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An API (active pharmaceutical ingredient) subsidiary of Glenmark Pharma, Glenmark Life Sciences opens its IPO today. It had a portfolio of 120 molecules globally and sold its APIs in India and exported its APIs to multiple countries in Europe, North America, Latin America, Japan and the rest of the world.
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Incorporated in 2011, Glenmark Life Sciences is the leading manufacturer of Active Pharmaceutical Ingredients (APIs). The company develops, manufactures, and supplies high-quality APIs for cardiovascular disease (CVS), central nervous system disease (CNS), pain management, and diabetes, gastrointestinal disorders, anti-infectives, and other therapeutic areas. It further operates in Contract Development and manufacturing operations (CDMO) to offer services to specialty Pharmaceutical companies.
2) IPO Details:
The offer comprises a fresh issue of Rs 1,060 crore and sale of shares worth Rs 453.6 crore by parent Glenmark Pharmaceuticals Ltd. The promoter shareholding will fall to 83% after the offer, while the rest will be held by the public.
IPO Date: Jul 27, 2021 - Jul 29, 2021
Face Value: ₹2 per equity share
IPO Price: ₹695 to ₹720 per equity share
Market Lot: 20 Shares
Listing At: BSE, NSE
Finalisation of Basis of Allotment: Aug 3, 2021
Initiation of Refunds: Aug 04, 2021
Credit of Shares to Demat Acct: Aug 05, 2021
IPO Shares Listing Date: Aug 06, 2021
The business of Glenmark Pharma's fully owned subsidiary has two key segments: generics and complex active pharma ingredients and contract development and manufacturing operations.Glenmark Life Sciences operates four multi-purpose manufacturing facilities in India at Ankleshwar and Dahej, Gujarat; and Mohol and Kurkumbh, Maharastra. It has three research and development facilities at Mahape in Maharashtra; and Ankleshwar and Dahej.
- As on March 31, 2021, Glenmark Life Sciences had a portfolio of 120 molecules globally, with top 10 products account for 66.36% of the revenue.
- Besides domestic sales, the company exports to countries in Europe, North America, Latin America, besides nations in other parts of the world including Japan.
- Top five customers including parent Glenmark Pharma, accounting for 55.8% of the revenue.
- 16 of the 20 largest generic companies are its customers.
Total income grew at a compounded annual rate of 15.84% over the last three years, while net profit rose at 17.35%.The company maintained a margin of around 30% range during the period.
- The company earned Rs 1,048.1-crore revenue from domestic customers, accounting for 55.60% of the total.
- The rest came from outside India.Their revenue from regulated market products stood at Rs 1,237.4 crore.
- Total expenditure on R&D at Rs 40.5 crore was 2.15% of total revenue from operations.
- Five largest customers accounted for 55.9% of total revenue from operations.
5) Peers comparison:
Glenmark Life Sciences competes with Divis Laboratories Ltd., Laurus Labs Ltd., Shilpa Medicare Ltd., Aarti Drugs Ltd. and Solara Active Pharma Sciences Ltd.
The company has a ROCE of 46.7% which is better than its peers like Divis labs, at an upper price band of ₹720 company is priced at PE of 22.38 which is better than all the API manufacturing companies
7) Grey Market premium:
(As on July 27) The grey market premium of Glenmark Life Sciences stood at Rs 120, or about 16% above the IPO price band.
8) Objective of IPO:
- To make payment of outstanding purchase consideration to the promoter for the spin-off of the API business from the promoter into the company.
- To finance capital expenditure requirements.
- To meet general corporate purposes.
- 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.
- Strong relationship with leading global generic companies.
- Proven track record of strong financial performance.
- High-quality product manufacturing with R&D infrastructure.
- Its promoters, Glenmark Pharma, are its second-largest customer.
- Manufacturing facilities and products required to comply with regulations and quality standards stipulated by the U.S. and other drug regulators and may thereby be subjected to warning/deficiency letters.
- No exclusivity arrangements/contracts with customers including five largest key customers that contributed around 55% of their revenues in last three financial years.
- High dependency on API business with concentration on limited therapeutic areas and certain key products could adversely impact profit margins and operations if market growth or demand is affected.
- All manufacturing and R&D facilities are located in Gujarat and Maharashtra: any social, political, economic disruption or natural calamities or civil disruptions can impact operations.
- Dependence on multiple third-party vendors located domestically and in China. Any increase in raw material costs or loss of suppliers could materially impact operations as it does not have long-term contracts with suppliers.
- Risk of cost overrun and timeline extension in completing the capex on time could impact future operations.
- Does not own the brand name ‘Glenmark’ and the trademarks for their name ‘Glenmark Life Sciences’ and logo is also registered in the name of the promoter.
- R&D efforts may not succeed and the introduction of new products may be hindered, adversely affecting business.
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