Zenith Drugs IPO Subscribed 179.18 times

About the Zenith Drugs IPO

The stock of Zenith Drugs IPO has a face value of ₹10 per share and it is a book building issue. The price for the book building issue is set in the price band of ₹75 to ₹79 per share. Being a book built issue, the price will be discovered in the above band. The IPO of Zenith Drugs Ltd has only a fresh issue component and no offer for sale (OFS) portion. The fresh issue portion is EPS dilutive and equity dilutive, but OFS is just a transfer of ownership and  hence it is not EPS or equity dilutive. As part of the fresh issue portion of the IPO, Zenith Drugs IPO will issue a total of 51,48,800 shares (51.488 lakh shares), which at the upper band of IPO price of ₹79 per share aggregates to fresh fund raising of ₹40.68 crore. Since there is no offer for sale (OFS) portion, the fresh issue size will also double up as the overall IPO size. Therefore, the overall IPO size will also comprise of the issue of 51,48,800 shares (51.488 lakh shares) which at the upper band IPO price of ₹227 per share will aggregate to overall IPO size of ₹40.68 crore.

Like every SME IPO, this issue also has a market making portion with a market maker inventory allocation of 8,52,800 shares. Gretex Share Broking Private Ltd will be the market maker to the issue. The market maker provides two-way quotes to ensure liquidity on the counter and low basis costs, post listing. The promoter holding in the company post the IPO will dilute from 100% to 69.98%. The fresh issue funds will be used for purchasing of machinery and equipment for setting up the new unit, block upgradation of the existing unit, and for general working capital purposes. Some part will also go towards general corporate purposes. Gretex Corporate Services Ltd will be the lead manager to the issue, and Bigshare Services Private Ltd will be the registrar to the issue. The market maker for the issue is Gretex Share Broking Private Ltd.

Final subscription status of Zenith Drugs IPO

Here is the subscription status of the Zenith Drugs IPO as at close on 22nd February 2024.

As can be seen from the above table, the overall IPO of Zenith Drugs Ltd got subscribed an impressive 179.18 times. The HNI / NII portion led the stakes with 368.77 times subscription, followed by the Retail portion at 139.28 times subscription. The QIB portion of the IPO also got a healthy subscription of 106.72 times. That is a very strong and smart response to an SME IPO, especially if you consider the median subscriptions that similar other SME IPOs have got in the past. The subscription has shown strong traction for the IPO across all the three categories of investors; QIB, retail and HNI / NII investors.

Allocation quota for various categories

The issue was open for QIBs, retail investors and the HNI / NII investors. There was a broad quota designed for each of the segments viz. the retail, QIB and the HNI / NII segments. A total of 12,88,000 shares were allocated as market maker portion to Gretex Share Broking Private Ltd, which will act as the market maker inventory to provide bid-ask liquidity on the counter post listing. Market maker action not only improves liquidity in the counter but also reduces the basis risk. The table below captures the allocation reservation done for each of the categories out of the total number of shares offered in the IPO.

In the above IPO of Zenith Drugs Ltd, the anchor allocation of 12,88,000 shares was carved out of the QIB portion, as a result of which the QIB offer to the public reduced from the original 41.71% of the issue size to 16.69% of the issue size. The anchor allocation bidding opened on February 16th, 2024 and also closed on the same day. A total of 12,88,000 shares were allocated across 6 anchor investors. The anchor allocation was done at the upper end of the IPO price band of ₹79 per share (which includes face value of ₹10 per share and premium of ₹69 per share).

The total anchor allocation value was worth ₹10.88 crore. Out of the 6 anchor investors who got allotted 100% of the anchor portion; each of them was allocated a minimum of 9% in the anchor portion. These 6 anchor investors were; Meru Investment Fund PCC – Cell 1 (29.32%), Aries opportunities Fund Ltd (19.63%), Vikasa India EIF-I Fund (16.40%), Neomile Growth Fund – Series I (14.78%), Chanakya Opportunities Fund - I (9.94%), and Moneywise Financial Services Ltd (9.94%). These 6 anchor investors accounted for 100% of the overall anchor allocation. Out of the anchor shares allocated to investors on February 16th, 2024, a lock in of 30 days will be applicable for 50% of the shares (up to March 24th, 2024) and a lock-in of 90 days will be applicable for the remaining shares (up to May 23rd, 2024). The allocation of market maker inventory of 16.56% is outside the anchor portion.

How subscription built up for the Zenith Drugs IPO

The oversubscription of the IPO was dominated by the HNI / NII followed by the Retail category and the QIB category in that order. The table below captures the day-wise progression of the subscription status of Zenith Drugs Ltd. The IPO was kept open for 4 working days.

Here are the key takeaways from the subscription numbers on a day-wise basis for Zenith Drugs IPO as of the close of the IPO on 22nd February 2024.

• The HNI / NII portion got the best subscription in the Zenith Drugs Ltd IPO at 368.77 times and it got 0.99 times subscribed on the first day of the IPO itself.
   
• The Retail portion was behind the HNI / NII portion in terms of subscription at 139.28 times overall and it got 3.42 times subscribed at the end of the first day.
   
• The QIB portion was third in the pecking order in terms of subscription at 106.72 times overall and it got 0.00 times subscribed at the end of the first day.
   
• While the QIB portion and the HNI / NII portion got fully subscribed only on the second day of the IPO, the retail portion got fully subscribed on the first day of the IPO itself. As a result, the overall IPO also got fully subscribed on the first day of the IPO itself.
   
• The overall IPO which saw subscription of 179.18 times got subscribed at 1.92 times at the close of the first day of the IPO. Let us now turn to how the last day traction on the IPO subscription played out across categories.
   
• Let us start with the HNI / NII portion. The HNI / NII portion saw the total subscription ratio moving from 7.98X to 368.77X on the last day of the IPO. That is a substantial amount of traction on the last day.
   
• Like the HNI / NII portion, even the retail portion saw very good traction on the last day of the IPO. On the fourth and final day of the IPO, the total subscription ratio for retail investors moved from 19.42X to 139.28X on the last day of the IPO.
   
• The strong last day traction was the case in the QIB investors also, which is natural as they see most of the flows on the last day. The QIB portion saw the total subscription ratio moving from 3.54X to 106.72X on the last day of the IPO.
   
• Finally, regarding the overall IPO subscription ratio, the move was obviously strongest on the last day of the 4-day IPO. The overall subscription moved from 12.43X to 179.18X on the last day of the IPO.

Next steps after the closure of the IPO

The issue opened for subscription on 19th February 2024 and closed for subscription on 22nd February 2024 (both days inclusive). The basis of allotment will be finalized on 23rd February 2024 and the refunds will be initiated on 26th February 2024. In addition, the demat credits are expected to happen on 26th February 2024 and the stock is scheduled to list on 27th February 2024 on the NSE SME segment. This is the segment, in contrast to the mainboard, where IPOs of small and medium enterprises (SMEs) are incubated. The demat credits to the demat account to the extent of allotment will happen by the close of 26th February 2024 under ISIN Number (INE0QWN01013).