( This page tries to bring out consolidated opinion, IPO Analysis , IPO Note/ reports and recommendation of brokerages , Analysts, Business New papers, Management views, information on Anchor investors etc on Laurus Labs Limited IPO and shall be updated continuously till the closure of IPO. The information collated from various sources and reports in public domain can help investors to decide whether they should subscribe to Laurus Labs Limited IPO)
Laurus Lab IPO Allotment is expected on 13-14 Dec 2016 IPO Allotment Status Link
|Subscription: Laurus Labs Limited IPO ( x times)|
Anchor Investors: Anchor Investors (AIs) portion in the Public Issue of Laurus Labs Limited, 9,238,385 equity shares have been subscribed today by 25 Anchor Investors at Rs. 428/- per equity share.
The anchor investors include Goldman Sachs India, Wells Fargo Emerging, HBM Partners, Nomura, Eastspring and Harvard AM. Domestic institutional investors that participated in the anchor allocation include Sundaram Mutual Fund, Birla Sunlife MF, Tata Mutual Fund, DSP Blackrock, ICICI Prudential AMC, Kotak Mutual Fund, SBI MF, HDFC Life etc.
Complete Anchor List : http://bit.ly/2gc9SGb
Views of Brokerages, Analysts, Business New Papers, Management views
Centrum Wealth: ” has a subscribe recommendation even as the IPO is expensive when compared to listed API players. At the higher end of the price band of Rs 428, the IPO is valued at 14.6x EV/EBITDA and 34.1x P/E on FY16 basis. It says such valuation may be sustained owing to continuation in growth momentum, reduction in debt and successful integration into formulation space. Hence long-term investors comfortable with such valuation, may look at the issue”
SPA Research: “Recommends to subscribe the issue for long term gains. It says that Lauras Labs’ unique position as a preferred supplier of APIs to several players helps in hedging against revenue volatility. “Steady growth in focused areas and patent approvals can easily maintain revenue growth at 25 percent CAGR for next 2-3 years. Laurus Labs is available at FY18 price to earnings of 24 times which is in discount to high growth pharma stocks. Company’s price earnings growth matrix looks slightly on the higher side at 1.2x. Company is trading at FY17 annualized EV/EBITDA of 13x which seems attractive.”
Ajcon Global: “At the upper end of the price band of Rs. 428, the IPO is valued at 30x at H1FY17 annualised Post issue EPS which is at a premium to its peers. We, however believe the premium is justified due to the following factors like a) leadership in APIs in select, high growth therapeutic areas; b) strong R&D capabilities and process chemistry skills; c) industry leading, modern and regulatory compliant manufacturing capacities; d) long-standing relationships with marquee clients; e) consistent & robust growth across topline and bottomline; f) good OPM in API segment at above 20 percent as compared to peers and decent ROE of 15.6 percent for an API player, g) private equity backed Company which increases our confidence on R&D capabilities and process chemistry skills, we recommend high risk investors to “SUBSCRIBE” the issue. However, client concentration risk and high receivables days may cap listing gains.”
Angel Broking: “On FY2016’s PAT of `133.3cr, the issue, at its upper band, is priced at P/E of 32x which looks expensive. Accounting for FY2017E PAT, the valuation still looks high at P/E of 28x. We believe that this kind of valuation is commanded by domestic pharma companies who have branded formulations business, healthy product pipeline and strong return ratios. Considering Laurus’ 1) high client concentration, 2) low pricing power 3) asset heavy model and 4) high valuation, we rate this IPO as Neutral.”
Hem Securities: “Avoid. It says at price band of Rs 426-428 , PE multiple will turn out to be 30 on post issue annualized H1FY17 earnings per share (EPS) of Rs 14/share of company. Looking at the present valuations of company, issue looks fully priced,”
Capital Market Magazine: Score 40/100 “On a higher price band of Rs 428, the diluted equity share capital of the company stands at Rs 105.71 crore of face value of Rs 10 each. EPS for FY 2016 works out to Rs 12.6. At higher price band the scrip is offered at P/E multiple of around 34. Much larger companies like Divi’s Lab and Aurobindo Pharma are trading at P/E of 20-25 times their FY 2016 EPS.”
BP Wealth: “The IPO is at a price band of Rs426-428. At the upper end of the band, the stock trades at a market cap of Rs 45bn and at 34x FY16 PER. We feel the pricing is AGGRESSIVE, considering company’s current financials. High product risk (90% revenue from APIs) and high client concentration (top 10 client contributes 78% of sales ) does not give us valuation comfort. We also do not expect any immediate listing gains. Thus, we recommend investors to ‘AVOID’ this issue.”
Business Standard: “Laurus Labs: Costly prescription ; While the firm is getting into higher-margin formulations, the price asked for growth is on the higher side.While its cost leadership as well as client roster is enviable, the company is asking for a steep premium from prospective investors. At the issue price of Rs 426-428, the stock would trade at 32x FY16 earnings and 28x FY17 estimated earnings, according to analysts. While some of the larger pharma names command these valuations, their pipeline, margin profile and diversified base justifies the same. Although Laurus is getting into the formulations space, which is more profitable, benefits from the same will start only in FY18 or FY19. Though valuations seem on the higher side for now, the company does have a good product portfolio and might also see improvement in return ratios as investments start accruing benefits over time. This IPO is for patient investors willing to take a bet on the company’s strategy to move up the value chain.”
ICICI Securities : ” At the upper end of the price band, the issue is fairly priced considering the growth prospects, possible headwinds and pricing power for the short to medium term.”
HDFC Securities: “Expertise in chemistry skills, cost advantage in many of the key APIs (ARV and hepatitis-C) and its foray into the formulations business with niche filings are the key positives for the IPO. Adjusted for unutilised assets in the formulation business, the RoCE and return on invested capital (RoIC) at 16.2 per cent and 26.5 %. Adjusted for the seasonality, at 25 times H1FY17, the IPO valuations are still at a 20-25 per cent premium to other API peers. ”
SPTulsiyan: “Single digit margins, client and product concentration risk, rich valuations, dull secondary market conditions may lead to muted demand to the issue. Thus, the IPO is an avoid, despite growth and experienced management / marque investors. ”
SMC: “Considering the P/E valuation on the upper end of the price band of Rs. 428, the stock is priced at pre issue P/E of 31.82x on its FY16 EPS of Rs. 13.45. Post issue, the stock is priced at a P/E of 35.11x on its EPS of Rs. 12.19. Looking at the P/B ratio at Rs. 428 the stock is priced at P/B ratio of 4.96x on the pre issue book value of Rs.86.37 and on the post issue BV of Rs. 105.84 t h e P/B comes to be 4.04x. On the lower end of the price band of Rs.426 the stock is priced at pre issue P/E of 31.67x on its FY16 EPS of Rs. 13.45.Post issue, the stock is priced at a P/E of 34.95x on its EPS of Rs. 12.19. Looking at the P/B ratio at Rs. 426, the stock is priced at P/B ratio of 4.93x on the pre issue book value of Rs. 86.37 and on the post issue book value of Rs. 105.84 , the P/B comes out to 4.02x. “
Standard disclaimer: I am not a SEBI registered analyst. I may have vested interest in every stock I discuss. Please do your own due diligence as stock market investments have high degree of inherent risk.