Eris Lifesciences IPO opens today; is it a 'subscribe'?

Key Highlights: 

• Eris Life Sciences IPO has raised Rs 779.43 crore from anchor investors
• Price band fixed between Rs 600 - Rs 603 per share 
• IPO consists of 2.89 crore shares

Pharmaceutical company Eris Lifesciences has begun its Rs 1741-crore initial public offering (IPO).

The issue will be open till June 20, 2017. 

Price band has been fixed at Rs 600 per share to Rs 603 per share and 2.89 crore equity shares are on offer. 

On Thursday, the company raised Rs 779.43 crore from its anchor investors by selling them 1.29 crore equity shares at the upper band.

75% of the IPO issue is being offered to qualified institutional buyers, while 15% is for non-institutional investors and remaining 10% for retail investors.

Yogesh Hotwani analysts at Motilal Oswal said, “We remain positive on the company and we believe it deserves premium valuation as 1) it is high growth story led by significant focus on lifestyle related disorders, 2) significantly higher margins, 3) debt free status and 4) superior return profile of 45%+ both ROEs and ROCEs. Hence we recommend to SUBSCRIBE for long term investment.”

Pankaj Panday, Head Research at ICICI Securities said, “At the upper band of Rs 603, the stock is available at 34.3x FY17 EPS of | 17.6. We has assigned SUBSCRIBE recommendation.”

Quoting for subscribe, Chaturya Aggarwal analysts at IDBI Capital mentioned, “While at the upper band PER of 36.9x FY17 is at a premium to its peers and is expensive in the current pharmaceuticals environment, we believe that it provides good investment opportunity for long-term as it has the potential to deliver higher growth than the industry.”

BP Wealth said, "On the global front, since Eris Lifesciences has no revenue from exports it is safe from any USFDA issues."

However, Payal Pandya and Siddhartha Khemka of Centrum also higlilighted few risk factors.

The duo said, “Any slowdown or demand-side issues in any of the top 10 products could hamper the growth considerably. Also any disruption in production at, or shutdown of, the only manufacturing facility could adversely affect the business, operations and financial condition.”