Innova Captab share price jumps 20% after tepid listing. What should investors do?

The lackluster debut performance fell way short of expectations, which highlights the potential risks associated with the highly competitive market, regulatory environment, and currency fluctuations.

However, the stock jumped 20% post the listing to hit the upper circuit.

Innova Captab has some core strengths, including a strong market position, robust financials, and strategic growth initiatives.

“Given the uncertain outlook, a cautious approach is warranted, and investors may exit their position; however, those who want to hold it should maintain a stop loss at the issue price,” said Shivani Nayti, Head of Wealth, Swastika Investmart.

The IPO of Innova Captab received tremendous response from investors with 55.26 times subscription at close. The issue received bids of 50,16,58,245 shares against the offered 90,78,010 shares.

Innova Captab is an integrated pharmaceutical company in India with a presence across the pharmaceuticals value chain including research and development, manufacturing, drug distribution, and marketing and exports.Its business includes CDMO business providing research, product development and manufacturing services to Indian pharmaceutical companies, a domestic branded generics business and an international branded generics business.

The number of CDMO products sold by the company has grown by 131.43% from 1,066 in FY21 to 2,467 in FY23. Meanwhile, revenue from their CDMO business rose at a 35.36% CAGR to Rs 679 crore in the same period.

The company’s strengths include a leading presence and one of the fastest growing CDMOs in the Indian pharmaceutical formulations market, well-established relationships with marquee CDMO customer base, and the rapidly growing domestic and international export branded generics businesses.

However, a key risk to the business is that the company operates in a market that is highly competitive. They compete to provide outsourced pharmaceutical manufacturing services or CDMO services and products, particularly for formulations, to pharmaceutical companies in India and other jurisdictions.

In FY23, the company’s revenue from operations grew 16% year-on-year to Rs 926 crore, while profit after tax was up marginally to Rs 67.9 crore. Revenue from operations grew at 50% CAGR from Rs 410.6 crore in FY21 to Rs 926 crore in FY23.

ICICI Securities and JM Financial acted as the book-running lead managers and KFin Technologies was the registrar to the offer.

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