Paper Reports, Management Views on Eris LifeSciences IPO .

Prabhudas Liladher: “There is an increased uncertainty on the domestic focused companies arising from the new government imitative of prescription of generics by the doctors instead of the existing sale of branded drugs. This brings the company into a new unchartered territory which questions the very profitability of the company going forward as the company is totally domestic centred. With the uncertain environment and with lack of clarity ahead, we feel the valuations are expensive, we recommend Avoid”  

BP Wealth: “Eris Lifesciences has shown a Revenue CAGR of 21% approx. from FY13 to FY17 which is much better than the industry standards. The company has shown a phenomenal growth in terms of EBITDA and PAT with 35% and 43% CAGR respectively on account of lower input costs and operational leverage. The company has been delivering superior return ratios of 49% ROCE and 45% ROE which is very unlikely being in the pharma sector. On the global front, since Eris Lifesciences has no revenue from exports it is safe from any USFDA issues. At the upper band price of Rs. 603 per share, the PE multiple as per the FY17 earnings is 34x and an EV/EBITDA multiple of 28x. Taking into consideration the above factors, we give a SUBSCRIBE rating for Eris Lifesciences with a long term perspective. “

Choice Broking: “
We are of the opinion that all the positives are already factored in
and at the issue price of Rs.603, it is available at an expensive valuation. If any investor wishes to invest in the pharma sector, there are many fundamentally strong companies available at lower valuation.”

Motilal Oswal: “Eris is the fastest growing company total revenue CAGR of 17% in FY13-17 and CAGR of 29% in Chronic category over the same period. Another positive about the company is that its EBITDA margins have expanded to 37% in FY17 from 22% in FY13 led by focus on niche segments within the chronic category. At upper price band of INR603, the issue is available at 34x FY17 EPS which is at par with other listed players. We remain positive on the company and we believe it deserves premium valuation as 1) it is high growth story led by significant focus on lifestyle related disorders, 2) significantly higher margins, 3) debt free status and 4) superior return profile of 45%+ both ROEs and ROCEs. Hence we recommend to SUBSCRIBE for long term investment.”

Emkay: “Overall, Eris represents a pure play on domestic branded formulations, but beyond listing gains, expansion in valuation multiples would depend significantly on Eris’s ability to sustain high teen’s growth by identifying new segments and therapies. This means that while current underlying business can sustain 8-10% revenue growth, the 12-14% in earnings CAGR growth may not sustain for long as costs catch up. A higher growth trajectory on the other hand means the company has to establish its dominance in new  areas and could be a delicate balancing act with the above-normal margins. “

SPA Secuirities: “Eris Lifesciences focuses on branded formulations with major focus on specialty and super specialty therapeutic areas. The strong MR coverage (with 1507 MRs as of FY17) and increasing demand of products and services in specialty segments in tier 1 cities and Metros have resulted in Revenue/PAT CAGR of ~17%/43% respectively between FY13-17. Eris is a debt free company with an asset turnover ratio of 1.94 and has strong return ratios with ROACE/ROANW of 43.3%/57.7%. Company had consistent positive free cash flows over the past five years. At the issue price, the company is valued at a FY17P/E of 34.3. With present capacity utilization at ~30% and specialty segments growing at a consistent rate, company expects to maintain sustainable growth rate of 18-20% in coming years. We recommend to SUBSCRIBE to the issue from a long term perspective.”

IDBI Capital: “Despite a higher valuation, the company provides good investment opportunity for the long term as it has the potential to deliver higher growth than the industry.”

Angel Broking: “On FY2017 EPS of INR 17.6, the issue is priced at P/E of 34.25x, which is at par with its MNC peers but higher than domestic peer, Alkem Labs. Considering that Eris’ faster growth, superior returns, debt free status, and specialty play, we believe that this is a fair valuation. We believe that Eris is likely to continue growing faster than its competitors owing to its marketing capability, higher operating leverage and growing market share of its mother brands. While most pharma companies are currently facing issues on several fronts, this business model looks attractive with no USFDA concerns and pricing pressure. Considering the company’s superior growth, better margin profile and high return ratios, we rate this IPO as SUBSCRIBE.”

IndiaInfoline: “Consolidated net sales were up 21% to Rs 724.98 crore and the operating profit margins increased from 28.7% to 37.1%, resulting in a 57% improvement to Rs xxxx crore in operating profit in FY 2017. Despite being debt-free, the interest outgo was around Rs 24 lakh. With 467% surge in other income to Rs 19.12 crore and 17% rise in depreciation to Rs 23.74 crore, consolidated profit before tax (PBT) was up 71% to Rs 23.74 crore. After providing total tax of Rs 21.87 crore, consolidated profit after tax jumped 81% to Rs 242.08 crore. Notably, the OPM of 37.1% is abnormally high and seems unsustainable.The equity share capital stands at Rs 13.75 crore. The face value per share is Re 1 each. EPS for FY 2017 works out to Rs 17.6. At a higher price band of Rs 603, the scrip is offered at P/E multiple of around 34.3 times FY 2017 earnings, in line with P/E multiples of listed associates of MNC majors, whose business models in India are similar.’

“Priced at 34x FY17 EPS of | 17.6; expensive but compelling. At the upper band of | 603, the stock is available at 34.3x FY17 EPS of | 17.6. We have assigned SUBSCRIBE recommendation to the issue based on management dynamism, robust financial performance, healthy  return ratios, leverage free balance sheet and strong free cash flows. A superior business and financial matrix justify the premium valuation.”

Rudra Shares & Stock Brokers: “Though the company financials are healthy, but major revenue of the company comes from its top 10 brands accounting to 74% in India. Considering the cut throat competition in the pharma sector we are NEUTRAL for this IPO.”

Jainam Wealth: “Recommends investors to “SUBSCRIBE” to the Eris Lifesciences Ltd IPO considering that the company is focusing on high margin therapeutic areas of cardiovascular, anti-diabetics, vitamins, gastroenterology & anti-infectives, prime focus is on metro cities and class 1 towns in India, Strong sales, marketing & distribution capabilities having team of 1,501 marketing representatives, acquired trademarks in relation to 40 brands from Amay Pharma as a strategic acquisitions and robust financial such as zero debt status, ROE (%) is 45% & ROCE (%) is 49% in FY17. Company available at P/E of 34x on FY17 EPS on upper price band.

SMC : “The company is an Ahmadabad based pharmaceutical company with its own manufacturing facility in Guwahati, Assam for its 20 products. It develops, manufactures and commercialises branded pharmaceutical products in select therapeutic areas within the chronic .The fundamentals of the company look sound but with the comparison to its peers it is looking pricy and long term investors may subscribe the issue”

SP Tulsiyan website: “Very strong fundamentals, expected healthy growth, cash rich status, no US FDA overhangs make this issue an ‘apply’, despite uneconomical pricing. “

Hem Securities:At price band of Rs 600-603 ,co is bringing the issue at p/e multi-ple of around 34.05-34.22 on FY17 Eps of Rs 17.62/share. Co’s strong financial with zero debt status makes it a strong candi-date for investment. Hence we recommend “Subscribe” on issue.”

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