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Sai Parenteral's IPO Day 2: The initial public offering (IPO) of Sai Parenteral's, a diversified pharmaceutical formulations company, which opened for subscription on March 24 will close tomorrow, March 26. By the end of the day, the issue was subscribed just 0.05 times.

The issue has fixed a price band in the range of ₹372-392 for the issue. The allotment status for the Sai Parenteral's IPO is slated to be finalised on March 30, with the tentative listing date set for April 2.

Investor sentiment toward the IPO is muted, as Sai Parenteral's grey market premium (GMP) is ₹0 on March 25. This suggested that the stock was likely to debut at ₹392, same as the IPO price.

'Grey market premium' indicates investors' readiness to pay more than the issue price.

The IPO has received weak subscription till now. By 11:10 am on Day 2, the issue was subscribed just 0.06 times, with 4.77 lakh shares bid for against 75.22 lakh shares on offer, according to exchange data.

The retail portion was subscribed 0.04 times, while the non-institutional investor (NII) portion was subscribed 0.18 times. The qualified institutional buyer (QIB) portion was bid 0.02 times.

By the end of Day 1, the issue was booked 0.05 times.

According to Swastika Investmart, at a pre-IPO P/E of 72.19x and RoCE of only 9.28%, the valuation appears stretched. Peers like Innova Captab trade at 32.45x and Gland Pharma at 44.71x, with significantly higher scale and earnings.

“The business fundamentals and growth trajectory are solid, but the P/E of 72x is expensive for a company of this size and RoCE. The company entered export markets in FY2023 and currently supplies to Australia, New Zealand, Southeast Asia, the Middle East and Africa, with WHO-GMP and TGA-accredited facilities, which supports a long-term growth thesis,” said the brokerage firm.

According to Swastika Investmart, investors seeking short-term or listing gains should avoid the IPO.

“Risk-reward is unfavorable. Better opportunities exist in the pharma sector at more reasonable valuations,” it said.

Meanwhile, SBI Securities recommended investors subscribe to the Sai Parenteral’s IPO at the cut-off price for a long-term investment horizon.

"At the upper price band of ₹392, Sai Parenteral’s IPO is valued at FY25 (proforma) P/E and EV/EBITDA multiples of 88.2x/46.3x respectively based on post-issue capital, which appears to be at a premium to its peers. However, we believe Noumed’s 451 dossiers offer a huge growth opportunity for Sai Parenteral’s Ltd,” it added.

The ₹409 crore IPO is a combination of a fresh issue of 0.73 crore shares aggregating to ₹285 crore and an offer for sale (OFS) of 0.32 crore shares aggregating to ₹123.79 crore. Ahead of the issue opening, the company raised ₹122.6 crore from anchor investors.

The company plans to utilise the proceeds from the fresh issue, with ₹111 crore earmarked for capacity expansion and upgradation of manufacturing facilities, ₹18 crore for the establishment of a new R&D centre, and ₹14.30 crore for debt repayment. The remaining portion will be used for general corporate purposes.

Investors can apply for the Sai Parenteral's IPO in lots of 38 shares. A retail investor would need to invest ₹14,896 to apply for one lot, based on the upper price band.

The offer is being made through the book-building process, wherein not more than 50% of the net offer is allocated to qualified institutional buyers (QIBs), while not more than 15% and 35% of the net offer are reserved for non-institutional investors (NIIs) and retail individual investors, respectively.

Arihant Capital Markets Ltd. is the book running lead manager and Bigshare Services Pvt. Ltd. is the registrar of the issue.

The company is a diversified pharmaceutical formulations player with capabilities in research, development, and manufacturing. It operates in the branded generic formulations segment and also provides contract development and manufacturing organisation (CDMO) products and services for domestic and international markets.

Its portfolio includes formulation products across various therapeutic areas such as cardiovascular, neuropsychiatry, anti-diabetic, respiratory health, antibiotics, gastroenterology, vitamins, minerals and supplements (VMS), analgesics, and dermatology. It offers a wide range of dosage forms, including injectables, tablets, capsules, liquid orals, and ointments.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.Pranati Deva is a seasoned financial journalist with over a decade of experience in high-pressure newsroom environments, currently working as a Senior Sub Editor at LiveMint. Over the years, she has developed a reputation for sharp editorial judgement, a strong grasp of market dynamics, and the ability to translate complex financial developments into clear, engaging stories for a wide audience.

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