Emcure Pharmaceuticals IPO: 10 key risks investors should consider before subscribing to the 1,952-crore issue

Emcure Pharmaceuticals IPO sails through first day of bidding smoothly led by non institutional and retail investors. The Pune-based firm's issue get fully subscribed on the day 1 itself.

The IPO consists of a new issue of equity shares valued at ₹800 crore and an offer of sale (OFS) by promoters and current shareholders for 1.14 crore equity shares, valued at ₹1,152 crore, at the top end of the price range. The overall public size as a result comes to ₹1,952-crore.

Among those selling shares in the OFS are investor BC Investments IV Ltd., a division of US-based private equity behemoth Bain Capital, and promoter Satish Mehta. Right now, BC Investments has 13.07% of the company's equity, while Satish Mehta has 41.85%.

Also Read: Emcure Pharmaceuticals IPO opens today: GMP, subscription status, review, other details. Apply or not?

The new issue's proceeds will be applied to general company operations and debt repayment.

Brokerage firms have estimated that the company's post-issue market capitalisation will exceed ₹19,000 crore, according to news reports.

A wide range of pharmaceutical treatments spanning numerous important therapeutic areas are developed, manufactured, and marketed internationally by Emcure Pharmaceuticals, a Pune-based company.

Also Read: Emcure Pharmaceuticals IPO: Shark Tank’s Namita Thapar likely to earn ₹127 crore from OFS

Here are some of the key risks listed by the company in its Red-Herring Prospectus (RHP):

• The company's reputation, business, financial situation, and operational outcomes might all suffer as a result of manufacturing or quality control issues. They could also be the target of regulatory action, lawsuits, and other penalties.
• Product liability lawsuits may arise from the company's noncompliance with appropriate quality standards, thereby having a negative impact on its operations, cash flows, business, and financial standing.
• The production and research and development operations of the organisation are vulnerable to operational hazards. Their business, financial situation, and operational outcomes might be negatively impacted by any halt or delay in their manufacturing or R&D activities.
• The supply and pricing of their products may be negatively impacted by any disruptions in the availability of these resources or by price hikes for the completed goods that they outsource. This might have a knock-on effect on their cash flows, business, financial situation, and operational outcomes.
• The company's business, financial condition, operational performance, and cash flows might all suffer if they are unable to fulfill their commitments, including financial and other covenants under their debt financing agreements.

Also Read: Emcure Pharma IPO: Here’s what GMP signals ahead of opening for subscription

• The company's business, financial situation, operational outcomes, and cash flows might all suffer as a result of their incapacity to effectively manage their inventory and estimate product demand.
• The company's profits and profitability might suffer if they are unable to increase output and the current rate of capacity utilisation at their manufacturing plants.
• Despite having demerged its US business, the firm is still facing huge losses and liabilities due to continuing civil procedures in the US, including class-action antitrust litigation and complaints brought by US state attorneys-general.
• Their goodwill and operational outcomes may suffer from the availability of counterfeit pharmaceuticals, such as drugs that are sold as their goods by others.
• Due to its global activities, the firm is subject to a variety of complicated managerial, legal, tax, and economic risks that might have a negative impact on their operations, finances, and overall business performance.

Also Read: Emcure Pharmaceuticals IPO sets price band at ₹960-1,008 apiece; Namita Thapar to offload stake partially

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.