1199549 SIP myths you must know!

The initial public offering (IPO) of Valiant Laboratories,  a pharmaceutical company that mainly manufactures paracetamol,  opened for subscription on 27th September, with a price band of Rs 133-140.

The offer will close on 3rd October, with the IPO intending to raise around Rs 152.5 crores via fresh issue of 10,890,000 equity shares. This will go towards funding the capital expenditure, working capital and general corporate requirements of Valiant Advanced Sciences Private Limited (VASPL), its wholly-owned subsidiary. Notably, Valiant laboratories, which is part of Aarti group of Industries, plans to set up a specialty chemicals manufacturing facility in Sakhya Industrial Area, Bharuch, Gujarat. The expenditure involved would be partly financed through the proceeds of this IPO.

There was little excitement around this IPO, with its gray market premium (GMP) being zero. GMP, which is the price at which shares are trading at before being officially listed on the exchange, are a strong indicator of investor sentiment. Here, investors are not willing to pay any premium for buying this share. As of 12 noon today, the IPO was only 16% subscribed.

Brokers are also not so exuberant about this IPO. This is because the company focuses on manufacturing a single ingredient, has a limited supplier network and a single manufacturing unit in Maharashtra. In other words, it is not equipped enough to face the intense competition in this space. While StoxBox and Profitmart Securities recommend applying for it, Swastika Investmart and Capital market recommend staying away from the issue.