Should you buy, sell, or hold it?

After a muted debut on the exchanges with a marginal 5 percent gain, shares of Innova Captab Limited gathered steam in the afternoon trade on December 29 and were locked in the upper circuit.

The stock was quoting Rs 542 in the afternoon at a premium of 21 percent to the issue price of Rs 448. Innova is an Indian pharmaceutical company involved in research and development, manufacturing, drug distribution, marketing and exports.

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What should investors who have been allotted shares of the company do? Here’s how analysts vision the Innova Captab’s listing.

“With most of the positives priced in, we advise investors to book profits on the listing day and subsequently consider investing in the company after evaluating its quarterly performance in the near term,” Prathamesh Masdekar, a research analyst at StoxBox, said. The listing missed the brokerage estimate of a 25 percent premium.

Also read: Will Innova Captab see double-digit gains on debut?

“The company’s strong brand recognition, long-term relationships and ongoing active engagements with distributors have helped the company expand its product offerings and geographic reach,” Masdekar said.

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Shivani Nyati, head of wealth at Swastika Investmart, suggests that Innova still possesses its core strengths, including a strong market position, robust financials, and strategic growth initiatives. The company has potential risks associated with the highly competitive market, regulatory environment, and currency fluctuations.

“Given the uncertain outlook, a cautious approach is warranted, and investors may exit their position, however, those who want to hold it should maintain a stop loss at the issue price,” Nyati said.

The Rs 570-crore issue comprises a fresh issuance of shares worth Rs 320 crore and an offer-for-sale (OFS) of Rs 250 crore worth of shares. Through its fresh proceeds, the healthcare company will repay debt of Rs 168 crore for its two facilities in Baddi. The company will allocate Rs 72 crore for its working capital requirements and the remainder will be used for general corporate purposes.

On the financial front, the pharma company has recorded revenue growth at a CAGR of 50.2 percent during FY21-FY23 to Rs 926.4 crore in the year ended March FY23, while the CDMO business recorded a CAGR of 35.36 percent during the same period to Rs 679.6 crore in FY23.

One of its key risks includes its dependence on China, China SEZ and Hong Kong for its raw material supplies. Any disruption due to political, economic and social conditions in greater China exposes Innova Captab, and can cause harm to its operations and financials.

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