Glenmark Life Sciences IPO will open on 27th July and will close on 29th July. The Price Band between which bids can be submitted is Rs 695-720. However these days, there is a strong demand of IPOs among Investors. So, if someone wants to apply for the IPO, investor will have to apply at the maximum price or cut-off price.
Total size of the IPO is nearly ₹1513 crore. Out of this amount, around ₹1060 is fresh issue and will be utilised by the company for payment of some outstanding purchase consideration to the Promoter (Glenmark Pharma) and to fund capital expenditure (for Setting up new manufacturing Plants or expanding existing ones). Remaining ₹453 crore is Offer For Sale and will be utilised by promoter Glenmark Pharma.
Ultimately, ₹1253 crore (₹453 OFS + ₹800 purchase consideration amount) will goes to Glenmark Pharma and remaining money would be utilised by Glenmark Life Sciences. So, it can be assumed that it is actually not a fresh issue. Most of the money will be used by existing Promoter.
In this Article
Business of Glenmark Life Sciences
Glenmark Life Sciences is a leading developer and manufacturer of Active Pharmaceutical Ingredients (APIs) in chronic therapeutic areas, including cardiovascular disease, central nervous system disease, pain management and diabetes. Company also manufacturers and sells APIs for gastro-intestinal disorders, anti-infectives and other therapeutic areas.
What is API?
In a medicine 💊, colour chemicals could be used to give some desired colour to the medicine, some other chemicals that will keep the medicine in texture. However, these chemicals will not help cure the disease for which you are taking the medicines.
There is another chemical in the medicine which helps to cure the disease or any problem. This chemical is called API. Active Pharmaceutical Ingredients or API is an chemical that is actually used in medicine to cure any ailment. Without an API in medicine, there will no use of it and it will not help to cure the disease at all.
Beside of direct manufacturing of APIs, Glenmark Life also offers contract development and manufacturing operations (“CDMO”) services to a range of multinational pharmaceutical and specialty pharmaceutical companies. Its portfolio comprises of 120 products (10 products in laboratory development; 4 products in laboratory validation and 106 products being commercialized).
The total market size in terms of sales for the 120 products globally, was estimated to be around US $142 billion in 2020 and is expected to grow by about 6.8% over the next five years to reach to about US $211 billion by 2026. The future growth of these products is expected to remain stable driven by the growing demand from the regulated markets where company exports its products.
Important Points About Glenmark Life Sciences
1) Generic APIs (generics and complex APIs) business of company accounts for nearly 90.63% of total revenue. CDMO (including specialty) accounts for 8.11% of revenues. Remaining part of revenue comes from other sources. It means, Glenmark Life Sciences is a pure API Play.
2) They currently operate four multi-purpose manufacturing facilities in India. These are situated in Ankleshwar (Gujarat), Dahej (Gujarat), Mohol (Maharashtra) and Kurkumbh (Maharashtra). On the back of these 4 plants, company has an annual production capacity of nearly 726.6 KL (1 KL= 1000 liter). However, current capacity utilisation in these plants is 85%.
3) Company’s R&D or Research & Development facilities are situated in Navi Mumbai and Gujarat. R&D operations are focused on developing new products and complex molecules as well as improving the efficiency of existing products.
4) They currently source most of their key raw materials from vendors in China and India. But they seek to de-risk the operations by continuing to diversify procurement base, reduce the amount of materials that they import and procure more materials from Indian suppliers. However, their three largest suppliers for total purchases of key starting materials accounted for nearly 40.26% in 2021 from 27.34% in 2019. That is an increase.
API Market Overview
The Asia Pacific API market is evaluated to be the fastest growing market as India, China and South Korea are developing as main hubs for outsourcing drug manufacturing.
The global API market was estimated to be around US$181.3 billion in FY2020 and is expected to grow at a CAGR of 6.2% to reach to about US$259.3 billion by FY2026.
Since few quarters, instability in Chinese supplies of APIs has caused several major pharmaceutical countries to reconsider and reshuffle their API import sources. In 2020, an estimated 40% of all factories in China have shut down, resulting in supply disruptions and higher costs.
Considering this trend, India has a great opportunity to become one of the largest API suppliers in the world due to its fairly competitive labour market. Indian API companies with relevant experience, track records, and ability is likely to benefit from API sector tailwinds in the near-to medium-term. Those that can secure their supply chain from raw materials to ingredients, in particular, are likely to see increased demand.
Indian API Industry
Ranked third in the world, the Indian bulk drug industry has grown at a CAGR of around 9% over 2016–2020. It is further expected to expand and grow at a CAGR of around 9.6% during 2021–2026, signifying its future potential and evolving global importance.
Currently, India imports nearly 68% of API, by value, from China. The latter is also a single supplier for many of the critical intermediaries and APIs including high-burden disease categories such as cardiovascular diseases (for example, Digoxin and Losartan), diabetes (Metformin and Glimepiride) and tuberculosis (Isoniazid and Streptomycin).
Over the last few years, the government has taken positive measures to change the business environment and promote domestic production, including raising the FDI cap and developing a new intellectual property rights (IPR) strategy to encourage innovation. The government is driving the clustering programs and production-linked schemes, illustrating policy resolution.
These steps will help in building an encouraging ecosystem and increase competitiveness for domestic manufacturers to achieve cost competitiveness with other countries in APIs Industry.
The Indian government has announced a package worth INR 9,940 crore (US$1.4 billion) for the bulk drugs industry in March 2020, in order to improve domestic production and exports. The Cabinet has also approved INR 3,000 crore (US$413 million) to be provided over the next five years to encourage bulk drug parks and finance common infrastructure facilities.
The government has also approved a Production Linked Incentive (PLI) scheme worth INR 6,940 crore (US$955 million) to promote domestic manufacturing of essential KSMs, drug intermediates, and APIs. For a period of six years, qualifying manufacturers of 53 specified essential bulk drugs will receive a financial reward based on incremental sales over the base year (2019-2020).
Positives about Glenmark Life Sciences
- GLS intend to increase API manufacturing capabilities by enhancing the existing production capacities at their Ankleshwar facility during the financial year 2022 and Dahej facility during the financial years 2022 and 2023. Company also intend to develop a new manufacturing facility in India for the manufacture of generic APIs from the financial year 2022 which is expected to become operational in the fourth quarter of the financial year 2023.
- Due to instability in prices of APIs sourced from China, there is an opportunity for domestic APIs manufactures. Over the world, Pharmaceutical companies are looking for new sources for APIs to de-risk their supply chains. That is expected to keep the near term outlook positive for APIs companies in India.
- Glenmark Life Sciences is adding on average 8-10 new molecules to its product portfolio annually with its over 200 scientists and Research Team. That is expected to bring more growth opportunities for the company.
- 16 of the 20 largest generic companies globally are the customers of company.
Risks in Glenmark Life Sciences
- The company’s five largest customers accounted for more than 50% of FY21 revenues with the Promoter the largest customer.
- The company’s top 10 products accounted for 66.36% of FY21 revenue. Any negative impact on margins or growth volumes of these products can impact company’s financials significantly.
- For FY21, three largest suppliers accounted for 40.26% of total purchases of key starting materials.
|Earning Per Share||32.6||29.0||24.6|
*All amounts in Rupees crore
As per latest financial data submitted by the company, outstanding shares amounts to 10.7 crore. New shares worth ₹1060 would be issued in the IPO. So, at the upper end of Price Band i.e Rs 720, Market Capital of Glenmark Life Sciences is expected to reach Rs 8,764 crore.
Comparison of Glenmark Life with peers
|Ratio||Glenmark Life||Laurus Labs||Divis Labs|
|Price to Earnings||25||35||64|
|Price to Sales||4.6||7.2||18|
*Price to Earning Ratio has been taken after adjustment of IPO shares.
All that information that we just saw above was to get an idea about what Glenmark Life Sciences does, what are the growth prospects of Industry in which company is working, and financials. Now big question is whether there are any good listing gains possibility in the Glenmark Life shares or not?
As per online sources, current GMP or Grey Market Premium of GSL is moving around ₹200. That means, shares of company are trading close to ₹900 levels in unofficial market as compared to IPO price of ₹720. That is a sign of good demand of company’s shares.
Considering its Product portfolio, Good execution track record, Visible growth and future plans of company, there is no doubt Glenmark Life Sciences is a good stock to invest.
GMP is attractive, market sentiment is positive regarding API companies and the Promoter backing is also strong, that makes it a candidate for good listing gains.
Considering the Psychological behavior of investors and fundamentals of company, stock has potential to list or moves to ₹1000 after listing. Beyond this price, it will depend on the response that Glenmark Life Sciences is able to gather.
Nevertheless, sentiments can change anytime in the Stock Market. Zomato was not expected to see a Bumper listing but that has happened. So, invest in Glenmark Life Sciences IPO considering this fact.
That is the end of this article.
Good Luck : )
Get Free Blog Post Updates!
Find us at the office
Darmofal- Broderick street no. 11, 88736 Vatican City, Vatican City
Give us a ring
+90 293 316 242
Mon - Fri, 8:00-14:00