IPO Alert! 3 Companies Including PharmEasy Get the Green Light

2021 was a ground-breaking year in terms of initial public offerings (IPOs). But 2022 has kicked off on a sour note.

Over the last few weeks, Indian stock market has been turbulent.

Investors are facing geopolitical risks, imminent interest rate hikes by the US Fed, high inflation, supply chain disruptions, a liquidity crunch, and peak valuations. This is bound to affect the primary and secondary markets adversely.

While the markets may remain choppy for some time, an attractive lineup of IPOs has already been announced.

According to media reports, there as many as 35-40 companies in the pipeline for the year 2022 to make their market debut. The state-owned Life Insurance Company's IPO will be the largest with a valuation of Rs 15 tn.

Moreover, the strong momentum in India's IPO market is poised to continue with the approval of three IPOs by the market regulator.

API Holdings - the parent company of online pharmacy PharmEasy - Wellness Forever Medicare, and CMR Green Technologies were among the firms that received approval.

Let's take a closer look at these three IPO bound companies.

1. API Holdings (PharmEasy)

API Holdings, the parent of e-pharmacy firm PharmEasy, on Monday said it has received approval from the market regulator to raise Rs 62.5 bn through an IPO.

The offer is going to be the primary issuance of equity shares and does not have an offer for sale (OFS). This essentially means the existing shareholders of API Holdings will not sell their stakes.

The company will use Rs 19.3 bn from the IPO proceeds to repay or pre-pay borrowings and Rs 12.6 bn to fund organic growth initiatives. It will also allocate Rs 15 bn on inorganic growth opportunities through acquisitions and other strategic initiatives.

PharmEasy may also consider a private placement aggregating up to Rs 12.5 bn. If such placement is completed, the fresh issue size will be reduced.

PharmEasy is one of the largest e-pharmacy firms in the country. It recently acquired a majority stake in Thyrocare Technologies. This deal was considered as the first-ever acquisition of a publicly listed firm by a unicorn startup in India.

The approval comes amid speculation that PharmEasy may postpone its IPO due to market volatility, which has been particularly harsh on the shares of new age firms that went public last year.

The online pharmacy company had filed its draft red herring prospectus (DRHP) with the regulator in November last year. This was on the back of a slew of public offers and listings of new age companies such as Nykaa, Zomato, PolicyBazaar, and Paytm.

PharmEasy, which was founded in 2015 by Dharmil Sheth and Dhaval Shah, claims to link more than 60,000 pharmacies and 4,000 doctors in 16,000 pin codes across the country. The startup claims to have served over 20 million consumers.

It reported a net loss of Rs 6.4 bn in the financial year 2021 against a Rs 3.4 bn loss in the previous year.

2. Wellness Forever Medicare

Wellness Forever Medicare is another healthcare firm whose IPO papers have been accepted by the market regulator. The Adar Poonawalla backed pharmacy chain is planning to raise Rs 15-16 bn.

It filed draft papers with the regulator on 1 October last year. The IPO consists of a fresh issue of equity shares aggregating to Rs 4 bn and an OFS up to 16 million equity shares, as per the DRHP.

As part of OFS, up to 7.2 lakh equity shares will be offloaded by Ashraf Mohammed Biran, up to 7.2 lakh equity shares by Gulshan Haresh Bhahtiani, up to 1.2 lakh equity shares by Mohan Ganpat Chavan, and up to 14.5 lakh equity shares by other existing shareholders.

The company proposes to use the net proceeds from the fresh issue to the tune of Rs 702 m for funding capital expenditure to set up new outlets, repayment or prepayment in part or full of certain borrowings amounting to Rs 1 bn, funding its working capital requirements to the extent of Rs 1.2 bn besides general corporate purposes.

Recently, the pharmacy chain announced the nomination of three new independent directors - Avani Davda, Ranjit Shahani, and Kewal Handa - to its board of directors, with broad experience in banking, healthcare, and retail.

Wellness Forever Medicare is India's third-largest retail pharmacy and wellness network by number of stores, with a leading position in western India in revenues. They operate a large omnichannel, hyperlocal retail network under their 'Wellness Forever' brand, serving as a one-stop solution for their customers' wellness needs with most of their stores operating 24x7.

As of 30 June 2021, it serves a registered customer base of 6.7 million customers. It now intends to deepen its penetration in tier 2 and 3 markets. It will also participate in the growing e-commerce pharmacy segment which is expected to grow at a 45% compounded annual growth rate (CAGR).

3. CMR Green Technologies

Along with these two companies, market regulator gave the green light to CMR Green Technologies as well to float its IPO.

According to the DRHP, metal recycling company CMR Green Technologies has offered to raise funds through an initial share sale of a fresh issuance of equity shares worth Rs 3 bn and an OFS of 3,34,14,138 equity shares by promoters and investors.

Those offering shares in the OFS include promoters - Gauri Shankar Agarwala who will sell 3.4 m equity shares, Kalawati Agarwal will offload up to 3.3 m equity shares and Mohan Agarwal and Pratibha Agarwal will divest up to 3 m equity shares each - and investor - Global Scrap Processors - will sell up to 19.9 m equity shares.

The proceeds from the fresh issue will be used for payment of debt and general corporate purposes.

The company filed preliminary papers with capital markets regulator in September 2021.

CMR Green Technologies is one of the leading metal recyclers in the domestic aluminium recycling industry. It's primarily focused on the recycling of aluminium.

Among the major key end-use industries, the automotive industry forms a large portion of total volumes of secondary aluminium in India. This demand is expected to grow at 14-15% CAGR over fiscal 2021 and fiscal 2025.

Should you bid for any upcoming IPOs?

After a record-breaking year, the BSE IPO Index, which tracks firms for two years since their listing, has plunged about 21% since the start 2022. It's headed for its worst month since March 2020.

One out of every three IPOs this financial year is presently trading below its offer price.

Among the top losers, CarTrade Tech and One97 Communications (Paytm) suffered the maximum value erosion with shares trading more than 60% below the issue prices.

India's new stock listings are losing their edge due to inflated valuations. In the last few months, market participants have become more cautious due to a sell-off in the markets.

Before investing in any IPO, investors must evaluate many aspects. It's important to remember, like the stock market, IPOs come with risks. Due diligence is essential before investing in them.

There are some precautions you can follow before investing in IPOs. These include studying the company's business, reading the prospectus, and understanding its financial health.

Also evaluate the post-listing valuation of the stock, the background of the promoters, the key management team and all the risk factors.

In the long run, a knowledgeable and well-informed investor always wins.

To know more, check out the current and upcoming IPOs.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...