Retailers and High Value Network Individuals (HNIs) would be in the wrong if Gland Pharma’s initial public offering (IPO) promoted by Fosun in China was lost. Shares of the Hyderabad-based company have gained 40 percent over its IPO price of 1,500 rupees.
On Monday, the shares rose 15 percent to end at 2,095 rupees. At one point, the stock was locked in a 20 percent upper loop, with only buyers and no sellers at the counter. However, some sales came later. The stock traded on Friday and ended the session at Rs 1,820, a gain of 21 percent on its issue price.
The latest gains were supported by positive analyst feedback.
In a note to investors, brokerage Ambit said that Gland Pharma lacks brand strength and innovative relationships compared to large generic companies. But its track record of execution and visibility of growth outweigh these shortcomings. The note further stated that the company had received no warning letters from the United States Food and Drug Administration (US FDA). In contrast, all generic specialties have received red flags in their injectable units.
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Ambit has a price target of Rs 2,109 for the shares.
The Rs 6,480 million IPO of Gland Pharma was one of the largest by a pharmaceutical company on the domestic market. The problem got through thanks to the support of institutional investors, even as retail and HNI investors avoided the problem. Analysts had recommended Gland Pharma, citing its attractive valuations, healthy growth rates and margins. But the IPO struggled to get ahead due to concerns, especially among HNI investors about the gray market premium. Before listing, the gray market premium soared.
“Gland Pharma is a niche player, focused on injectables. It has a proven track record of growth and profitability along with a track record of consistent regulatory compliance. The prospects are encouraging, as it has 267 abbreviated applications for new drugs (ANDA), of which 215 are approved. The pharmaceutical sector is in focus and given its strong fundamentals and promising future, there is a lot of investment interest, ”said Hemang Jani, director of equity, brokerage and distribution strategy for Motilal Oswal Financial Services.
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