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16. VALUE INVESTOR  Dec 6, 2016 8:09:32 PM IST Reply

Laurus Labs Ltd IPO

Good response from both Q1B and NII on first day.
Don''t look at GMP, Just Apply blindly....AND HOPE FOR Allotment
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15. VALUE INVESTOR  Dec 5, 2016 2:23:36 PM IST Reply

Laurus Labs Ltd IPO

SP Tulsian analysis:
-------------
Analysis of upcoming IPO of Laurus Labs has been loaded on LinkExternal Link

You can access it in the Free Zone in New Issue Analysis section (no login required). The section can be accessed at:
https://www.sptulsian.com/free_zone/new_issues_analysis

New issue (IPO) Analysis:
An Expensive Drug
Laurus Labs is entering the primary market on Tuesday 6th December 2016, to raise upto Rs. 300 crore via fresh issue of equity shares of Rs. 10 each and an offer for sale (OFS) of upto 2.41 crore equity shares by PE investors, both in the price band of Rs. 426 to Rs. 428 per share. At the upper end, issue represents 29.42% of the post issue paid-up share capital and will raise Rs. 1,332 crore, of which, OFS portion is Rs. 1,032 crore. Issue closes on Thursday, 8th December.
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.
Company has strong R&D focus, having spent 5.6% of H1FY17 revenue on R&D and employing 24% of its over 2,500 employees at 2 R&D centers, located in Hyderabad and US. As of 30-9-16, company owned 34 patents and had 152 patent applications pending. It has 5 manufacturing facilities at Visakhapatnam and Hyderabad, 2 of which are USFDA approved and 3rd undergoing inspection. 4th and 5th facilities have been acquired in June 2016 (pursuant to 73% stake purchase in Sriam Labs for Rs. 21 crore, 27% stake held previously). Company is establishing 2 additional facilities, one for potent APIs (to commence operations in FY16) and other for APIs and intermediates (to commence operations in FY17).
FY16 consolidated revenue rose 35% YoY Rs. 1,784 crore, of which exports constituted a third. EBITDA rose 62% YoY in FY16 to Rs. 380 crore (EBITDA margin expanding to 21.3%) as material costs as a percentage to sales declined 590 bps from 62.4% in FY15 to 56.5% in FY16. In the past too, material costs have swung very widely – FY13 material costs stood at 57.4% of sales, which shot up to 62.6% in FY14. In a span of 4 years, company’s material costs have swayed between 56% to 63% of sales - such wild swings are quite unheard of in the pharma business and surprising they were not passed on!
Thus, FY16 show sharp growth on account of FY15’s low base / poor show. FY15 PAT margin FY14’s 8.4%) which moved higher in FY16, to 7.4%, on PAT of Rs. 133 crore. FY16 diluted EPS stood at Rs. 13.48. For H1FY17, company achieved consolidated revenue of Rs. 930 crore, EBITDA of Rs. 209 crore and PAT of Rs. 75 crore, translating into diluted EPS of Rs. 7.59, on equity of Rs. 98.75 crore, adjusted for 3:1 bonus issue made in July 2016.
As of 30-9-16, consolidated networth was Rs. 929 crore and total debt at Rs. 1,127 crore. Excluding cash and equivalents of Rs. 14 crore, net debt to equity ratio is 1.2:1, which will contract to 0.7:1 post IPO, as close to Rs. 225 crore from fresh issue proceeds will go towards debt repayment, while balance will be used for general corporate purposes.
Promoters held 32.82% stake as on date of RHP, which will reduce to 30.64% post IPO. Company has 3 investors – Warburg Pincus’s Bluewater, FIL Capital Management (erstwhile Fidelity Growth Partners) and Aptuit - collectively holding 58.14% stake, and all 3 are participating in the OFS. While Aptuit (invested since 2010) is exiting completely, other 2 are making a partial exit, and will continue to hold 31.42% stake in company, post IPO.
At the upper end of the price band of Rs. 428, Laurus will have a market cap of Rs. 4,526 crore and EV Rs. 5,415 crore, which translates into EV/EBITDA multiple of 14.3x and 13.0x for FY16 and FY17E respectively. On PE multiple basis, the IPO is demanding valuation of 32x for FY16 and 27x on estimated FY17 EPS of Rs. 15.7. These multiples are quite stretched, considering company’s current financial position as well as somber mood of the secondary markets. It seems that the IPO is factoring in 2 year forward prospects at current discount multiples!
In the RHP, company has compared itself with Aurobindo and Divi’s. Aurobindo Pharma, having market cap of 42,000 crore, annual topline of Rs. 15,000 crore plus, stronger net margins of 15%, diversified product profile spread over 7 therapeutic areas and 21 manufacturing facilities, is currently trading at PE multiple of 18x, on FY17E earnings. Divis’s Labs, with market cap of Rs. 30,000 crore and annual topline of 4,000 crore, clocking high net margins of close to 30% and debt free status, is trading at PE multiple of 27x, on FY17E. Thus, these peers are not only larger in size but also stronger in earnings which can justifying their high valuation multiple.
Since Laurus has a very high share of APIs, its net margins are very low (have been 8% or lower in past 5 years). Once formulations business, in which close to Rs. 300 crore has been invested, picks up, margins may expand, but that is still a few quarters away. Besides high product risk (90% revenue from API), single therapeutic focus (over 50% from ARVs) and high client concentration, on such a large base (Rs. 2,000 crore topline), debt levels of Rs. 900 crore post repayment is also not small.
API maker Aarti Drugs, with annual topline of Rs. 1,250 crore, net margins similar to Laurus with high debt (debt equity ratio of 1:1) and 63% promoter holding is trading at PE multiple of 23 times, based on annualised H1FY16 earnings). Thus, at PE of 27x, valuation of Laurus is atleast 15-20% higher. On the contrary, being a primary market offering, some money needs to be left on the table, to incentivize prospective investors, which is clearly absent in this issue.
On macro front too, things are not looking too hunky dory – existing bluechips and fancied mid-caps are ruling anywhere between 20-25% lower from their monthly highs, and pharma space in particular is completely out of flavor - despite robust earnings. Adding fuel to the fire, neither is the IPO market booming - grey market activity is very low, Greensignal Bio IPO was called off, Sheela Foam IPO saw retail portion remaining undersubscribed (0.44x) while recent listings Varun Beverages, HPL Electric and ICICI Prudential Life are ruling below issue price.
In a nutshell, 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.
Disclosure: No Interest.
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15.1. Splash  Dec 5, 2016 3:08:12 PM IST

Laurus Labs Ltd IPO

Looks like S P Tulsian is not in favour with Lauras.

Are you applying value investor?
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15.2. VALUE INVESTOR  Dec 5, 2016 3:23:57 PM IST

Laurus Labs Ltd IPO

Yes applying, But allotment will be tough....
Pharma stocks will always be in Demand, now or later....
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15.3. SIPs  Dec 5, 2016 3:28:08 PM IST

Laurus Labs Ltd IPO

Capital market 40/100
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15.4. Sunil Patel  Dec 5, 2016 5:04:50 PM IST

Laurus Labs Ltd IPO

SP tulsian says sell. You should buy.

Apply to this IPO.
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15.5. Chitra M  Dec 6, 2016 3:03:59 PM IST

Laurus Labs Ltd IPO

If SP Tulsian analysis is neutral, then it is a huge positive.
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14. VALUE INVESTOR  Dec 2, 2016 12:54:54 PM IST Reply

Sheela Foam Ltd IPO

Sleepwell is not a great player in this segment.
I recently purchased duroflex mattresses after seeing the price difference. A typical double bed matresses cost around 15000 Rs and some offer 10% discount.
If you see matresses segment, there is duroflex, peps, kurlon etc.
bedsheet segment, there are plenty of players.
It may have first mover advantage of listing at stock exchange, but price is too high to take that kind of risk.
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14.1. ShareView  Dec 2, 2016 1:19:39 PM IST

Sheela Foam Ltd IPO

SpringWell also is a tough rival . Their products are available at 10 - 25 % discount compared to sleepwell.Recently I have purchased springwell product at discounted rate . sleepwell is even costlier to kurl-on which is the closest rival .

Listing may be between 700 - 725
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14.2. Jayaram Yarram  Dec 2, 2016 4:15:27 PM IST

Sheela Foam Ltd IPO

Yes, I agree that sleepwell products are expensive but that may not be a reason for listing at lesser price. Well established branded products are always costlier.
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13. VALUE INVESTOR  Dec 1, 2016 9:48:20 PM IST Reply

Sheela Foam Ltd IPO

You should not apply in IPOs were lower and higher price band is wider
Here 680 - 730 Rs, difference of 50 Rs.
ICICI Prudential 330 - 334 Rs (34 Rs difference)
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13.1. ShareView  Dec 2, 2016 8:54:29 AM IST

Sheela Foam Ltd IPO

ICICI Lower Price Band 300 or 330 ?
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13.2. VALUE INVESTOR  Dec 2, 2016 9:14:12 AM IST

Sheela Foam Ltd IPO

Icici prudential Issue Price: Rs. 300 - Rs. 334 Per Equity Share
we were hoping they will issue at 300Rs considering very large issue, but they did not.
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12. VALUE INVESTOR  Dec 1, 2016 5:45:42 PM IST Reply

Sheela Foam Ltd IPO

Did not apply.
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11. VALUE INVESTOR  Nov 18, 2016 6:05:38 AM IST Reply

Sheela Foam Ltd IPO

Why face value is 5 Rs?
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10. VALUE INVESTOR  Nov 9, 2016 11:45:31 AM IST Reply

PNB Housing Finance Ltd IPO

I did some shopping today in RBL Bank, ICICI Prudential, VRL, SYNGENE, QUESS, PNB Housing, sun pharma, Equitas and Advanced Enzyme.
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10.1. VALUE INVESTOR  Nov 9, 2016 11:46:05 AM IST

PNB Housing Finance Ltd IPO

Forgot to add varun beverages to the list :-)
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10.2. VALUE INVESTOR  Nov 9, 2016 11:47:17 AM IST

PNB Housing Finance Ltd IPO

Forgot to add varun beverages in the above list :-)
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10.3. Pokemongo  Nov 11, 2016 8:03:06 PM IST
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9. VALUE INVESTOR  Nov 9, 2016 10:04:45 AM IST Reply

Varun Beverages Ltd IPO

varun is still good stock as it is recovering to its issue price in no time.
Speaks of its strength. Anyhow i again purchase today at 400 Rs for long term.
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8. VALUE INVESTOR  Nov 8, 2016 12:10:10 PM IST Reply

Varun Beverages Ltd IPO

SOLD 1 lot@457 now, seems to be falling now.
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8.1. Gdhruv  Nov 8, 2016 12:15:37 PM IST

Varun Beverages Ltd IPO

Nifty is going down so is the vbl....but I must say this stock really has investors eye otherwise it''s rare for an IPO to cross the issue price even when its listed on discount.
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7. VALUE INVESTOR  Nov 7, 2016 11:25:47 AM IST Reply

PNB Housing Finance Ltd IPO

Expecting close between 840-855 for today. Just my observation. May be wrong.
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7.1. prom pay  Nov 7, 2016 2:31:45 PM IST

PNB Housing Finance Ltd IPO

what to do now sell or hold
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6. VALUE INVESTOR  Nov 7, 2016 11:23:05 AM IST Reply

PNB Housing Finance Ltd IPO

Don''t be in hurry to buy. Let US Elections get over.
Let price stabilize and discovery of price happen.
PNB Housing results on 17th Nov.
Better to take decision on more buying next week or after thursday.
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5. VALUE INVESTOR  Nov 7, 2016 10:41:21 AM IST Reply

PNB Housing Finance Ltd IPO

sold 2lots@872, 1lot@880 and 1lot@896
Happy after all tension of discount listing
made profit of 7400 after brokerage on 4 applications.
Better not to be greedy!!!!
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4. VALUE INVESTOR  Nov 6, 2016 9:05:04 PM IST Reply

Varun Beverages Ltd IPO

LinkExternal Link


US beverages and snacks major PepsiCo''s Indian arm PepsiCo India will launch five new products in the market by early 2017. The group has a major focus on nutrition and building a healthier portfolio of products.

"We are moving as an organisation towards creating a healthier portfolio. we have been working on developing products after understanding the local food palette and need for whole grains and nutrition in the Indian diet," PepsiCo India VP-Nutrition Category Deepika Warrier told PTI.

"We are looking at launching 4-5 new products by end thisyear or beginning of next year," Warrier added.
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3. VALUE INVESTOR  Oct 29, 2016 8:55:51 PM IST Reply

Varun Beverages Ltd IPO

I applied in 2 applications, but decided to make it one application at last moment and withdrawn one application at 2:58 PM on icicidirect ASBA before they went offline at 3:00 PM. I lot is OK to take risk, even if it list at 400 Rs, very unlikely 45*33= 1500 Rs. Let''s see what happens.
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2. VALUE INVESTOR  Oct 25, 2016 3:03:14 PM IST Reply

PNB Housing Finance Ltd IPO

Retail quota portion is only 15%.
So it will be difficult to get shares even if we APPLY as it is not 35%
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2.1. BAAHUBALI  Oct 25, 2016 3:14:20 PM IST

PNB Housing Finance Ltd IPO

Its almost 50% dude... IPO ki baare me Kuch padke aajao yaar
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2.2. Msharma  Oct 25, 2016 3:40:59 PM IST

PNB Housing Finance Ltd IPO

gone case.
Refer RFP

Retail Category The portion of the Issue, being not less than 35% of the Net Issue or [●] Equity Shares,
available for allocation to Retail Individual Investors, which shall not be less than the
minimum Bid lot, subject to availability in the Retail Category and the remaining Equity
Shares to be Allotted on a proportionate basis
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2.3. Durairaj,Tiruppur  Oct 25, 2016 4:46:05 PM IST

PNB Housing Finance Ltd IPO

it''s 50% including employee quote not 15%
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1. VALUE INVESTOR  Oct 17, 2016 10:13:53 AM IST Reply

Endurance Technologies Ltd IPO

selling pressure will be high on listing day. Sell and enter at lower lowels.
Listing gain will be minimal based on market conditions as not much left on table
for investors.
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