The IPO of ChrysCapital-backed Eris Lifesciences opens tomorrow but the public offer has already received positive reviews and recommendations from analyst fraternity. Priced in the range of INR600 – 603 per share, the IPO will offer an exit route to the private equity investor. CEO and founder Amit Bakshi will also sell 687,500 shares in the offer. Readers can check out our analysis of the IPO by clicking on this link. Here is a quick overview of what brokerage houses have to say regarding Eris Lifesciences IPO recommendations.
ICICIdirect has highlighted high product concentration and single plant dependence among major concerns regarding the IPO while assigning positive rating. “At the upper band of Rs 603, the stock is available at 34.3x FY17 EPS of Rs 17.6. We have assigned SUBSCRIBE recommendation to the issue based on management dynamism, robust financial performance, healthy return ratios, leverage free balance sheet and strong free cash flows. A superior business and financial matrix justify the premium valuation,” said its research note.
Angel Broking further added to positive Eris Lifesciences IPO recommendations, noting that the company is growing at a faster rate than its competitors. “On FY2017 EPS of `17.6, the issue is priced at P/E of 34.25x, which is at par with its MNC peers but higher than domestic peer, Alkem Labs. Considering that Eris’ faster growth, superior returns, debt free status, and specialty play, we believe that this is a fair valuation. We believe 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. Considering the company’s superior growth, better margin profile and high return ratios, we rate this IPO as SUBSCRIBE,” noted the note on Eris Lifesciences IPO.
Hem Securities is also positive about the company’s prospects going forward and has placed a subscribe call. “Between Fiscals 2013 and 2017, there has been an increase in the number of doctors prescribing co’s products from 37,842 (constituting 13.8% of doctors in metro cities and class 1 towns in India) to 50,282 (constituting 15.7% of doctors in metro cities and class 1 towns in India) with a prescription share of 1.3% for Fiscal 2017.Co has posted strong operating margin of 37% & net profit margin 33% in FY17. Also Co’s ROE & ROCE stands at whopping 45% & 49% in FY17,” analysts noted in the report. “At price band of Rs 600-603, co is bringing the issue at p/e multiple of around 34.05-34.22 on FY17 EPS of Rs 17.62/share. Co’s strong financial with zero debt status makes it a strong candidate for investment. Hence we recommend “Subscribe” on issue,” added the report, further bolstering positive Eris Lifesciences IPO recommendations.
However, not every analyst is impressed. Choice Broking has placed an Avoid rating on the IPO citing reduction in tax incentives, increase in raw material costs and competition. “The government’s emphasis to sell unbranded over branded drugs is detrimental to firms who are selling branded drugs. We are of the opinion 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,” noted the brokerage house in its report.