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09 December 2023

Valiant Laboratories IPO: Navigating Pharmaceutical Innovation

Introduction:

The Valiant Laboratories IPO, a book-built issue valued at Rs 152.46 crores, is an exclusive offering of 1.09 crore fresh shares. Commencing on September 27, 2023, the IPO bidding phase concluded on October 3, 2023. The allotment process was finalized on October 5, 2023, and the shares were officially listed on both BSE and NSE on October 6, 2023.

Pricing Spectrum:

With a price band set at ₹133 to ₹140 per share, the IPO catered to a diverse investor base. The minimum lot size for an application was 105 shares, requiring a minimum investment of ₹14,700 from retail investors. For the NonInstitutional Investors (NII), the minimum lot size investment for small NII (sNII) was 14 lots (1,470 shares), amounting to ₹205,800, while big NII (bNII) had a minimum investment of 69 lots (7,245 shares), totaling ₹1,014,300.

Stock Market Performance Snapshot:

As of November 17, 2023, Valiant Laboratories Ltd (VALIANTLAB) was trading at ₹188.40, experiencing a marginal decrease of 0.03%. The stock opened at ₹188.45, oscillating between ₹191.90 and ₹187.05. The previous close stood at ₹188.45, with a total traded value of 2,49,869. Over the past 52 weeks, the stock reached a high of ₹206.10 (Nov 03, 2023) and a low of ₹162.10 (Oct 09, 2023).

Key IPO Details:

The IPO, dated from September 27, 2023, to October 3, 2023, unveiled a face value of ₹10 per share. The listing occurred on October 6, 2023, with a total issue size of 10,890,000 shares, aggregating up to ₹152.46 crores. The IPO was a Book Built Issue and got listed on BSE and NSE.

Ownership Evolution:

Pre-IPO, Valiant Laboratories Ltd had a shareholding of 32,560,000, which increased to 43,450,000 post-issue. The IPO reserved 30.00% for Anchor Investors, 20.00% for Qualified Institutional Buyers (QIBs), 15.00% for NonInstitutional Investors (NIIs), and 35.00% for Retail Individual Investors (RIIs). There were special provisions for small and big NIIs to ensure inclusive participation.

Investor Preferences:

The IPO allocation was structured with 3,266,970 shares offered to Anchor Investors, 2,178,030 to QIBs, 1,633,500 to NIIs, and 3,811,500 to RIIs. Anchor Investors bid ₹45.74 crores, with an anchor lock-in period for 50% shares ending on November 20, 2023, and the remaining 50% on February 14, 2024.

Timeline Highlights:

The IPO process unfolded as follows:

- IPO Open Date: Wednesday, September 27, 2023
- IPO Close Date: Tuesday, October 3, 2023
- Basis of Allotment: Thursday, October 5, 2023
- Initiation of Refunds: Friday, October 6, 2023
- Credit of Shares to Demat: Friday, October 6, 2023
- Listing Date: Friday, October 6, 2023

Lot Size Dynamics

Investors could bid for a minimum of 105 shares, and multiples thereof. The table below elucidates the minimum and maximum investment parameters for both retail investors and High Net Worth Individuals (HNI):

Application	Lots	Shares	Amount
Retail (Min)	1	105	₹14,700
Retail (Max)	13	1365	₹191,100
sNII (Min)	14	1,470	₹205,800
sNII (Max)	68	7,140	₹999,600
bNII (Min)	69	7,245	₹1,014,300

Promoter Holdings Transition:

Promoters, namely Shantilal Shivji Vora, Santosh Shantilal Vora, and Dhanvallabh Ventures LLP (DVL), exhibited a pre-issue shareholding of 100.00%, which post-issue reduced to 74.94%.

Company Overview:

Incorporated in 1980, Valiant Laboratories Ltd specializes in manufacturing pharmaceutical ingredients with a predominant focus on Paracetamol. Its manufacturing unit, situated in Palghar, Maharashtra, spans 2,000 sq. mts. and boasts an annual installed capacity of 9,000 MT. Additionally, the company has an R&D facility equipped for developmental activities.

Financial Standing:

As of March 31, 2023, Valiant Laboratories Ltd reported assets worth ₹212.76 crores, revenue from operations at ₹338.77 crores, and a net profit of ₹29.00 crores. The company imports Para Amino Phenol, a key raw material, from China and Cambodia.

Key Financial Metrics:

Valiant Laboratories IPO demonstrated a market cap of ₹608.3 crores, with a P/E (x) of 15.71. The Return on Equity (ROE) was 33.73%, and the Return on Capital Employed (ROCE) stood at 22.76%. Other indicators included a Debt/Equity ratio of 0.59, Earnings per Share (EPS) of ₹8.91, and a Return on Net Worth (RoNW) of 28.86%.

IPO Objectives:

The net proceeds from the IPO are designated for:

1. Investment in its wholly-owned subsidiary, Valiant Advanced Sciences Private Limited (VASPL), for part-financing its capital expenditure requirements related to the setup of a manufacturing facility for specialty chemicals.
2. Investment in VASPL for funding its working capital requirements.
3. General corporate purposes.

Expert Insights:

Suggests that although Valiant Laboratories Ltd is engaged in manufacturing APIs and bulk drugs with a primary focus on Paracetamol, it has shown declining trends for its Profits After Tax (PAT) and Return on Capital Employed (RoCE) margins for the reported periods. Investors are advised to consider the fully priced nature of the issue and may find potential for medium to long-term rewards based on FY23 earnings.

In Conclusion:

With a subscription rate of 29.76 times, the Valiant Laboratories IPO signifies significant market interest. The company's strategic focus on pharmaceutical manufacturing, particularly in the Paracetamol segment, adds depth to its investment appeal. However, investors are encouraged to exercise due diligence, considering the evolving landscape of the pharmaceutical industry and aligning their investments with their financial objectives. Seeking guidance from financial experts can provide valuable insights, aiding in well-informed investment decisions.

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