Laurus Labs, a Hyderabad-based pharma company, is approaching the primary market with its Rs 1,332-crore initial public offering (IPO). The public issue comprises offer for sale of up to 24.1 million equity shares and fresh issue of 7 million equity shares at a price band of Rs 426-428 per share of Rs 10 each.
The issue opens on December 6 (Tuesday) and closes on December 8 2016 (Thursday).
Laurus Labs raised Rs 395 crore by issuing 92.38 lakh equity shares to anchor at the upper end of the price band (Rs 428).
The anchor investors include SBI Mutual Fund, DSP BlackRock, ICICI Prudential Mutual Fund, Nomura Trust and Banking and Goldman Sachs India.
"The IPO Committee of the Board of Directors of the company at its meeting held on December 5, 2016 in consultation of the book running lead managers, have finalised allocation of 9,238,385 equity shares in aggregate to anchor investors at Rs 428 per equity share including share premium of Rs 418 per equity share," Laurus Labs said in a statement.
Here is the profile of the company and highlights of the IPO (according to IDBI Capital Markets & Securities):
Laurus Labs manufactures active pharmaceutical ingredients (APIs), nutraceutical and several other products.
The company has launched 59 products since its inception in 2005. The Company's key customers include Aspen Pharmacare Ltd, Aurobindo Pharma Ltd, Cipla Ltd, Mylan Laboratories Ltd, Natco Pharma Ltd and Strides Shasun Ltd.
Besides the API business, the Company also has a fast growing contract research and manufacturing (CRAM) business supporting several global pharmaceutical companies.
It has strong financials with consistent & robust growth across topline and bottomline, along with 20 percent+ OPM in API segments and ROEs of ~15.6 percent.
As of September 30, 2016, the company owned 34 patents and had 152 pending patent applications, in several countries.
The company's sales and net profit for the first six months of the current fiscal (H1, FY2017) stood at Rs 929.60 crore and Rs 76.6 crore, respectively. For the financial year 2015-16, the sales and net profit figures were Rs 1,783.8 crore and Rs 133 crore, respectively.
The issue will provide exit to its PE investors [offer for sale (OFS) for up to 24,107,440 shares by Private Equity shareholders – Aptuit, Bluewater, FIL Capital Management, FIP (acting through its trustee FIL Capital Advisors)].
The net proceeds are planned to be utilised for pre-payment of debt and general corporate purposes.
At the price-band of Rs 426-428, the company's implied PER is 26.8x on FY16 EPS of Rs16. Post the recent correction in the overall sector, its PER is higher than even Lupin (22x), Divi (24.6x). While the near term gains may be capped, we believe that Laurus provides a good investment opportunity in the long-term given its potential to outperform the sector growth.
The risks for the company are broadly two.
a. In addition to Indian regulations, it is required to comply with regulations and quality standards stipulated by such international regulators. Its manufacturing facilities and products are subject to audit by regulatory agencies and if it is not in compliance with any of their requirements, its facilities and products may be the subject of a warning letter or sanctions, which could result in the withholding of product approval and the shut-down of its facilities.
b. The company's sales skewed towards key therapeutic segments and few customers.
