Citi Pharma attracts Rs2.3b in IPO

Citi Pharma Limited (CPL) - the manufacturer of Paracetamol - has attracted investment of Rs2.33 billion by selling 72.69 million shares to the institutional, rich and retail investors at the Pakistan Stock Exchange (PSX).

The company sold shares at a price of Rs32 per share. It determined the share price during the two-day (Tuesday and Wednesday - June 15 and 16) auction (book-building process) at the bourse. It began the auction at Rs28 per share.

The price of Rs32 per share is 14% higher compared to the floor (minimum) price at which the auction began (Rs28 per share) on Tuesday.

According to the rules in place, the share price was allowed to increase by a maximum of 40% to Rs39.2 per share from the floor price of Rs28 per share during the auction. The company’s existing revenue mainly comes through one active pharmaceutical ingredient (API), ie Paracetamol.

According to the company prospectus, “Citi Pharma is planning to expand its existing pharmaceutical capacities drastically and is also introducing new products.”

“We received total participation of approximately Rs4 billion against the issue size of Rs2 billion (at a floor price of Rs28 per share) - an oversubscription of two times,”

Topline Securities, the lead manager and book-runner of the issue of shares, said in post-auction comments. The offer of shares by Citi Pharma Limited was the third initial public offering (IPO) since the beginning of 2021. It was the first IPO in the pharmaceutical sector in three years and the second pharmaceutical IPO in 26 years, the securities’ firm said.

“It is also the largest IPO (in terms of raising investment) amongst the last three issues,” it added.

According to the rules, the company booked to sell all 72.69 million shares to the institutional and high net-worth individual investors during the two-day auction (bookbuilding process). However, it would initially sell only 75% of shares (or 54.52 million) to them. In the second phase of the IPO, it would offer the remaining 25% of shares (or 18.17 million) to retail investors at a determined price of Rs32 per share on June 23-24.

In case of low participation by the retail investors, the company would sell the remaining shares to the remaining successful institutional and high net-worth individual investors. Later, CPL would be listed at the PSX and its shares would be publicly available for trade at the bourse.

The company earned a net profit of Rs168.54 million in the first half (Jul-Dec) of current fiscal year compared to the net profit of Rs145.63 million in the previous fiscal year (FY20), according to the prospectus.

“In the wake of Covid-19 pandemic, demand for Paracetamol witnessed a surge. Moreover, health awareness and health spending also increased. Hence, CPL intends to expand their existing capacity of 3,600 tons of Paracetamol per annum to 6,000 tons per annum,” it said.

“Further to this, CPL plans to add new APIs to its existing product line, which include Ascorbic Acid, Chloroquine Phosphate and Hydroxychloroquine Sulfate; subsequently, these will also add formulation products of the same to the company’s portfolio.”

The company has a large client base including many international and local pharmaceutical and healthcare companies, eg GlaxoSmithKline Pakistan Limited, The Searle Company Limited, Abbott Laboratories (Pakistan) Limited and Novartis Pharmaceuticals Pakistan.