Windlas Biotech IPO opens for subscription today; should you invest?

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The initial public offering (IPO) of Windlas Biotech opens for public subscription today at a price band of Rs 448-460 per equity share. The Rs 401.53-crore IPO will close on August 6.

Windlas Biotech IPO comprises a fresh issue of shares worth Rs 165 crore and an offer for sale of shares worth Rs 236.5 crore (51,42,067 equity shares) by existing selling shareholders.

The company has already raised up to Rs 120.46 crore through the anchor book launched on August 3, a day before the issue opening. It has allocated 26,18,706 equity shares to anchor investors at Rs 460 per equity share.

Read here: Windlas Biotech IPO to open today; here are key things to know

Windlas Biotech is focusing on formulation CDMO and there is no peer company focusing solely on the CDMO model.

The company’s innovative portfolio of complex generic products supported by robust R&D capabilities, efficient and quality compliant manufacturing facilities with significant entry barriers, long-term relationships with Indian pharmaceutical companies and a consistent track record of financial performance provide for further growth visibility, says BP Equities.

“On the valuation front, at the upper price band, the issue is aggressively priced at 64.4x P/E considering the diluted equity shares and FY21 annualized earnings. However, considering all the positive factors mentioned above, we give a “Subscribe” rating on this issue for the long term,” said the brokerage.

On the back of increased sales from the existing customers, the addition of new CDMO products & customers and improved business from the domestic trade generics & OTC brands, the company has reported a 6.7 percent CAGR rise in consolidated business over FY18-21 to Rs 427.6 crore in FY21.

Consolidated EBITDA increased by 11.6 percent CAGR to Rs 54.7crore in FY21. EBITDA margin expanded by 163 bps over the period to be at 12.8 percent in FY21.

“At higher price band of Rs 460, the company is demanding a P/E valuation of 26.6x (to its restated FY21 EPS of Rs 17.3). Considering its return ratios and profitability, the issue seems to be fully priced. But factoring the growth drivers of the CDMO sector and opportunities available for the company, we assign a “Subscribe for Long Term” rating for the issue,” said Choice Broking.

Analysts expect the domestic injectables CDMO industry to grow at a CAGR of 11.5 percent to 12.5 percent between FY20 and FY25 on account of growth in chronic therapeutic areas, such as, anti-diabetic and oncology, and strong demand from outsourcing for these therapeutic segments by the large pharmaceutical companies.

“WBL has strong R&D and manufacturing capabilities with long term client relationships with marquee pharma companies. We recommend a ‘subscribe’ rating to the issue,” said GEPL Capital.

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