Home >Money >Personal-finance >Syngene debut lifts hopes for other IPOs

Shares of Syngene International Ltd debuted at a more than 24% premium to the issue price on Tuesday, lifting hopes of other firms waiting to hit the market.

The initial public offer (IPO) of the research arm of Biocon Ltd, which was open for subscription from 27 July to 29 July to raise up to 550 crore, was subscribed more than 32 times.

The issue was the second largest to hit the market this year, after Inox Wind Ltd.

Syngene’s current market capitalization is $966.98 million.

Syngene shares on Tuesday closed 24.16% higher at 310.40 on the BSE, while parent Biocon lost 0.71% to end at 461.90.

The BSE’s 30-share benchmark Sensex closed 0.84% lower at 27,866.09 points.

“Syngene was a good quality IPO. Not only does the pedigree matter, but also the business model was good. It is still a good investment, from a long-term perspective," said Amisha Vora, joint managing director at Mumbai-based brokerage Prabhudas Lilladher Pvt. Ltd.

The IPO, the first by a pharmaceutical firm in five years, had raised 150 crore from anchor investors, and the issue price for the IPO was 250 per share.

A contract research organization, Syngene has played a key role in boosting Biocon’s revenue and profitability in the past few years, especially when the growth in the bio-pharmaceutical business remained flat.

Syngene’s revenue rose 31.5% to 234 crore in the quarter ended 30 June, accounting for a little less than a third of the biotechnology firm’s total revenue.

In other ongoing issues, the public offer of Power Mech Projects Ltd, a power infrastructure services company, was subscribed about 38 times on the last day of offer. Some of the prominent upcoming public offers include InterGlobe Aviation Ltd (IndiGo airlines), Coffee Day Enterprises Ltd (Cafe Coffee Day) and Matrix Cellular (International) Services Ltd.

“The environment is such that good quality issues will receive excellent response. Quality will be of extreme importance from here," said Vora.

Among the nine IPOs that have listed in 2015, six are trading with gains, compared to their issue prices, while three are in the red.

Gains are the highest for VRL Logistics Ltd, which is trading 91.02% above its issue price.

The worst performer has been Adlabs Entertainment Ltd, which is down 14.89% from the issue price. Still, the relatively strong performance by most new listings could be encouraging for a long list of upcoming IPOs.

At least four companies are testing the waters in the capital market this month, and could collectively raise a little over 1,700 crore through IPOs, Mint had reported on 6 August.

The four companies are Power Mech Projects ( 273 crore), Pennar Engineered Building Systems Ltd ( 160 crore), Navkar Corp. Ltd ( 600 crore) and Prabhat Dairy Ltd ( 700 crore).

While Power Mech’s IPO concluded on Tuesday, the others are yet to announce a date.

“Typically, there are four stages of the IPO market. The first phase is good companies with good prices; the second phase is when good companies come in at a bad (high) price; the third stage is when bad companies come with good prices, and the fourth phase is when bad companies hit the market with bad prices," said Prithvi Haldea, founder chairman, Prime Database, a primary market tracker.

According to Haldea, when the IPO stream starts, the first phase is usually about strong firms with reasonable valuation, adding that only then they are able to attract investor interest.

“We are in the initial stages of first phase of the IPO bull run. So, for now, the companies that are coming in are mostly good ones, and are leaving enough on the table for investors. They will continue to see good demand for IPOs and that will also results in decent gains, post-listing," said Haldea.

So far this year, nine companies have raised 4,377.1 crore through IPOs, which is more than what was raised in the previous two years.

Also, 24 firms have filed their draft IPO papers for the year to date. The last time the primary market saw such activity in terms of the number of IPOs was in 2011.

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