What you must know about Zenith Drugs IPO?

Tanushree Jaiswal Tanushree Jaiswal 13th February 2024 - 09:08 pm
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Zenith Drugs Ltd was incorporated in the year 2000 as a pharmaceutical company specialising in manufacturing and trading high-quality, affordable medicines. This includes generic drugs and prescription medicines. The company is in adherence with the WHO-GMP guidelines. The product portfolio of Zenith Drugs includes ORS Powder, liquid Orals, ointments; liquid externals, and capsules. As of date, the US FDA (Food & Drug Administration) has already approved over 600 products and 325 are currently already in production.

Zenith Drugs Ltd is currently setting up a new manufacturing facility near the city of Indore in the state of Madhya Pradesh. Its products are currently supplied to the regions of Asia, Africa, and Latin America. Specifically, the products reach out to countries like Costa Rica in Central America; Malawi, Mauritius, Mozambique, Sudan, Tanzania, and Sierra Leone in Africa; as well as, Bhutan , Cambodia, and Tajikistan in Asia. Its biggest business vertical is third party white label manufacturing. Some of the key clients for whom Zenith Drugs Ltd outsources include names like Ajanta Pharma, Bio Medical Laboratories, and Zest Pharma. Out of its 89 employees; 61 are on regular rolls and 28 are on contract basis.

Key terms of the Zenith Drugs IPO SME

Here are some of the highlights of the Zenith Drugs IPO on the SME segment of the National Stock Exchange (NSE).

  • The issue opens for subscription on 19th February 2024 and closes for subscription on 22nd February 2024; both days inclusive.
  • The stock of the company 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. It must be remembered that 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 Ltd 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 company has been promoted by Sandeep Bhardwaj, Bhupesh Soni and Ajay Singh Dassundi. The promoter holding in the company currently stands at 100%. Post the fresh issue of shares in the IPO, the promoter equity holding share will get diluted 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.

IPO allocation and minimum lot size for investment

Zenith Drugs Ltd has already announced the market maker allocation at 8,52,800 shares as inventory for market making. Gretex Share Broking Private Ltd will be the market maker for the IPO. The net offer (net of market maker allocation) will be divided between the retail investors and the QIB Investors, HNI / NII investors. The breakdown of the overall IPO of Zenith Drugs Ltd in terms of the allocation to various categories are as under.

Investor Category

Shares Allocated in the IPO

Market Maker Shares

8,52,800 shares (16.56% of the total issue size)

Anchor Allocation Portion

To be carved out of the QIB portion

QIB Shares Offered

21,47,200 shares (41.70% of the total issue size)

NII (HNI) Shares Offered

6,44,800 shares (12.52% of the total issue size)

Retail Shares Offered

15,04,000 shares (29.21% of the total issue size)

Total Shares Offered

51,48,800 shares (100.00% of total issue size)

The minimum lot size for the IPO investment will be 1,600 shares. Thus, retail investors can invest a minimum of ₹1,26,400 (1,600 x ₹79 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest a minimum of 2 lots comprising of 3,200 shares and having a minimum lot value of ₹2,52,800. There is no upper limit on what the QIBs as well as what the HNI / NII investors can apply for. The table below captures the break-up of lot sizes for different categories.





Retail (Min)




Retail (Max)




HNI (Min)




Key dates to be aware of in the Zenith Drugs IPO (SME)

The SME IPO of Zenith Drugs IPO opens on Monday, 19th February 2024 and closes on Thursday, 22nd February 2024. The Zenith Drugs Ltd IPO bid date is from 19th February 2024 at 10.00 AM to 22nd February 2024 at 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is 22nd February 2024.


Tentative Date

IPO Opening Date

19th February 2024

IPO Closing Date

22nd February 2024

Finalization of Basis of Allotment

23rd February 2024

Initiation of Refunds to non-allottees

26th February 2024

Credit of Shares to Demat account of eligible investors

26th February 2024

Date of listing on the NSE-SME IPO segment

27th February 2024

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account. The credit of shares to the demat account on February 26th 2024, will be visible to investors under the ISIN Code – (INE0QWN01013).

Financial highlights of Zenith Drugs Ltd

The table below captures the key financials of Zenith Drugs Ltd for the last 3 completed financial years.





Net Revenues (₹ in crore)




Sales Growth (%)




Profit after Tax (₹ in crore)




PAT Margins (%)




Total Equity (₹ in crore)




Total Assets (₹ in crore)




Return on Equity (%)




Return on Assets (%)




Asset Turnover Ratio (X)




Earnings per share (₹)




Data Source: Company DRHP filed with SEBI

Here are some of the key takeaways from the financials of the company for the last 3 years.

  • The revenues have grown at a steady pace in the last 2 years and hence the latest year revenue data shows a secular growth trend, which is a positive signal. The top line sales are up 56% over the last 2 fiscal years. The PAT margins are relatively strong at 4.50%, considering that this is an outsourcing business, where margins tend to be lower.
  • While net margins of the company have been relatively stable, it is more because the company plays more of a volume game rather than a margin game in the pharma outsourcing business. In addition, the ROE at 29.88% and the return on assets or ROA at 5.26% in the latest year are very attractive and stable.
  • The asset turnover ratio or the sweating ratio has been consistently above 1X, but with robust return on assets, even minor dips should not be a problem. Also, as the sales picks up in the coming quarters, this ratio of asset turnover will get better.


The company has latest year EPS of ₹4.29 and even through previous data may not really be comparable, the weighted average EPS of last 3 years stand at ₹3.44. The latest year earnings are being discounted by the IPO price of ₹79 per share at 18-19 times P/E ratio. However, if you look at the first half data for FY24, we are looking at a  full year annualized EPS of ₹9 per share which brings down the forwards P/E ratio to just about 8.78X.

With its established market demand and a tried and tested manufacturing value chain, the stock is in a business where investors can take a long term bet on the pharma outsourcing vertical.  The pharma outsourcing business is seeing aggressive competition, so investors are exposed to a higher level risk. Hence investors must adopt a longer term strategy on this IPO and give themselves at least over a year to see returns.

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