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The proceeds from the IPO will be utilised for purchasing of equipment required for capacity expansion of the facility at Dehradun Plant -IV and addition of injectables dosage capability at the facility at Dehradun Plant-II.

Initial public offer (IPO) by Windlas Biotech, a manufacturer of pharmaceutical formulations, is set to hit the primary market on August 4 to raise around Rs 401 crore. The company has fixed a price band of Rs 448-460 a share for its initial share-sale. The three-day IPO will conclude on August 6.

The IPO comprises fresh issuance of equity shares worth Rs 165 crore and an offer for sale of up to 5,142,067 equity shares. As a part of the OFS, Vimla Windlass will offload 11.36 lakh equity shares, and investor Tano India Private Equity Fund II will sell 40,06,067 equity shares.

The proceeds from the IPO will be utilised for purchasing of equipment required for capacity expansion of the facility at Dehradun Plant -IV and addition of injectables dosage capability at the facility at Dehradun Plant-II.

Should you subscribe the IPO?

Marwadi Shares and Finance: Subscribe

Considering the FY21 adjusted earnings per share (EPS) of Rs 7.14 on the post-issue basis, the company is going to list at a P/E of 64.39 with a market cap of Rs 1002.5 crore. There are no listed companies in India that engage in a business similar to that of the company. Hence, it is not possible to provide an industry comparison in relation to the company. Marwadi Shares and Finance assigns the “Subscribe” rating to this IPO as the company is one of the leading contract development and manufacturing organisation (CDMO) players with an innovative portfolio of complex generic products supported by robust research and development capabilities and has quality compliant manufacturing facilities with significant entry barriers.

Sharekhan: Strong growth prospects

At the IPO price band of Rs 448-460, the offer is priced at 52.4x / 53.8x its FY2021 reported EPS (at its lower / upper price band). The domestic formulations CDMO industry is projected to grow at a CAGR of around 14% over FY2020 to FY2025. Windlas is among the few players with a wide range of CDMO offering in the formulations segment in India with experience in providing customer-centric additive manufacturing solutions. Windlas is well placed to capture this growth opportunity and expand its customer base. The foray in the injectables space will complement its existing CDMO offerings and enable to achieve higher margins while the business to business model also allows an opportunity for scaling up operations. Thus, the growth prospects for the Windlas are strong.

Dilip Davda, Chittorgarh.com: Invest for long term

Primary market watcher Dilip Davda said that despite growth in its top lines, Windlas has posted declining trends for bottom lines in order to clear its slate. Based on its financial parameters, the issue is aggressively priced. All recent moves will take about two years to be on a fast forward mode. Thus it is purely a long term bet at the current valuations that discounts all near term positives. Cash surplus investors may consider it with a long term perspective.