Gland Pharma up 40% in 2 days, but nobody can explain this sudden interest

Runjhun Jain, a pharma analyst from Nirmal Bang, said the surge could only be a short-term phenomenon. That said, it is a good company for the long term, though it was expensive even at the IPO price.

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Many of the investors who had come in hoards to apply for other IPOs, did not show similar interest in Gland Pharma. They are scrambling after the stock in the secondary market.
NEW DELHI: In just two sessions since its listing, shares of Gland Pharma – whose IPO was seen as expensive at its issue price and which was hurt by concerns over its China and Satyam connections – have surged handsomely. Apparently, no one has any clue why!

The 40 per cent surge in the stock over its issue price may have given complex to HNIs and retail investors, who showed little enthusiasm in subscribing to the issue (at 51 per cent and 24 per cent, respectively).

Institutional investors, too, were not that enthusiastic about the IPO when seen vis-à-vis the subscription levels seen in other issues that hit the market over the past few months. Along with retail investors and HNIs, they are now chasing the stock in the secondary market.


“Retail investors and HNIs both missed the bus. The institutional portion of the IPO had been oversubscribed, but retail and HNIs were not very keen on two counts: first, the IPO was fairly valued and second, because of the Chinese ownership as India-China border escalations have become a regular and that raised fear that the company may land up in trouble,” said Deepak Jasani, Head of Retail Research, HDFC Securities.

But why exactly is this sudden interest in the stock, when no one was willing to buy it at a huge discount to current price? There is no definite answer to this, only speculations.

Runjhun Jain, a pharma analyst from Nirmal Bang, said the surge could only be a short-term phenomenon. 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.
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Jasani thinks the concerns raised during the IPO were overblown, as the company’s growth prospects look impressive. The company has a lot of ANDAs in the pipeline and a lot of products may be launched gradually, giving revenue growth visibility. It is one of the largest and vertically integrated company in the injectables space.

“Plus, they have been very compliant and have had little regulatory issues. So, these positives were overlooked during the IPO,” he said.

Ambit Capital initiated coverage of the stock outlining similar positives with a price target of Rs 2,109, which the stock hit on Monday, before closing at Rs 2,091, up nearly 40 per cent over its issue price of Rs 1,500. During the day, the stock hit a high of Rs 2,184.

The Head of Research with a prominent brokerage firm, who also shunned the IPO, differs with other analysts. He said these concerns were legitimate and retail investors showed maturity during the IPO. “It is better to be safe than sorry,” he said.
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“For the first time, retail investors have shown maturity that we will not take excessive risk just to earn Rs 400-500. When they jump in every IPO, people say retail investors do not apply their brains. Now, everyone is questioning their intelligence,” he said but requested anonymity as he has not rated the stock in official capacity.

Many of the investors who had come in hoards to apply for other IPOs, did not show similar interest in Gland Pharma. They are scrambling after the stock in the secondary market.
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“Who are the buyers, what have they discovered in last five days that was not known during the IPO? There is definitely something that needs to be looked at,” said the Head of Research quoted above.
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