Glenmark Life Sciences IPO kicks off today: Should you subscribe?

Glenmark Life Sciences, a subsidiary of Glenmark Pharmaceuticals, is hitting the primary markets with an initial public offering (IPO) today. The three-day IPO will conclude on July 29 and it has fixed a price band of Rs 695-720 a share for the IPO.

Mumbai: Glenmark Life Sciences, a subsidiary of Glenmark Pharmaceuticals, is hitting the primary markets with an initial public offering (IPO) on Tuesday (July 27). While the total issue size is Rs 1,513 crore, the share sale consists of a fresh issue of equities worth Rs 1,060 crore and an offer for sale by promoter Glenmark Pharmaceuticals for Rs 453 crore.

The three-day IPO will conclude on July 29 and it has fixed a price band of Rs 695-720 a share for the IPO. According to the company, proceeds from the issue will be used towards payment of outstanding purchase consideration to the promoter for the spin-off of the API business and for funding the capital expenditure requirements.

Half of the total issue has been reserved for qualified institutional buyers, 35 per cent for retail investors, and remaining 15 per cent for non-institutional investors. At the upper end of the price band, the IPO will fetch Rs 1,513.6 crore. The lot size is 20 shares.

Goldman Sachs (India) Securities Private Limited, SBI Capital Markets, Kotak Mahindra Capital Company, BofA Securities India Ltd, DAM Capital Advisors Ltd and BoB Capital Markets are the lead managers to the issue. The equity shares of the company are likely to be listed on BSE and NSE on August 6.

All you need to know about the company

· Glenmark Pharmaceuticals entered API manufacturing in 2001-02 with a facility in Kurkumbh in Maharashtra, and later the pharma major spun it off, creating Glenmark Life Sciences in 2019.

· Glenmark Life Sciences is a leading developer and manufacturer of select high value, non-commoditized APIs in chronic therapeutic areas, including cardiovascular disease, central nervous system disease, pain management and diabetes. APIs refer to active pharmaceutical ingredients that are used in a finished pharmaceutical product.

· The company also manufactures and sells APIs for gastro-intestinal disorders, anti-infectives and other therapeutic areas.

· It is also into contract development and manufacturing operations services to a range of multinational and speciality pharma firms. It supplies around 50 per of the total production of 726 kl to domestic companies, of which 35 per cent is to the parent Glenmark.

· Recently, it finalised a large greenfield project in Solapur in Maharashtra in the vicinity of its Mohol plant at an estimated cost of Rs 600 crore. To be spread over 40 acres, this plant is expected to add around 800 kl of fresh capacity over the next four years. When completed fully this project will take our overall capacity to 1,726 kl

· The capacity expansion is on the back of the company’s plan to enter more regulated growth markets like Brazil, Mexico, Russia, Korea, Taiwan and Saudi Arabia

· The move is also part of the company’s bid to cash in on many global formulation makers (tablets, capsules, injectables, syrups, etc) bid to de-risk their procurement strategies by creating a new raw material source other than China.

· Currently, half of its revenue comes from exports, primarily to the highly regulated North America, Europe, Latin America and Japan.

· According to media reports, Glenmark Life Sciences also sources raw materials like chemicals and intermediates from China to the tune of 35-40 per cent but is now fast developing alternative suppliers.

· Over the years, the company has developed a 120-strong API portfolio (including those developed as part of the parent), and is adding on average 8-10 new molecules annually with its over 200 scientists/researchers.

· Currently, it has a brownfield expansion underway at Dahej in Gujarat, with a proposed Capex of over Rs 150 crore, which will drive up our capacity by 200 kilo-litres (kl) from the existing 726 kl capacity. This expansion will be fully funded by the IPO proceeds.

· In total, it operates four plants --Ankleshwar, Gujarat (511 kl), Dahej (141.9 kl), Mohol in Maharashtra (49.1 kl) and Kurkumbh in Maharashtra with (24.6 kl).

· As of May 2021, it owns/co-owns 39 patents and has 41 pending patent applications in several countries and six pending provisional applications in the country.

· For FY21, its revenue from regulated market products stood at Rs 1,237.4 crore, which was 65.6 per cent of its total revenue from operations. The global market of its 120 molecules globally was around USD 142 billion in 2020.

· It has reported a 6.15 per cent rise in its consolidated net profit to Rs 233.87 crore for the quarter ended March 2021 on account of higher sales. The company had posted a net profit of Rs 220.30 crore in the corresponding period of the previous fiscal. Its consolidated revenue from operations stood at Rs 2,859.9 crore for the quarter under consideration. It was Rs 2,767.5 crore for the same period a year ago.

· For the fiscal ended March this year, the company posted a net profit of Rs 970.1 crore as against Rs 776 crore in the previous fiscal. The company's revenue from operations stood at Rs 10,943.9 crore for the fiscal ended March 2021. It was Rs 10,641 crore in 2019-20.

· In May, the company's board recommended a dividend of Rs 2.50 per share for the financial year 2020-21.

Should you subscribe to the Glenmark Life Science IPO?

“At the upper end of the IPO price band, Glenmark Life Sciences Ltd. is offered at 25.09x its FY21 earnings, with a market cap of Rs. 8,821 crore,” brokerage firm Anand Rathi said in a note to its investors.

“Given the company’s leadership in select high value non-commercialized APIs in chronic therapeutic areas, cost leadership, strong management, strong balance sheet, growing business, high RoNW of 46.71% in the fiscal ended March 31, 2021 and reasonable valuations; we give this IPO a "Subscribe" rating,” the brokerage firm added.

(With PTI Inputs)

(Disclaimer: The data points and views provided above may not reflect the complete financial health of the company. ETV Bharat recommends its readers to do their own research before arriving at an investment decision.)