IPO Analysis: Glenmark Life Sciences
IPO rating: Invest for long-term
About the issue:
Established in the year 2011, Glenmark Life Sciences is the leading manufacturer of active pharmaceutical ingredients (APIs). The company is coming out with its initial public offering (IPO) of equity shares with a face value of Rs 2 per equity share. The issue size of the company is Rs 1,513.60 crore, with a fresh issue comprising Rs 1,060 crore while the remaining include the sale of shares worth Rs 453.60 crore by existing investors, according to its red herring prospectus.
The price band of the issue has been fixed at Rs 695 to Rs 720 per equity share. The IPO opening date is July 27, 2021, while it will be closing on July 29, 2021. The issue will be listed on the exchange on August 06, 2021. The IPO market lot size is 20 shares. A retail-individual investor can apply up to a maximum of 13 lots (260 shares or Rs 1,87,200). The net proceeds generated from the IPO will be utilised towards making payment of outstanding purchase consideration to the promoter for the spin-off of the API business from the promoter into the company and to finance capital expenditure requirements as well as to meet other general corporate purposes.
Glenmark Life Sciences IPO details:
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IPO opening date
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July 27, 2021
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IPO closing date
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July 29, 2021
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Issue type
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Book built issue IPO
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Face value
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Rs 2 per equity share
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IPO price
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Rs 695 to Rs 720 per equity share
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Market lot
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20 shares
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Min order quantity
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20 shares
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Listing at
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BSE & NSE
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Issue size
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[.] equity shares of Rs 2
(aggregating up to Rs 1,513.60 crore)
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Fresh issue
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[.] equity shares of Rs 2
(aggregating up to Rs 1,060.00 crore)
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Offer for sale
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63,00,000 equity shares of Rs 2
(aggregating up to Rs 453.60 crore)
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About the company:
The company develops, manufactures & supplies high-quality APIs for cardiovascular disease (CVS), central nervous system disease (CNS), pain management, and diabetes, gastrointestinal disorders, anti-infectives along with other therapeutic areas. It further operates in contract development and manufacturing operations (CDMO) to offer services to speciality pharmaceutical companies. It is a leading developer and manufacturer of select high value, non-commoditised active pharmaceutical ingredients (APIs) in chronic therapeutic areas, including cardiovascular disease (CVS), central nervous system disease (CNS), pain management & diabetes.
As on December 31, 2020, the company had a portfolio of 120 molecules globally and sold their APIs in India, and exported it to multiple countries in Europe, North America, Latin America, Japan & the rest of the world (ROW). As of April 7, 2021, the company had filed 399 drug master files (DMFs) and certificates of suitability to the monographs of European Pharmacopoeia (CEP) across various major markets (i.e. United States, Europe, Japan, Russia, Brazil, South Korea, Taiwan, Canada, China & Australia). It works with 16 of the 20 largest generic companies globally as of December 31, 2020, and enjoys a reputation of trust & reliability with such companies. Currently, it has four manufacturing facilities at Ankleshwar & Dahej (both in Gujarat) as well as Mohol & Kurkumbh (Maharashtra) with an aggregate annual installed capacity of 725.8 KL as of December 31, 2020.
Competitive strengths:
Leading manufacturer of selected specialized APIs for chronic therapeutic areas like CVS, CNS, diabetes, and pain management.
Export products in Europe, Latin America, North America, Japan, and the rest of the world.
Cost Leadership across products through careful monitoring and continuous effort
Strong relationship with leading global generic companies.
Proven track record of strong financial performance.
High-quality product manufacturing with R&D infrastructure.
Financials:
The revenue of the company has been growing at a CAGR of 16.34 per cent for the last two years while PAT grew at a healthy CAGR rate of 34.08 per cent during the same period. It delivered a RoCE of 31.2 per cent for the last three years.
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Particulars
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For the year/period ended (Rs in million)
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31-Mar-21
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31-Mar-20
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31-Mar-19
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Total assets
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19,970.75
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17,256.04
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14,753.95
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Total revenue
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18,859.76
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15,493.03
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8,868.65
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Profit after tax
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3,515.81
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3,130.98
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1,955.92
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Recommendation:
Glenmark Life Sciences (GLS), the API spin-off from Glenmark Pharma has announced its IPO. The company intends to use the proceeds from the IPO for capital expenditure requirements, which includes the expansion of capacity at Dahej (Gujarat) manufacturing site to meet the anticipated future demand of its generic API products, which will be beneficial in generating further revenue for the company. Glenmark Life Sciences has a good performance execution and a clean regulatory track record. The company is also a leading developer & manufacturer of select high-value, non-commoditised APIs in chronic therapies. The growth momentum also has a strong undercurrent of global API industry growth. Although product concentration remains a key risk where top 10 products contribute more than 66 per cent, the company aims to reduce the dependence with planned Capex in FY22, going further. It has strong R&D capabilities and is backed by strong promoter backing. This additional production capacity is expected to help the company in expanding generic API production and also, the oncology products pipeline. Looking at the above positives, we believe that the company will keep growing its business, and hence, you can invest for the long-term.
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