Why retail, HNI investors may be regretting giving Gland Pharma IPO a miss

Topics Gland Pharma | HNIs

The Rs 6,480-crore IPO of Gland Pharma was one of the biggest by a pharma company in the domestic market
Retail and high-networth individuals (HNIs) would be ruing giving China’s Fosun-promoted Gland Pharma’s initial public offering (IPO) a miss. The shares of the Hyderabad-based firm have gained 40 per cent over its IPO price of Rs 1,500.

On Monday, the stock rose 15 per cent to end at Rs 2,095. At one point, the stock was locked in 20 per cent upper circuit, with only buyers and no sellers in the counter. Some selling, however, emerged later. The stock got listed on Friday and ended the session at Rs 1,820, a gain of 21 per cent over its issue price.

The latest gains were underpinned by positive analyst commentary.

In a note to investors, broking firm Ambit said Gland Pharma lacks branding strength and innovator relationships compared to generic majors. But its execution track record and growth visibility overcomes these deficiencies. The note further said that the company had not received any warning letters from the US Food and Drug Administration (US FDA). In contrast, all generic majors have been red-flagged in their injectable units.

Ambit has a price target of Rs 2,109 for the stock.

The Rs 6,480-crore IPO of Gland Pharma was one of the biggest by a pharma company in the domestic market. The issue managed to sail through on the back of institutional investor support, even as retail and HNI investors shunned the issue. Analysts had recommended Gland Pharma citing its attractive valuations, healthy growth rates and margins. But the IPO struggled to get through due to concerns, especially among HNI investors about the grey market premium. Ahead of its listing, the grey market premium soared.

“Gland Pharma is a niche player, focused on injectables. It has a proven track record of growth and profitability along with a consistent regulatory compliance history. The prospects are bright as it has 267 Abbreviated New Drug Application (ANDA) filings, of which 215 are approved. The pharma sector is in focus and, given its strong fundamentals and promising future, there is a lot of investment interest,” said Hemang Jani, head, equity strategy, broking & distribution, Motilal Oswal Financial Services.

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