Alkem Laboratories (Alkem) IPO Update

ALKEM chart by TradingView

Alkem Laboratories (Alkem) is coming out with an initial public offering (IPO) to raise Rs1,315-1,355 crore from the equity market at a price band of Rs1,020-1,050 per equity share. Since the offer is being made through offer for sale, the proceeds from the offer will be remitted to the respective shareholders. The company will not receive any proceeds from the offer.

At the price band of Rs1,020-1,050, the issue is priced at 26-27x price earnings (PE) ratio for FY2015 (discount to its listed peers like Cadila, Lupin and Torrent) whereas, on EV/EBITDA basis, it is offered at 24.8-25.5x EV/EBIDTA for FY2015 (15x on FY2016 annualised EBIDTA) which is in line with the listed comparable companies. However, the company has shown a significant improvement in its growth trajectory and margin profile in the first half of FY2016 which makes it appear relatively attractive if the company is able to maintain the growth momentum and sustain higher margins.

Verdict

You must go for this IPO as this is a good stock to stay invested for years.

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