Glenmark Life Sciences IPO: All You Need To Know

Bulk drug and contract manufacturer Glenmark Life Sciences Ltd. will launch its initial public offering on July 27 as it joins companies going public in what may be India's record year for maiden offers.

Glenmark Life Sciences will sell shares at Rs 695-720 apiece, seeking a market value of Rs 8,822 crore at the upper end of the price band. 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., according to its IPO prospectus.

The promoter shareholding will fall to 83% after the offer, while the rest will be held by the public.

Kotak Mahindra Capital, BofA Securities, Goldman Sachs, Kotak Mahindra Capital, DAM Capital, BoB Caps and SBI Capital Markets are the book running lead managers to the issue.

Issue Details

• Issue Opens/Closes: July 27/29

• Issue Size: Up to Rs 1,513.6 crore

• Face Value: Rs 2 per share

• Lot Size: 20 shares and multiples.

• Listing: BSE and NSE

Watch the full interaction with the management here:

Objective

• Glenmark Life Sciences plans to use Rs 800 crore from the IPO proceeds to pay the parent for the acquisition of the active pharmaceutical ingredient business in 2018. The company had sold the unit at a slump-sale value of Rs 1,100 crore.

• The company will use Rs 155 crore for brownfield capital investment at its Dahej facility to enhance the total installed capacity by 200 Kiloliter. The investment is expected to expand generic API production and grow oncology product pipeline.

• Glenmark Life Sciences also plans to set up a greenfield facility in Solapur, Maharashtra to double its capacity by 2024. The new facility, expected to be operational in January-March 2023, will aid growth of contract manufacturing and boost generic API business capacity.

• The remaining amount will be used for other general corporate purposes.

Business

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.

According to a Frost & Sullivan report, Glenmark Life Sciences develops and makes select high-value, non-commoditised APIs in chronic therapeutic areas, including cardiovascular and central nervous system diseases, pain management and diabetes. They also manufacture and sell APIs for gastro-intestinal disorders, anti-infective and other therapeutic areas.

The company, the report said, intends to grow its complex API portfolio in oncology, peptides and complex injectables compounds.

• 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.

Financials

• 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.

Other Highlights (FY2021)

• 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.

Peers

Glenmark Life Sciences competes with Divis Laboratories Ltd., Laurus Labs Ltd., Shilpa Medicare Ltd., Aarti Drugs Ltd. and Solara Active Pharma Sciences Ltd.

Key Risks

• 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.

Watch | IPO Adda with Glenmark Life Sciences' MD & CEO Yasir Rawjee: