Hyderabad based, Gland Pharma’s IPO which closed on Wednesday received a tepid response from retail investors as compared to the blockbuster response received by some of the recent IPO’s in the last few months which included Mazagaon Dock, Angel Broking, CAMS and Happiest Minds.
From its modest beginnings in the year 1978 as a contract manufacturer of small-volume liquid parenteral products, Gland Pharma today has become one of the largest and fastest-growing injectable-focused companies in the world. A majority of the company's business is from the B2B segment and has a strong customer base spread across 60 countries around the globe, including the USA, Canada, Australia and European countries. Gland Pharma has four facilities with 22 production lines for finished formulations and three facilities for Active Pharmaceutical Ingredient (API).
The retail portion of Gland Pharma’s IPO was subscribed only 0.24 times, while the QIB portion of the IPO was subscribed 6.40 times which helped the issue to sail through.
In comparison to this, the retail portion of IPO subscribed in the case of Mazagaon Dock, Angel Broking, CAMS and Happiest Mind IPO stood at 35.63, 4.31, 5.54 and 70.94 times respectively.
So, what could be the possible reason for this tepid response of retail investors to Gland Pharma’s IPO?
Could anti-China sentiment be the reason for the tepid retail response to Gland Pharma Ipo?
Gland Pharma is a subsidiary of China’s Fosun Pharma and is the first domestic company with a Chinese promoter to list on Dalal Street.
In its red herring prospectus filed with SEBI, Gland Pharma had flagged the changing India-China political relations as a risk factor. In the filings, it had also mentioned that it could be subject to supply disruptions if future as a result of the border dispute between India and China.
Anti-China sentiment has been at an all-time high in India, especially given the current standoff with China. Twenty soldiers of the Indian army were killed in a clash with the Chinese military in the Galwan Valley of Easter Ladakh on June 15 this year, which is the first deadly clash in the last 45 years. In spite of several rounds of discussions between India and China, there are no signs of de-escalation.
Hence market experts believe that it could be a matter of wrong timing for the Gland Pharma IPO and because of current anti-China sentiment, low participation of retail investors in the IPO cannot be ruled out.
On the other hand, according to some market experts, while anti-China sentiment could be one of the reasons, the primary reason could be the high valuation. While Gland Pharma is a debt-free company with consistent growth in profit over the past three years and operates in a segment with high entry barriers, it may take some time for the share price to reach its true potential. So at this point, a high valuation could be the reason behind the tepid response from retail investors.
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