The rally of 45 percent in the stock price of Gland Pharma is mind-boggling and this is even as investor subscription for its primary market issue was low. Though in today's trade it is trading lower by close to 4 percent.
Despite being deemed expensive at its IPO price, while retail and other HNI investors on the massive jump as against the issue price, are now lamenting not subscription to the IPO issue. They are now seen chasing it after its stock market debut.
The factors that kept these investors away in the primary market include:
1. The first is the company's backing from China that was seen as a dent with continuing India-China border row and they felt anytime the company may see some trouble coming in as per HDFC Securities.
2. Second the IPO was seen to be expensive in valuations
Runjhun Jain, a pharma analyst from Nirmal Bang, is of the view that the sudden rally in the stock could be a short term phenomena. That said, it is a good company for the long term, though it was expensive even at the IPO price. "We don't know what has happened with the stock overnight [that brought in these investors]," she said
Deepak Jasani of HDFC Securities opines that the concerns raised at the IPO time were exaggerated though the prospects for the company look going ahead. So, there are no clear answers on why the stock saw such massive jump in 2 days time. And the company has a string ANDAs pipeline and hence revenue stream is in the offing.
Besides the company is the largest and vertically integrated company in the injectables sector. "Plus, they have been very compliant and have had little regulatory issues. So, these positives were overlooked during the IPO," he said.
Ambit Capital another brokerage citing similar positives for the stock raised the target price to Rs. 2109 which the stock reached on November 23, 2020
before closing at Rs 2,091, up nearly 40 per cent over its issue price of Rs 1,500. 4
"Gland Pharma is a niche player, focused on injectables. It has a proven track record of growth and profitability along with a consistent regulatory compliance history. The prospects are bright as it has 267 Abbreviated New Drug Application (ANDA) filings, of which 215 are approved. The pharma sector is in focus and, given its strong fundamentals and promising future, there is a lot of investment interest," said Hemang Jani, head, equity strategy, broking & distribution, Motilal Oswal Financial Services.