Valiant Laboratories IPO Anchor Allocation at 30%

About the Valiant Laboratories IPO

The anchor allocation of Valiant Laboratories IPO saw a relatively strong response on 26th September 2023 with 30% of the IPO size getting absorbed by the anchors. Out of the 1,08,90,000 shares (108.90 lakh shares) on offer, the anchors picked up 32,66,970 shares (32.67 lakh shares approximately) accounting for 30% of the total IPO size. The anchor placement reporting was made to the BSE late on Tuesday, September 26th, 2023; one working day ahead of the IPO opening. The IPO of Valiant Laboratories Ltd opens on 27th September 2023 in the price band of ₹133 to ₹140 and will close for subscription on 03rd October 2023 (both days inclusive).

The entire anchor allocation was made at the upper price band of ₹140. This includes the face value of ₹10 per share plus a premium of ₹130 per share, taking the anchor allocation price to ₹140 per share. Let us focus on the anchor allotment portion ahead of the Valiant Laboratories IPO, which saw the anchor bidding opening and also closing on September 26th, 2023. Before that, here is how the overall allocation will look.

The overall allocation to QIBs includes the anchor portion, so the anchor shares allotted will be deducted from the QIB quota for the purpose of the public issue.

Finer points of anchor allocation process

Before we go into the details of the actual anchor allotment, a quick word on the process of anchor placement. The anchor placement ahead of an IPO/FPO is different from a pre-IPO placement in that the anchor allocation has a lock-in period of just one month, although under the new rules, part of the anchor portion will be locked in for 3 months. It is just to give confidence to investors that the issue is backed by large established institutions. Here are the details of the anchor lock in.

However, the anchor investors cannot be allotted shares at a discount to the IPO price. This is explicitly stated in the SEBI revised regulations as under, “As per the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirement) Regulations, 2018, as amended, in case the Offer Price discovered through book building process is higher than the Anchor Investor Allocation Price, then the Anchor investors will be required to pay the difference by the pay-in as specified in the revised CAN.

An anchor investor in an IPO is normally a qualified institutional buyer (QIB) like a foreign portfolio investor or mutual fund or insurance company or a sovereign fund which invests before the IPO is made available to the public as per SEBI regulations. Anchor portion is part of the public issue, so the IPO portion to the public (QIB portion) is reduced to that extent. As initial investors, these anchors make the IPO process more attractive for investors, and instil confidence in them. Anchor investors also largely aid in price discovery of the IPO

Anchor placement story of Valiant Laboratories IPO

On 26th September 2023, Valiant Laboratories IPO completed the bidding for its anchor allocation. There was a strong and robust response as the anchor investors participated through the process of book building. A total of 32,66,970 shares were allotted to a total of 4 anchor investors. The allocation was done at the upper IPO price band of ₹140 (including premium of ₹130 per share) which resulted in an overall allocation of ₹45.74 crore. The anchors have already absorbed 30% of the total issue size of ₹152.46 crore, which is indicative of fairly robust institutional demand.

Listed below are the 4 anchor investors who got allotted the entire 100% shares as part of the anchor allocation quota for the IPO of Valiant Laboratories Ltd. The entire anchor allocation of ₹45.74 crore was spread across these 4 major anchor investors and between them, they accounted for the entire 100% of the anchor allocation. The anchor allocation of Valiant Laboratories Ltd and their participation will set the tone for retail participation in the IPO.

Data Source: BSE Filings

The stock has not been too active in the grey market and hence there is no credible GMP available for the stock. Despite that, there was strong response to the anchor allocation with the anchors taking up 30% of the total issue size. The QIB portion in the IPO will be reduced to the extent of the anchor placement done above. Only the balance amount will be available for QIB allocation as part of the regular IPO.

There was no participation from mutual funds in the anchor placement of Valiant Laboratories Ltd.

Brief on the Valiant Laboratories Ltd business model

Valiant Laboratories Ltd was incorporated in 1980, and it is a major pharmaceutical ingredient manufacturer in India; with primary focus on Paracetamol. The company has a production unit in Palghar near Mumbai, spread across 2,000 SQM. Its current installed capacity is 9,000 MT per year. It also has a state-of-the-art R&D facility which is fully equipped with an analytical laboratory and the necessary infrastructure for developmental activities in existing products. Valiant Laboratories Ltd imports Para Amino Phenol, which is the raw material for manufacture of Paracetamol, from China and Cambodia. The company is part of the Aarti group of industries. Its main product is Paracetamol / Acetaminophen (API/ Bulk Drug) which can treat headache, muscle ache, arthritis, backache, cold and fever.

Paracetamol can also be used in the case of severe pain instances such as post-surgical pain and cancer related pain. Valiant Laboratories makes paracetamol in various grades as per the specifications of customers like Powder, Fine Powder, Dense, Free Flowing etc. Valiant Laboratories Ltd manufactures paracetamol as per the required Pharmacopeia like IP/BP/USP/EU, based on the requirement of the customers. The company also has a dedicated team for carrying out various R&D projects to identify newer molecules that the company can commercialise for future growth. The Paracetamol API can be formulated further for end uses like tablets, capsules, Effervescent tablets, Oral suspension, Patch etc.

The company was promoted by Shantilal Shivji Vora, Santosh Shantilal Vora and Dhanvallabh Ventures LLP. Currently the promoters hold 100.00% of the company, which will get diluted post the IPO to 74.94%. The proceeds of the fresh issue portion will be used to invest in its wholly owned subsidiary (Valiant Advanced Sciences) to part finance its capex; as well as to fund its working capital needs. Part of the funds will also be applied for general corporate purposes. The issue will be lead managed by Unistone Capital Private Ltd. Link Intime India Private Ltd will be the registrar to the issue.