3 min read.Updated: 22 Jul 2016, 08:31 AM ISTAnkit Doshi
The firm plans to raise `412 crore in the IPO and has fixed a price band of `880-896 per share, through which it is looking to raise around `412 crore
The Advanced Enzyme Technologies Ltd initial public offering (IPO) which opened on Wednesday has received demand for 4.27 times the number of shares on offer, stock exchange data showed.
The enzyme manufacturing, research and development company is planning to raise ₹ 412 crore in the IPO. It has fixed a price band of ₹ 880-896 per share for the IPO, through which it is looking to raise around ₹ 412 crore.
As of 5.30pm, financial institutions had bid for 5.9 times the number of shares set apart for them, while categories for retail investors and high net-worth individuals (HNIs) were subscribed 4.89 times and 0.83 times (83%), respectively.
On Wednesday, the first day of the issue, investors had bid for 89% of the shares on offer. The public offer closes on Friday.
In Mumbai’s grey market, Advanced Enzyme Technologies’ shares were quoting at a premium of ₹ 300-320, two dealers familiar with the matter said, on condition of anonymity.
Advanced Enzyme is engaged in manufacturing, marketing, research and development of 400-plus proprietary products developed from enzymes.
Investment banks Axis Capital Ltd and ICICI Securities Ltd are managing the sale. On Tuesday, the company allotted shares worth ₹ 122.85 crore as part of its anchor book allotment ahead of the IPO.
The anchor book is that portion of the IPO which bankers can sell to institutional investors on a discretionary basis. Anchor book subscription opens a day before the IPO and acts as an indicator of institutional investor interest.
Shares were allotted to the anchor investors at the upper end of the price band of ₹ 896 per share.
A total of 15 institutional investors participated in the company’s anchor book allocation. DB International (Asia) Ltd and Kuwait Investment Authority were the foreign investors in the anchor book. HDFC Mutual Fund, Reliance Capital Ltd, ICICI Prudential Life Insurance, SBI Life Insurance, Birla Sun Life and L&T Mutual Fund were among the domestic investors who picked up a stake in the anchor book allotment.
Domestic brokerages have recommended clients to subscribe to the issue citing the company’s business structure, size of operations as well as the inexpensive valuations compared with global peers.
“At the higher price band, Advanced Enzyme’s shares are valued at a P/E multiple of 25.5x (to its restated FY16 EPS). There is no listed peer in the domestic market. Its global peer Novozymes A/S, which is also the global market leader, is trading at a P/E multiple of 35x (to its trailing twelve months earning). Taking into consideration the profitability profile of Advanced Enzyme and valuation discount to Novozymes A/S, we feel that there is a significant upside potential post listing of the shares," said Choice Equity Broking Pvt. Ltd in a note to investors on 19 July.
The public offering of Advanced Enzyme is a mix of primary fund-raising and a secondary share sale by existing investors. The company is looking at raising ₹ 50 crore in primary capital through the IPO, which will be used for investment in its US subsidiary for repayment of certain loans.
In 2015-16, the company reported a revenue of ₹ 294.6 crore, up from ₹ 224.2 crore the previous year, while profit rose to ₹ 78.4 crore from a year ago.
The Advanced Enzyme’s share sale comes at a time when the IPO market has seen significant momentum in the last few weeks. On 1 July, the IPO of integrated business services provider Quess Corp. Ltd (QCL) received subscriptions that were 144.31 times the issue size of ₹ 400 crore, registering the fifth highest overall subscription (in percentage terms) for any IPO since 2000.
Last week, L&T Infotech Ltd’s ₹ 1,243 crore IPO was subscribed more than 11 times.
So far this year, 13 companies have raised around ₹ 9,425.5 crore through IPOs, while last year, 21 firms raised ₹ 13,614 crore from their initial share sales, according to data from Prime Database, a primary market tracker.