Akums Drugs And Pharma IPO - Investment Rationale, Issue Details, Financials, Risks And More: IDBI Capital

IDBI Capital Report

Akums Drugs And Pharmaceuticals Ltd. will launch its initial public offering on July 30 and close on Aug. 1. The largest CDMO serving Indian market in terms of manufacturing capacity has set a price band of Rs 646-679 per share. The minimum lot size for bidding will be 22 shares.

The Rs 1,856.74 crores IPO comprises of fresh issue of equity shares worth Rs 680 crore and an offer for sale of 1.73 crore shares.

Object of the issue

• debt repayment and funding of incremental working capital requirements.

Competitive Strengths

• Largest contract development manufacturing organisation serving Indian pharmaceutical Industry.

• Diverse client base with longstanding CDMO relationships.

• Large and rapidly growing R&D capabilities across its product portfolio.

• Strategic presence across the pharmaceutical value chain.

Summary

Akums is one of the leading CDMOs in India and owns the intellectual property for the manufacturing processes of several of its formulations and the core business is focused on providing end to end product development and manufacturing solutions to its clients.

We adjust for the fair value changes since the put option liability of the Company for buy back stands extinguished as per Shareholders agreement with Quadria capital.

Adjusting for the fair value changes, the company is valued at 29.8 times FY24 (post equity) earnings which is at a discount to its listed peer Innova Captab which trades at 38 times FY24 earnings.

Also Akums possesses size and scale benefits compared to its competitors meriting a higher multiple. In light of the same we ascribe Subscribe rating to the issue.

Key Risks

• Protracted slowdown in outsourcing work by major clients.

• Any major quality issues faced in the products.

• Any crucial delays in the supply chain with regard to critical raw material or intermediate products.

• Higher than anticipated increase in key input prices.

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