Supriya Lifescience lists 55% higher over issue price; buy, sell or hold?

Supriya Lifescience (SLL) has made a strong market debut, with its shares listing at Rs 425, a 55 per cent premium over its issue price of Rs 274 per share on the BSE. The stock has opened at Rs 421, a 54 per cent higher against its issue price on the National Stock Exchange (NSE).

At 10:01 am; the stock traded at Rs 396.80, 45 per cent higher to its issue price. It hit a low of Rs 388.25 on the BSE and a low of Rs 388 on the NSE in intra-day trade. A combined around 8.4 million equity shares changed hands on the counter on the NSE and BSE.

SLL is one of the key Indian manufacturers and suppliers of active pharmaceuticals ingredients (APIs) had garnered investors' interest on the back of strong financials and attractive valuations. The IPO had received a strong response, which was subscribed 71.51 times on back of robust subscription of individual investors. Retail investors bid 56 times the reserved portion, and non-institutional investors’ portion was subscribed 161 times, whereas qualified institutional investors bid for 31.83 times.

The company’s promoter Satish Waman Bagh divested shares worth Rs 500 crore through the IPO. The objectives for the fresh issue included funding capital expenditure requirements of Rs 92.3 crore, Rs 60 crore for repayment/pre-payment, in full or parts of borrowings and remaining amount will be used for general corporate purposes.

"In the last three-five years, the API and specialty chemical industry has been a darling for investors, and we believe that this trend will continue for several years. As a result of the decent participation from investors. In the long run, investors should hold the stock, while those who applied for listing gains can keep a stop-loss of Rs 380 on a closing basis. Investors can also look for buying opportunities on dips," said Santosh Meena, Head of Research, Swastika Investmart.

About the company

SLL, as of October 31, 2021, the company has niche product offerings of 38 APIs focused on diverse therapeutic segments such as antihistamine, analgesic, anaesthetic, vitamin, anti-asthmatic and anti-allergic

It has been the largest exporter of Chlorpheniramine Maleate and Ketamine Hydrochloride from India, contributing to 45-50 per cent and 60-65 per cent, respectively, of the API exports from India, between FY17 and FY21. SLL is among the largest exporters of Salbutamol Sulphate in India contributing to 31 per cent of the API exports from India in FY21 in volume terms. The company reported a net profit of Rs 65.96 crore on sales of Rs 224.80 crore in six month ended September 2021.

"We like SLL given its niche product portfolio in diverse therapeutic segments, backward integrated business model with advanced manufacturing and R&D capabilities, extensive global presence with strong clients’ relation and robust financials. It is well placed to tap opportunity in the pharma API market given its strong pipeline focused on further diversification," analysts at Motilal Oswal Financial Services had said in IPO note earlier.