What you must know about Concord Biotech IPO

Concord Biotech Ltd, a company backed by Rakesh Jhunjhunwala’s RARE Enterprises, is a R&D driven biopharma company. Concord Biotech is into the manufacture of Active Pharmaceutical Ingredients (API) via fermentation and semi-synthetic processes. It is also into the manufacture of finished formulations. Since inception, the company has transformed from being a single-product company to a wide-spectrum solution provider. It currently offers products and solutions across diversified therapeutic segments. Currently, Concord has an established presence in 70 countries worldwide with distribution set-ups in place in the US, Europe, Japan, Latin America, Africa, and Asia. It also has a significant presence in the domestic market.  The company is currently partnering with leading global pharma giants to meet their product development needs for APIs and formulations.

Concord Biotech Ltd has 3 manufacturing facilities comprising of 2 API manufacturing units and one finished formulation unit. All the units are located in Gujarat. The Unit I at Dholka facility manufactures different classes of APIs. The Unit II at Valthera facility is into formulations manufacturing. It has manufacturing units for oral solids, including tablets and capsules, as well as oral liquids, including oral solutions and oral suspensions. Concord is also developing liquid and lyophilized vials injectable line, a dry powder injectable line and a sterile powder bulk lyophilization line, which will be dedicated to manufacturing of injectables, including injectable liquids, lyophilized injectables and dry powder injectables. Finally, the Unit III, Limbasi facility is also an API manufacturing facility. It has a total of 24 fermenters with aggregate fermentation capacity of 800 m3.

Highlights of the Concord Biotech IPO issue

Concord Biotech IPO size is not yet known, but the number of shares to be sold is already known since the price band for the IPO of Concord Biotech Ltd is yet to be fixed. What we know, as per the Red Herring Prospectus (RHP) is that the IPO will be entirely be by way of an offer for sale by early investors. There will be no fresh issue portion in the IPO. The total size of the issue of Concord Biotech Ltd will entail the issue of 2,09,25,652 shares (2.09 crore shares). This will entirely be by way of an offer for sale with no new issue component. An offer for sale does not result in fresh funds coming into the company. However, it leads to change in ownership and increase in free float of the company, resulting in currency value barometers emerging via a stock exchange listing.

As stated earlier, the entire issue of 2,09,25,652 shares or 2.09 crore shares, will be an offer for sale issue. The selling shareholder for the entire 2.09 crore OFS offering is Helix Investment Holdings Pte Ltd. The pricing of the IPO is expected to be finalized in the next few days, post which, the overall value of the issue would also be known. The issue will be lead managed by Kotak Mahindra Capital Company, Citigroup Global Markets and Jefferies India Private ltd. The registrar to the issue is Link Intime India Private Ltd. The issue size may reduce slightly from the 2.09 crore size as about 10,000 shares will be offered to employees. The total issued and paid up capital consists of 10,45,16,204 share. Post the issue of 2,09,25,652 shares by way of OFS, representing 20.02% of the total outstanding capital, will now become the free float in the market.

About the promoters and key shareholders

Concorde Biotech IPO has been promoted by Sanjay Vaid and Manju Vaid, who are the main promoters of the company. Given below is the shareholding of the top 11 shareholders who account for more than 97% of the total share capital of Concord Biotech Ltd.

Data Source: Company RHP

As per the latest data the promoters group holds a total of 44.08% stake in Concord Biotech, Helix Investments holds 20% and Rakesh Jhunjhunwala family holds 24.09% in the company. While the stake of the other shareholders will remain the same post the issue, Helix Investments will cease to be the shareholder as it is offering its entire holding of 2.09 crore shares as part of the OFS offer.

Allotment quotas for different categories in the Concord Biotech IPO

As per the terms of the offer, 50% of the net offer is reserved for the qualified institutional buyers (QIBs), while 35% of the total issue size is reserved for the retail investors. The residual 15% is kept aside for the HNI / NII investors . The table below captures the quotas.

The company has a face value of ₹1 per share and post the IPO, the stock of Concord Biotech Ltd will be listed on the NSE and on the BSE. Being entirely an offer for sale, the IPO will not result in dilution of equity and EPS. However, there will be transfer of ownership internally as Helix Investments will cease to be a shareholder of the company post the IPO and these stocks will be redistributed to the public.

Check Concord Biotech IPO GMP

Key dates for Concord Biotech IPO and how to apply?

The issue opens for subscription on 04th August 2023 and closes for subscription on 08th August 2023 (both days inclusive). The basis of allotment will be finalized on 11th August 2023 and the refunds will be initiated on 14th August 2023. In addition, the demat credits are expected to happen on 16th August 2023 and the stock will list on 17th August 2023 on the NSE and the BSE. Concord Biotech Ltd is the second big pharma related issue this year after Mankind Pharma. Mankind saw very good traction in the IPO and also the post listing performance has been laudatory. Let us now turn to the more practical issue of how to apply for the IPO of Concord Biotech Ltd.

Investors can apply either through their existing trading account or the ASBA application can be directly logged through the internet banking account. This can only be done through the authorized list of self-certified syndicate banks (SCSB). In an ASBA application, the requisite amount is only blocked at the time of application and the necessary amount is debited only on allotment. Investors can apply in the retail quote (up to ₹2 lakh per application) or in the HNI / NII quota (above ₹2 lakh). Minimum lot sizes will be known after pricing. It must be noted that the anchor allocation will happen on 02nd August, 2023; a day before the IPO opens for subscription to the public. Anchor allocation will be deducted from QIB portion.

Financial highlights of Concord Biotech Ltd

The table below captures the key financials of Concord Biotech Ltd for the last 3 completed financial years.

Data Source: Company RHP filed with SEBI

There are few key takeaways from the financials of Concord Biotech Ltd which can be enumerated as under

1. In the last 2 years, the revenues have grown steadily as have the net profits and the cash generated by operations. Even the return on equity and the return on assets have held at a robust level in the last 3 years.
    
2. The company is currently having a weighted average EPS of ₹20.79 over the last 3 years and higher end pharma and biotech command valuations of around 40X to 50X. With its impressive roster of investors, getting higher valuations may not be a problem.
    
3. As the pricing is awaited, one thing that stands out is the low asset turnover ratio or the asset sweating ratio. That needs to improve for the company to be able to justify higher valuations in the future.

The roster of investors is extremely impressive, but that must not be the reason to buy into this IPO. It has a strong business model, although most of the positives are likely to be priced into the issue. Concord Biotech Ltd is best suited to investors with a longer time perspective and a higher risk appetite.