Akums Drugs IPO

Akums Drugs IPO will open for subscription on July 30, 2024 and close on August 1, 2024. Below is a breakdown of the generic drug maker's strengths, weaknesses, and growth prospects to help investors make an informed decision. Akums Drugs IPO in a nutshell Quality : The company's three-year average ROE and ROCE was nearly -8.8 and 3 per cent, respectively, between FY22 and FY24. Growth : The company's revenue grew 6.7 per cent per annum between FY22-FY24. It reported a profit after tax of Rs 1 crore in FY24 from a loss of Rs 251 crore in FY22. Valuation : Post the IPO, the stock will be valued at a P/E and P/B ratio of 13356 and 7.3 times, respectively. Overview: India's pharmaceutical industry is growing at a rapid pace with the country emerging as the largest generic (off-patent) drug manufacturer in the world. The 'China plus one' strategy adopted by global players has further pushed the industry in the limelight. Akums Drugs stands to benefit from this trend, particularly due to its large scale. However, the strict regulatory environment and highly competitive nature of the generic business can impact its performance. About Akums Drugs Incorporated in 2004, Akums Drugs is a pharmaceutical contract development and manufacturing organisation (CDMO). Operating 11 manufacturing across India, it is the largest India-focused CDMO company in terms of revenue and production capacity. It manufactures an extensive range of finished dosages and active pharmaceutical ingredients (APIs) and counts large players like Sun Pharma, Dr Reddy's and Mankind Pharma among its clients. It derives most of its earnings from India business with the domestic operations contributing 94 per cent to its total revenue in FY24. Strengths of Akums Drugs Large scale: The company's scale is its biggest strength. It can manufacture nearly 50 billion finished dosages annually through its 11 manufacturing facilities. It is the largest India-focused CDMO company and manufactures generic drugs for major Indian pharmaceutical companies. Additionally, it retains most of its clients with 76 per cent of its revenue coming from recurring customers over the last five years. Weaknesses of Akums Drugs Cash outflow overhang: Akums Drugs had raised Rs 500 crore from private equity (PE) firm Ruby QC Investment in 2019. The deal allowed Ruby QC the option to sell its stake back to the company at a predetermined price. As a result, the company had a Rs 1,365 crore liability towards Ruby QC as of March 2024. The PE investor, which currently has a 20 per cent stake in Akums, is selling half of its stake through the IPO. It retains the right to sell the remaining 10 per cent stake either by selling it back to the company or through the open market after the stock's listing. In case the PE firm opts to sell the stake back to the company, Akums would need to pay around Rs 650-700 crore based on the latest valuation. It has set aside Rs 181 crore for this payment as of March 2024. Ruby QC can exercise its right to sell the remaining stake back to Akums between January 1, 2025 and July 31, 2025. Industry regulations: The pharma industry is highly regulated and any unfavourable observations or regulatory developments can severely impact the company's operations. Akums Drugs IPO details Total IPO size (Rs cr) 1,857 Offer for sale (Rs cr) 1,177 Fresh issue (Rs cr) 680 Price band (Rs) 646 - 679 Subscription dates July 30, 2024 to August 1, 2024 Purpose of the issue