Drug maker, Laurus Labs, which had set the IPO price on the upper price band at Rs.428, opened with a huge gap at Rs.490, up almost 15% over IPO price. But it has not been able to sustain at this level and is now down to Rs.475, nevertheless up 11% over IPO price.

The issue was subscribed over 4.5 times  and QIBs were the highest subscribers at 10.54 times, followed by HNIs at 3.58 times and retail investors remained typically low at 1.61 times.

Laurus Labs manufactures active pharmaceutical ingredients (APIs), which account for ~90% of revenue, finished dosage formulations, synthesis (contract development and manufacturing services) and specialty ingredients used in nutraceutical/cosmeceutical sector. 61% of APIs serve the therapeutic area of anti-retrovirals (ARV), others key areas being Hepatitis C and onclogy. Thus, product concentration risk is high. In addition, client concentration is also high, as top five customers - Aspen Pharmacare, Aurobindo Pharma, Mylan Laboratories, Natco Pharma and Strides Shasun - contributed nearly 59% of H1FY17 income.

In our New Issue Analysis we had said, “single digit margins, client and product concentration risk, rich valuations, dull secondary market conditions may lead to muted demand to the issue. Thus, the IPO is an avoid, despite growth and experienced management / marque investors.”

The listing nowadays is sparkling but later it loses all its fizz - recent listings Varun Beverages, HPL Electric and ICICI Prudential Life are prime examples where post euphoric listing today they are ruling below issue price.