Onyx Biotec IPO Listing: Stock lists at 11% discount on NSE SME
Onyx Biotec
Onyx Biotec IPO Listing: A Weak Start with Losses for Investors Despite Upper Circuit Movement
Onyx Biotec, a pharmaceutical company known for manufacturing sterile water for injections, made its debut today on the SME platform of the National Stock Exchange (NSE).
This debut followed the closure of its ₹29.34 crore initial public offering (IPO), which was open for subscription from November 13 to 18, 2024.
While the IPO attracted significant attention from investors, the stock had a lackluster start, leaving IPO investors with initial losses despite a subsequent rally to its upper circuit limit.
The IPO, priced at ₹61 per share, saw a weak listing price, and even after hitting the upper circuit, IPO investors still ended the first trading day in the red.
Onyx Biotec IPO: A Surge in Demand
The Onyx Biotec IPO was met with overwhelming enthusiasm from investors. The issue was subscribed a staggering 198 times across all categories, reflecting the strong demand for the company’s shares.
The Qualified Institutional Buyers (QIB) portion was subscribed 32.49 times, the Non-Institutional Investors (NII) portion was subscribed an eye-popping 602.86 times, and the portion reserved for retail investors was subscribed 118.26 times.
This indicates a high level of investor interest and reflects the anticipation surrounding the company’s growth potential.
A total of 48.10 lakh new equity shares, with a face value of ₹10, were issued under this offering. The funds raised from the IPO are intended to support several key initiatives.
The company plans to use the proceeds to upgrade its manufacturing unit, establish a high-speed cartoning packaging line for dry powder injections, repay outstanding debt, and finance general corporate purposes.
These measures are expected to strengthen Onyx Biotec’s manufacturing capabilities and help reduce its debt load, positioning the company for future growth.
Weak Listing Despite Strong Investor Interest
Although the Onyx Biotec IPO generated significant subscription and investor enthusiasm, the stock faced a weak market debut.
Upon listing, the shares opened at ₹54.05 on the NSE SME platform, which represented a loss of 11.39% from the IPO price of ₹61.
The weak opening was a surprise to many, especially considering the strong subscription numbers and investor demand during the offering.
This early dip caused concern among IPO investors who had anticipated a more robust market performance. However, the stock did manage to make a recovery after the initial drop.
Following its weak opening, Onyx Biotec’s shares surged and hit the upper circuit limit of ₹56.75. The stock then closed at ₹56.75 by the end of the trading day, marking a 6.97% loss from the IPO price.
While the stock had rebounded from its initial dip, it still ended the first trading session in the negative, leaving IPO investors with unrealized losses.
Onyx Biotec: Strong Fundamentals and Financial Growth
Despite the lackluster debut on the stock exchange, Onyx Biotec has a solid foundation to build upon. The company, which was founded in May 2005, specializes in manufacturing sterile water for injections.
It also produces dry powder injections and dry syrups, which it sells in both domestic and international markets.
The company’s products are used by major pharmaceutical companies, with prominent clients such as Mankind Pharma and Sun Pharma.
In fact, Onyx Biotec has a wide customer base of over 100 clients worldwide, indicating the company’s robust presence in the global pharmaceutical sector.
From a financial standpoint, Onyx Biotec has experienced both challenges and growth. For the fiscal year 2022, the company reported a net profit of ₹3.35 crore, but its profits dropped to ₹1.84 crore in 2023.
However, the company’s performance rebounded in FY 2024, with net profit rising to ₹3.03 crore. Over this period, Onyx Biotec’s revenue has grown at a compound annual growth rate (CAGR) of over 9%, reaching ₹53.87 crore by the end of FY 2024.
In the current financial year (2023-24), Onyx Biotec has continued its positive momentum. For the period of April-May 2024, the company achieved a net profit of ₹1.31 crore and revenue of ₹10.54 crore.
This indicates that the company is on track to achieve steady growth in the coming fiscal year, which could improve investor sentiment in the medium term.
The Company’s Future Prospects
Onyx Biotec’s future growth prospects are closely tied to its ability to successfully implement its expansion plans.
The company intends to upgrade its manufacturing capabilities, particularly through the installation of a high-speed cartoning packaging line for dry powder injections.
This is expected to improve its production capacity and efficiency, potentially boosting its revenues in the long term.
Moreover, the company’s efforts to reduce its debt using the funds raised from the IPO should improve its financial stability and reduce interest expenses.
Onyx Biotec’s focus on producing sterile water for injections and dry syrups, both essential components in the pharmaceutical industry, positions it well to continue catering to the growing demand in both domestic and international markets.
With its existing client base of major pharmaceutical companies and a growing portfolio of over 100 clients globally, Onyx Biotec has solid growth potential if it successfully executes its plans.
The company’s recent profitability growth and revenue expansion also suggest that it is on a path toward long-term sustainability.
However, its future performance will depend on several external factors, including industry regulations, competition, and the global demand for its products.
Risks and Challenges for IPO Investors
Despite the optimism surrounding Onyx Biotec’s long-term prospects, the company’s weak debut on the stock exchange highlights the risks associated with investing in IPOs, particularly in the small and medium enterprise (SME) sector.
Stocks in this segment are known to be volatile, and investors often face significant fluctuations in prices, especially in the initial days following listing.
The 11.39% loss on the day of listing and the final 6.97% loss by the end of the trading day could serve as a cautionary tale for future investors in similar IPOs.
Although the company’s fundamentals are strong and its growth prospects are promising, short-term volatility can lead to losses for investors who are not prepared for such fluctuations.
Final Remarks: A Mixed Outcome for IPO Investors
The Onyx Biotec IPO received an overwhelming response from investors, but its stock faced a weak debut on the NSE SME platform.
While the stock eventually reached its upper circuit limit, investors who subscribed at ₹61 per share still ended the first trading day with a loss of 6.97%.
Despite this initial setback, the company’s strong financials, growth potential, and plans for expansion suggest that Onyx Biotec could offer long-term value.
However, investors should be mindful of the inherent risks in SME IPOs, where stock prices can be highly volatile in the short term.
In conclusion, while Onyx Biotec’s long-term prospects look promising, IPO investors may want to exercise caution and monitor the stock closely, particularly as the company works to execute its growth strategies and strengthen its market position.
