Saroja Pharma Industries IPO lists at -22.62% discount, then hits upper circuit

Weak listing for Saroja Pharma Industries IPO, then hits upper circuit

Saroja Pharma Industries India Ltd had a very weak listing on 13th September 2023, listing at a sharp discount of -22.62%, but subsequently gaining further ground and closing at the 5% upper circuit over the listing price. Of course, the stock may have closed comfortably above the IPO listing price of the day, but still closed well below the IPO issue price. In a sense, the markets had a positive trading day on September 13th 2023, as the Nifty gained 76 points and closed at 20,070 levels. It was a decisive close above the psychological 20K mark for the Nifty. In the midst of such a strong day for the markets overall, the stock of Saroja Pharma Industries India Ltd listed at fairly embarrassing discount of -22.62% but to offset such negative sentiments on the counter, it went on to hit the 5% upper circuit on the listing price for the day.

The stock of Saroja Pharma Industries India Ltd did show a lot of weakness on opening but managed to use that as the base and bounce higher to the upper circuit. The positive sentiments on the Nifty only helped the stock to bounce back despite a very weak opening. The stock closed above the IPO listing price due to hitting the 5% upper circuit, but did still close well below the IPO issue price. Being an NSE SME IPO, it is only traded on the SME segment of NSE. Saroja Pharma Industries India Ltd opened -22.62% lower and the opening price turned out to be the low price for the day. With subscription of 14.83X for the retail portion and 2.90X for the HNI / NII portion; the overall subscription was relatively tepid at 8.88X. The subscription numbers may have been tepid enough to allow the stock to list at a large discount on the listing day. However, the positive sentiments surround the nifty after it breached the psychological mark of 20,000 helped the stock of Saroja Pharma Industries India Ltd to scale up to 5% upper circuit on the listing price.

Stock closes Day-1 at 5% upper circuit, but at discount to issue price

Here is the pre-open price discovery for the Saroja Pharma Industries India IPO (SME) on the NSE.

Data Source: NSE

Saroja Pharma Industries IPO was priced at a fixed IPO price of ₹84 per share via the fixed pricing format. On 13th September 2023, the stock of Saroja Pharma Industries India Ltd listed on the NSE at a price of ₹65, a discount of -22.62% on the IPO issue price of ₹84 per share. However, the stock took support at that level for the day and that became the low price for the day, and the stock did manage to bounce back sharply from lower levels and scale towards the upper circuit of the day. The stock of Saroja Pharma Industries India Ltd closed the listing day at a price of ₹68.25, which is 5% above the IPO listing price but -18.75% below the issue price of the IPO on the first day of listing. In a nutshell, the stock of Saroja Pharma Industries India Ltd had closed the day exactly at the upper circuit price for the stock of 5% with only buyers and no sellers. However, this upper circuit was a small consolation after the stock listed at a steep discount to the issue price on the NSE on Wednesday. Like the upper circuit price, even the lower circuit price on listing day is calculated on the listing price and not on the IPO price. The opening price actually turned out to be the low price of the day and the stock closed at the upper circuit price of the day.

How prices traversed for Saroja Pharma Industries India IPO on listing day

On Day-1 of listing i.e., on 13th September 2023, Saroja Pharma Industries India Ltd touched a high of ₹68.25 on the NSE and a low of ₹65 per share. The high price of the day was exactly the closing price of the stock while the stock listing price was the low price of the day, which is some redemption after a weak and discount listing for the stock. Incidentally, the closing price represented the 5% upper circuit price of the stock for the day, which is the maximum that the SME IPO stock is allowed to move in the day. What is truly appreciable is that the stock closed strong despite the weak opening at a discount to the issue price. Of course, the strong sentiments on the Nifty helped matters as the Nifty closed above the psychological level of 20,000. The stock closed at the 5% upper circuit with 36,800 buy quantity and no sellers. For the SME IPOs, 5% is the upper limit and also the lower circuit on the listing price on the day of listing.

Timid volumes for Saroja Pharma Industries India IPO on listing day

Let us now turn to the volumes of the stock on the NSE. On Day-1 of listing, the Saroja Pharma Industries India Ltd stock traded a total of just 54,400 shares on NSE SME segment amounting to value of ₹36.26 lakhs on the first day; extremely low by regular standards.  The order book during the day showed a lot of buying with the buy orders consistently exceeding the sell orders at any point of time. That also led the stock to close at the upper end of the circuit filter. It must be noted here that Saroja Pharma Industries India Ltd is in the trade to trade (T2T) segment so only delivery trades are possible on the stock. Hence the entire volume for the day purely represents the delivery volumes.

At the close of Day-1 of listing, Saroja Pharma Industries India Ltd had a market capitalization of ₹27.44 crore with free-float market cap of ₹7.40 crore. It has a total of 40.20 lakh shares as the issued capital of the company. As stated earlier, since the trading is on the T2T segment, the entire volume of 54,400 shares during the day is accounted for only by delivery trades.

Brief on the business model of Saroja Pharma Industries India Ltd

Saroja Pharma Industries Ltd was incorporated in 2019 to engage in trading, exports, and supply of Specialty Chemicals and active pharma ingredients (API). The APIs are the intermediate specialized inputs that go into the manufacture of formulations, which we buy at the chemist shops. The company deals in 3 categories of products viz. Chemicals, Pharmaceutical Intermediaries and Veterinary Pharma APIs. These APIs were formerly referred to as bulk drugs and constitute the principal ingredients used in making finished dosages consumed the form of capsules, tablets, liquids etc. Saroja Pharma Industries Ltd exports to other countries including Egypt, Russia, Jordan, Hong Kong, Singapore, and Pakistan, among others. The company broadly deals in chemicals, pharma APIs and pharma intermediates. Here is a quick look at key products it offers under each category.

Under the specialty chemicals category, Saroja Pharma Industries Ltd offers liquid bromine, ethyl acetate, thionyl chloride, and benzyl chloride. Under the Pharma API category, Saroja Pharma Industries Ltd offers; Oxyclozanide BP VET, Bromhexine HCL BP grade, Triclabendazole, Fenbendazole BP VET, Nitroxinil BP VET, Oxfendazole BP VET, Albendazole USP, Rafoxanide BP VET and Febantel EP. Under pharma intermediates, the company offers N-[(4s,6s)-6-methy1-7, 7-dioxido-2-sulfamoy1-5, 6-dihydro-4hthieno[2,3-b]thiopyran-4yl) acetamide and para nitro phenol. Some of the major strengths that the company brings to the table include experienced promoters with a credible track record, a respect management team, highly scalable business model at moderate cost, a wide range of diverse product offerings and a de-risked business model.

The company was promoted by Biju Gopinathan Nair and Manish Dashrath Kamble. The promoter holding in the company currently stands at 100.00%. However, post the fresh issue of shares, the promoter equity holding share will get diluted proportionately to 73.02%. The funds from the new issue will be used by the company for setting up a new manufacturing unit and also for repayment of some its high cost unsecured loans taken. Part of the fund raising will also go towards general corporate expenses. While Swastika Investmart Ltd will be the lead manager to the issue, KFIN Technologies Ltd will be the registrar to the issue. The market maker for the issue is also Swastika Investmart Ltd.