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The IPO of Glenmark Life Sciences, the subsidiary of Glenmark Pharmaceuticals, has received a subscribe rating from many analysts on the back of reasonable valuations compared to peers, leadership in select high value non-commoditized APIs in chronic therapeutic areas, strong relationship with leading global generic companies, strong balance sheet, cost leadership across products, growth opportunity in CDMO services and clean regulatory track record.
The company is planning to raise Rs 1,513.6 crore through its public issue during July 27-29, comprising a fresh issue of Rs 1,060 crore, and an offer for sale of Rs 453.60 crore by promoter Glenmark Pharma.
The net proceeds from the fresh issue will be utilised for payment of outstanding purchase consideration to the promoter for the spin-off of the API business from the promoter into their company, and working capital requirements.
The price band for the offer has been fixed at Rs 695-720 per share.
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“Considering the FY21 adjusted EPS of Rs 28.69 on post issue basis, the upper price band implies a P/E of 25.09 with a market-cap of Rs 8,822 crore, while its peers namely Divi’s Laboratories, Laurus Labs and Shilpa Medicare are trading at a P/E of 64.0, 36.1 and 36.5, respectively,” said Marwadi Financial Services.
The brokerage recommended subscribing to this IPO as the company is a leader in select high value, non-commoditized APIs in chronic therapeutic areas with quality focused & compliant manufacturing / R&D infrastructure and is available at reasonable valuation as compared to its peers.
Anand Rathi also gave this IPO a subscribe rating given the cost leadership, strong management, strong balance sheet, growing business, high return on net worth (RoNW) of 46.71 percent in the fiscal ended March 31, 2021 and reasonable valuations.
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Incorporated in 2011, Glenmark Life Sciences is a leading developer and manufacturer of select high value, non-commoditized active pharmaceutical ingredients (APIs) in chronic therapeutic areas, including cardiovascular disease (CVS), central nervous system disease (CNS), pain management and diabetes.
The company also manufactures and sells APIs for gastro-intestinal disorders, anti-infectives and other therapeutic areas.
It has strong market share in select specialised APIs like Telmisartan (anti-hypertensive), Atovaquone (anti-parasitic), Perindopril (anti-hypertensive), Teneligliptin (diabetes), Zonisamide (CNS) and Adapalene (dermatology).
As of March 31, 2021, Glenmark Life Sciences had a portfolio of 120 molecules globally and sold their APIs in India and exported their APIs to multiple countries in Europe, North America, Latin America, Japan and the rest of the world. Revenues from regulated markets were 65.64 percent of FY21 revenues.
The company also increasingly provides contract development and manufacturing operations (CDMO) services to a range of multinational and specialty pharmaceutical companies.
Its key customers include Glenmark, Teva Pharmaceutical Industries, Torrent Pharmaceuticals, Aurobindo Pharma, Krka etc.
Total market size in sales terms for Glenmark Life’s portfolio of 120 molecules globally was estimated at around $142 billion in 2020 and is expected to grow around 6.8 percent in the next five years. It works with 16 of the 20 largest generic companies globally.
The company currently operates four multi-purpose manufacturing facilities which are situated on leasehold properties located at Ankleshwar and Dahej in Gujarat; and Mohol and Kurkumbh in Maharashtra with an aggregate annual total installed capacity of 726.6 kilo-litres as of March 31, 2021.
“Glenmark Life has a good performance execution and clean regulatory track record. The growth momentum also has a strong undercurrent of global API industry growth,” said ICICI Securities which recommended subscribe to the issue.
Geojit Financial Services also assigned a ‘subscribe’ rating for the issue on a long-term basis considering its strong focus on R&D, expansion plans (1726.6KL when completed), growth opportunity in contract development and manufacturing organization (CDMO) services and expanding complex API portfolio.
Hem Securities, too, recommend ‘subscribe’ on issue both for listing gains & long term perspective.
Since 2015, the company’s facilities have been subject to 38 inspections and audits by regulators including the US Food and Drug Administration (FDA) and others. It has not received any warning letters/import alerts from regulatory authorities. Its facilities have also been subject to 432 inspections by customers during this period.
During FY19-21, its revenue grew at around 46 percent CAGR while PAT growth stood at around 34 percent CAGR during the same period with an average EBITDA Margin of 30 percent.
The company has debt-to-equity of 1.3x with a debt of Rs 916 crore which includes Rs 800 crore payable to Glenmark Pharmaceuticals, post IPO debt will be negligible.
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