The launching of Onyx Biotec Stock of any company in the market is one of the most eagerly awaited by investors. Many believe that it is the final culmination of the efforts of any company to prepare itself for a new growth chapter, and it is going to be publicly traded, up for anyone to own. However, Onyx Biotec’s market debut on November 22, 2024, didn’t live up to expectations. The stock made a weak start, listing 11.5% below its issue price. In this blog, we’ll explore the details of Onyx Biotec’s IPO listing, the performance of the stock on its debut day, the investor response during the offering, and the company’s prospects going forward.
Onyx Biotec’s Stock Market Debut
On November 22, Indian pharmaceutical company Onyx Biotec debuted on the National Stock Exchange’s SME platform. However, it wasn’t the strong market performance that many had hoped for. The stock of the company opened at ₹54 per share-11.5% lower than the issue price of ₹ 61 on its very first day of listing.
These market dynamics, investor sentiment, and external economic conditions combined to make this a weak debut at the time of listing and received a very tepid response. Surprisingly, though, the stock managed to recover somewhat with gains of 5% soon after listing to ₹56.75 per share.
While the 5% rebound from the initial correction was reassuring, the opening loss of 11.5% below the issue price was certainly a body blow. For investors who subscribed to the IPO at ₹61, this initial correction was discouraging, but recovery suggests more gains in offing later, which would depend on the performance of the company post-listing.
Onyx Biotec IPO: Strong Investor Demand but Poor Market Reception
The storyline of the IPO is important to discuss after summarizing why its debut was weak. Notably, the SME IPO by Onyx Biotec, valued at ₹29.34 crore, witnessed considerable interest from investors in advance. Its IPO was open between November 13 and November 18, 2024, within a price band of ₹58 to ₹61 per share. The offering had attracted powerful interest, and the overall IPO was oversubscribed by 198 times. This shows that though the initial listing was weak, the investors’ demand for Onyx Biotec’s stock was highly excellent.
Details of the oversubscription:
The non-institutional investor lot was subscribed 602 times
The subscription of the lot from the retail investor was 118 times.
The QIB lot was booked 32.49 times.
These figures reflect the enormous level of interest exhibited by investors, especially by non-institutional investors and retail investors. High demand can be ascribed to their confidence regarding the company’s prospects and its business model. The fact that this investor enthusiasm at the IPO is matched with poor listing on the exchange suggests that there may be some exogenous factors underlying the post-IPO market dynamics, which include general market conditions and market sentiment concerning the pharmaceutical sector.
What was Onyx Biotec’s IPO meant for?
The money raised from the IPO would be planned for several key purposes that would help the company enhance its operations and further expand its business. The company, Onyx Biotec, said in its DRHP, or Draft Red Herring Prospectus, it would use the net proceeds of the issue towards:
1. Upgradation of Manufacturing Units:
Upgrade the existing Manufacturing Unit I to produce high-volume parenteral for intravenous applications where the existing capacity of the company will meet the growing demands.
2. Installation of High-Speed Packaging Line:
The amount collected will help to add a high-speed carton packaging line in its dry powder injection at Manufacturing Unit II to further enhance manufacturing capabilities.
3. Repayment of Loans:
Onyx Biotec would use the net proceeds to prepay or repay part of its outstanding loans, thus strengthening the company’s financial well-being and helping reduce debts.
4. General Corporate Purposes:
The residual funds were intended for general corporate purposes, which may involve new business opportunities, investments, or operational improvement measures.
This strategic focus on upgrading manufacturing facilities and reducing financial liabilities points out Onyx Biotec’s commitment to enhancing its production capabilities as well as streamlining the operations for future growth.
Onyx Biotec: Company Overview
Onyx Biotec is an Indian pharmaceutical company primarily engaged in manufacturing sterile water for injections and also working as a pharmaceutical contract manufacturer. The company provides a full range of dry powder injections and dry syrups to the Indian market and international markets. Currently, it operates two state-of-the-art manufacturing facilities located in Himachal Pradesh:
Manufacturing Unit I:
This site can produce 6,38,889 units of sterile water for injection in a day.
Manufacturing Unit II:
this site can manufacture 40,000 units of dry powdered injection in one day and 26,667 units of dry syrups in one day.
The company has thus managed to forge strong relationships with several strategic customers, including the most active names in the pharmaceutical market, such as Hetero Healthcare Limited, Mankind Pharma Limited, Sun Pharmaceutical Industries Limited, and Macleods Pharmaceuticals Limited among others. These long-established relationships are evidence of the company’s ability to deliver high-quality products that have been meeting market demands for a long period.
The company offers critical products for intravenous use, and the steady demand for such products will provide a solid underpinning for growth from both domestic and international markets. This will be particularly pertinent during a time when healthcare and pharmaceuticals continue to draw increased interest due to the persistent health issues the world is facing.
Effect of Listing Performance on Onyx Biotec Stock
Indeed, the weak listing of Onyx Biotec’s stock elicited some raised eyebrows in the market. However, stock prices are influenced by a series of factors in the short term, and thus the post-listing performance does not typically predict the long-term prospects of a company.
Factors Influencing the Listing Performance
While the overall market sentiment is a strong contributor to the performance of the stock post-listing, an IPO can certainly go through a test phase during which the stock price plummets regardless of how very strong the fundamentals of the company are and even with positive investor sentiments during the IPO.
Sector-Specific Sentiment:
The pharmaceutical sector is always significant in an economy, often subject to regulatory issues and price controls as well as competition. News and other factors that will affect the entire sector may likely affect investor sentiment toward stocks such as Onyx Biotec.
Liquidity Concerns:
In the context of small and mid-sized companies, liquidity concerns might be another factor influencing the post-listing performance. A lower number of traded shares would sometimes lead to sharp price fluctuations, especially when market indicators do not reflect any trend or catalyst that would drive the stock price up.
Market Environment/Events:
Factors such as interest rate shifts, inflationary expectations, and geopolitical risks can create a negative market environment, driving investor sentiment downwards and thus driving volatility in their respective stock prices.
Even though it did take a dip initially, the 5% recovery suggests that it would find some support at some level, especially if the company can implement its growth plans appropriately. Investors will see how Onyx Biotec does with its manufacturing upgrades, pays off its debt, and gains contracts to further add to its current partnerships.
Future Outlook for Onyx Biotec Stock
Onyx Biotec’s future remains strong for several reasons:
Strong Client Base:
The company’s established relations with major pharmaceutical companies, along with the diversity in its portfolio of injectable and sterile products, gives it a significant market position to capitalize on the growing demand for healthcare products not just in India but also globally.
Infrastructure Expansion:
Upgrades to Onyx Biotec’s manufacturing facilities will increase its capacity for the mass production of sterile and injectable products, which are in increasing demand by hospitals, healthcare providers, and other pharmaceutical companies.
Debt Reduction:
Instead, the company’s focus on reducing its debt using the money raised from an IPO will have positive implications on the balance sheet and give the company greater flexibility in terms of finance to support future expansions.
Pharma Industry Growth:
The pharmaceutical sector is not only increasing rapidly in the domestic markets but also in the international ones. With competitive pricing and high-quality manufacturing capabilities, Onyx Biotec looks to avail substantial opportunities brought about by this growth.
Global Market Opportunity:
A combination of Onyx Biotec’s success in the domestic market with its efforts in establishing itself in the international markets gives enough scope for growth.
Conclusion: Buy Onyx Biotec Stock?
Onyx Biotec Stock made a very weak debut, but certainly, with an intact long-term growth story, Onyx Biotec might still attract the investors who are hoping to gain on the infrastructure up-gradation of the company, debt reduction, and expanded market reach.
The recovery in the stock price after its first drop suggests promise for future growth, and if the company delivers on promises of modernization and expansion, it may become one of the rising pharmaceutical manufacturing sector companies.
Nevertheless, investors should always consider their risk tolerance and due diligence before making investment decisions. With a strong improving sector like the healthcare sector, a commitment by Onyx Biotec to quality manufacturing and strategic growth could give a huge upside over the future years.
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