Eris makes a decent debut

There was one more new entrant on the bourses today morning, Eris Lifesciences. As against the IPO price of Rs.603, it got listed on the BSE at Rs.612.

The issue was subscribed 3.29 times with institutional subscription at 4.68 times and retail at 3.51 times.

In our New Issue Analysis we had has strongly recommended putting money in the IPO. We had stated, “Rarely one comes across business delivering 49% RoCE and 45% RoE, which is definitely unheard of in the pharma sector. Since Eris earns zero revenue from exports, it is immune from US FDA issues plaguing Indian pharma currently. This is a big distinguishing factor vis-à-vis peers. Moreover, it enjoys tax break (under Income Tax Act, which will continue post GST) till FY24 on its sole manufacturing facility at Guwahati, Assam, which accounts for 78% of sales. Balance 22% of sales is outsourced to contract manufacturers. Hence, effective tax rate for company was very low at 8.3% in FY17 and 12.7% in FY16. Very strong fundamentals, expected healthy growth, cash rich status, no US FDA overhangs make this issue an ‘apply’, despite uneconomical pricing.”