Eris Lifesciences makes quiet debut, ends below IPO price

The stock slipped to Rs 592, 2% below its IPO price of Rs 603, after listing at Rs 612 on the BSE

Eris Lifesciences slipped 2% to Rs 592, below its initial public offer (IPO) price of Rs 603, after a subdued listing on BSE. The stock listed at Rs 612, 1.5% higher against its issue price on BSE.

The stock ended at Rs 601, after hitting high of Rs 628 post its listing.

On the National Stock Exchange (NSE), the stock was trading at Rs 604, after opening at Rs 611 levels. It touched high of Rs 628 and a low of Rs 593 so far. A combined 3.59 million shares have changed hands on the counter on BSE and NSE.

The Rs 1,741-crore IPO of Eris Lifesciences was subscribed 3.3 times.  The 16-million share offering had received bids for 52.3 million shares, according to stock exchanges’ data. The price band for the IPO was Rs 600-603 per share.

The institutional and retail portion of the IPO was subscribed 4.7 times and 3.5 times, respectively. The high net worth individual (HNI) segment garnered only 45% subscription. The IPO entirely comprises of secondary share sale by the promoter group entities.

Eris Lifesciences is a developer, manufacturer and commercialiser of branded pharmaceutical products in select therapeutic areas within the chronic and acute categories of the IPM.

Analyst at Angel Broking believes 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.

The company enjoys tax break (which will continue post GST) till FY24 on its manufacturing facility at Assam, which accounts for 78% of sales. The remaining 22% of sales is outsourced to contract manufacturers. Hence, effective tax rate for company was very low at 8.3% in FY17 and 12.7% in FY16.

Analyst at Choice Broking in IPO update said 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.

“The IPO valuation is in line with the trailing PE of multinational pharma players and ahead of domestic focus players like Alkem Labs. We believe the company could be worth a relook post listing, if multiples march into the comfort zone,” IIFL Wealth Management had said in an IPO note.