Evaluating Emcure Pharmaceuticals Ltd IPO opportunity; Should you invest?

Evaluating Emcure Pharmaceuticals Ltd IPO opportunity; Should you invest?

Mandar Wagh
/ Categories: Trending, IPO, IPO Analysis

In this analysis, we take a closer look at Emcure Pharmaceuticals Ltd and present you with the exclusive IPO details.

About the Issue:  

Emcure Pharmaceuticals Ltd is set to launch its initial public offering (IPO) for equity shares, each with a face value of Rs 10. The IPO price range is set between Rs 960 and Rs 1,008 per equity share, resulting in a total issue size of Rs 1,952.03 crore at the upper price band.  

The IPO is scheduled to commence on July 03, 2024, and will conclude on July 05, 2024. The market lot size for the IPO is 14 shares, with the option to apply for multiples of this lot. Individual retail investors have the opportunity to apply for a maximum of 14 lots, equivalent to 196 shares or a total investment of Rs 1,97,568 assuming the upper price band.

IPO Details
IPO Opening Date  July 03, 2024
IPO Closing Date  July 05, 2024
Issue Type  Book Built Issue IPO
Face Value Rs 10 per equity share
IPO Price  Rs 960 to Rs 1,008 per equity share
Min Order Quantity  14 shares
Listing At  BSE, NSE
Total Issue 19,365,346 shares of FV Rs 10*
(Aggregating up to Rs 1,952.03 Cr)*
Fresh Issue 7,936,507 shares of FV Rs 10*
(Aggregating up to Rs 800 Cr)*
Offer for Sale 11,428,839 shares of FV Rs 10*
(Aggregating up to Rs 1,152.03 Cr)*
QIB Shares Offered  50% of the Offer
Retail Shares Offered  35% of the Offer
NII (HNI) Shares Offered 15% of the Offer
*At Upper Price Band  

Objects of the Issue  

The offer encompasses both the fresh issue and the offer for sale. It's important to note that the company will not accrue any proceeds from the offer for sale. The company plans to allocate the net proceeds raised from the fresh issue for the following purposes:

1. Repayment and/ or prepayment of all or a portion of certain outstanding borrowings availed by the company

2. General corporate purposes

Promoter holding  

Satish Ramanlal Mehta, Sunil Rajanikant Mehta, Namita Vikas Thapar and Samit Satish Mehta are the promoters of the company. The promoters and promoter group currently hold a pre-issue shareholding stake of 83 per cent in the company.

Company profile  

Emcure Pharmaceuticals Ltd is an Indian pharmaceutical company involved in the development, manufacturing, and global marketing of a wide range of pharmaceutical products across several major therapeutic areas.

The company's competitive advantage in the domestic market stems from its differentiated product portfolio, which has enabled it to establish a presence in most major therapeutic areas, including gynaecology, cardiovascular, vitamins, minerals and nutrients, HIV antivirals, blood-related products, and oncology.

Across the gynaecology, vitamins, minerals and nutrients, HIV antivirals, blood-related, and oncology/antineoplastics therapeutic areas, Emcure Pharmaceuticals Ltd ranked among the 10 largest pharmaceutical companies in India in terms of domestic sales for MAT Financial Year 2024. This strong positioning has allowed the company to reach a wide range of target markets in over 70 countries, with a particularly strong presence in India, Europe, and Canada.

The company has 13 manufacturing facilities across India, with in-house capabilities for most of its specialty products, including complex injectables, iron products, photo-chemistry products, chiral molecules, and biotherapeutics.

As of March 31, 2024, the company had been granted 220 patents and had 30 pending patent applications in several countries. Additionally, it had submitted 102 drug master files for APIs with the U.S. Food and Drug Administration (USFDA).

Financials  

Rs (in crore) FY22 FY23 FY24
Revenue 5,919 6,032 6,715
Profit before tax (PBT) 973 747 727
Net Profit 703 562 528

Although the company has successfully increased its revenue with consistent growth, it is struggling to boost its bottom line. According to the management, this difficulty is due to higher interest and depreciation provisions. The company completed its planned expansion using borrowed funds, and all four new facilities are now operational. With the reduction of debt and a focus on greater domestic market penetration, which yields higher margins, the company expects its bottom line to improve going forward.

Valuation and outlook  

Company Name P/E P/B RoE (%)
Emcure Pharmaceuticals Ltd 37 6 17
Listed Peers
Dr. Reddy's Laboratories Ltd  19 4 21
Cipla Ltd 29 4 13
Alkem Laboratories Ltd  33 6 11
Torrent Pharmaceuticals Ltd 57 14 20
Mankind Pharma Ltd 45 9 19
Abbott India Ltd 49 16 32
JB Chemicals & Pharmaceuticals Ltd 49 9 19

The issue is priced with a P/BV ratio of 6.18 times, calculated using its Net Asset Value (NAV) of Rs 163.22 as of March 31, 2024. When we calculate the PE ratio for the company by considering the annualized FY24 earnings relative to the fully diluted paid-up equity capital, the resulting PE ratio stands at 37.

Considering both valuation and returns, Emcure Pharmaceuticals Ltd stood strong with a PE ratio less than the industry average of 40x and returns that justify the valuation.

Given the vast potential of the pharmaceutical industry, the transformative impact of AI and other emerging technologies, the company's strong market presence, diversified product portfolio, and considerable financial growth, we recommend investors to subscribe to the issue with a long-term perspective.

DSIJ's 'Value Pick' service recommends long-term stocks based on Value Investing Philosophy. If this interests you, do download the service details here.

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