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India's biggest Initial Public Offering (IPO) by a pharmaceutical firm i.e. China’s Sanghai Fosun-controlled injectables maker Gland Pharma Ltd.’s three-day initial public offer opens on Nov. 9.
The company plans to raise Rs 6,480 crore through an IPO at a price band of Rs 1,490-1,500 apiece.
Here are 10 key things that you should know before you subscribe.
Gland Pharma Ltd, the Hyderabad-based company is one of the fastest-growing generic injectable companies. It manufactures a diversified range of high-quality complex injectables. The company offers products like sterile injectables, oncology, and ophthalmics, complex injectables (peptides, suspensions, hormonal products, long-acting injectables), NCE-1s, First-to-File products, etc. The company follows a B2B model to sell its products in more than 60 countries including the US, Canada, Australia, India, Europe, etc. Leading pharma companies i.e. Sagent Pharmaceuticals, Apotex Inc. Athnex Pharmaceutical Division, LLC, Fresenius Kabi USA, LLC, etc. are some of the key customers.
2) Issue details
IPO Date: Nov 9, 2020 - Nov 11, 2020
Issue Size: 43,196,968 Eq Shares of ₹1
(IPO of ₹1,250.00 Cr & OFS of ₹5,229.55 Cr)
Face Value: ₹1 per equity share
IPO Price: ₹1490 to ₹1500 per equity share
Market Lot: 10 Shares
Listing At: BSE, NSE
Finalisation of Basis of Allotment: Nov 17, 2020
IPO Shares Listing Date: Nov 20, 2020
3) Grey market premium
The grey market premium dropped to around Rs 50-70 against around Rs 200 quoted before the company fixed IPO price band. The fall is largely attributed to the pricing of issue which is comparatively on the higher side and also higher than market expectations.
4) Financials & Key Markets
For FY18-20, revenue grew at a CAGR of 27% while PAT grew by 55% CAGR. In FY20, GPL reported PAT of ₹773 crore on revenue of ₹2,633 crore with EBITDA margin at around 36%.
Gland Pharma is coming up with the IPO at PE levels of 30.1x for FY20 which is slightly premium to midcap pharma peers along with this company also trading at EV/Sales of 8.1x and EV/EBITDA of 20.1x for FY2020 which are also expensive to peers.
5) Shareholding Pattern:
Sanghai Fosun, through its subsidiary Fosun Pharma Industrial Pte., holds 74% stake in the company. It will fall to 58% after the offer.
The net proceeds from the IPO will be used for the following purposes:
- To finance the incremental working capital requirements of our Company.
- To meet funding requirements for capital expenditure requirements.
- To meet the general corporate purposes.
7) Industry Overview:
The Company has considerably No Debt (~4 Cr in 2020).
- It will be the only listed player in the pure formulations space in India.
- The company follows a B2B model with sales in 60 different countries and long-term contracts with various partners which provide a good forward looking pipeline in terms of sales.
- Gland is extremely strong with a CAGR of upwards of 25% in both its top and bottom line from 2018-20.
- Margins were around 39% in FY20 and its Q1FY21 margins were even more impressive at 48%.
- The extensive product portfolio of complex injectables.
- Diversified B2B model with a targeted B2C model in India.
- Strong manufacturing capabilities.
- Robust financial track record.
- Experienced and qualified managerial team.
- It has 7 robust manufacturing units in India comprising 4 finished formulations facilities, 22 production lines, and 3 APIs.
1) Since Gland Pharma is largely owned by the Chinese companies Fosun Singapore and Shanghai Fosun Pharma with 74% stake pre-offer, So if the clashes between India and China worsen then revenue may be affect.
2) 3.87% of the stake is held by 10 companies belonging to Ramalinga Raju's and the family involved in the Satyam scam. (ED directs Gland Pharma to transfer Ramalinga Raju family's 6 mn shares to escrow account)
3) Its top five customers accounted for nearly half of its total revenue from operations in fiscals ended March 2018, 2019, 2020 and the June quarter.
4) Failure or delay in obtaining necessary permits or approvals.
5) Interruption in API production or failure to produce or procure high-quality APIs might impact sales causing delay.
6) Raw material supply disruptions due to strained India-China relations as 33.27% of its raw material imported form China.
Suggestion: Apply for only 'one lot' and Subscribe this issue for as 'long term investment'.
Research Analyst (SEBI Regd.)
Linkedin | firstname.lastname@example.org
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