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Supriya Lifescience IPO: All You Need To Know

Supriya Lifescience Limited is a company that manufactures Active Pharmaceutical Ingredients (APIs). APIs are raw materials used in making drugs, medicines, vaccines, and other pharmaceutical products. Supriya Lifescience has filed for an Initial Public Offering (IPO) that goes live on December 16, 2021, and closes on December 20, 2021. The company plans to raise close to Rs 700 crore through the IPO. In this piece, we discuss the company’s business model, its finances, and what makes this IPO stand out from others. 

Business Model

  • Headquartered in Mumbai, Supriya Lifescience Ltd produces 38 APIs focused on diverse therapeutic segments such as antihistamine, analgesic, anaesthetic, vitamin, anti-asthmatic and antiallergic. It is the largest exporter of Chlorpheniramine Maleate (CPM) and Ketamine Hydrochloride from India. CPM is used to treat hay fever, allergy and the common cold, whereas Ketamine Hydrochloride is used to make anaesthetic to induce a loss of consciousness and relieve pain. 
  • According to a CRISIL report, the company was the largest exporter of Salbutamol Sulphate in India, contributing to 31% of the API exports from India in FY 2021 in terms of volume. Salbutamol Sulphate is used to treat asthma, bronchospasm, and reversible airways obstruction.
  • Ketamine Hydrochloride contributed the most to the revenue stream. In FY21, it contributed to 27.42% of total revenue, followed by Chlorpheniramine Maleate and Salbutamol Sulphate, which contributed 18.17% and 9.86%, respectively.
  • The company has a manufacturing plant in Lote in Ratnagiri District of Maharashtra. The main manufacturing plant at Lote is spread across 23,806 sq. mts, having a reactor capacity of 547 KL/ day and seven cleanrooms. The company has also acquired a plot of land of 12,551 sq. mt, near the present manufacturing facility for expanding capacity. The manufacturing plant has been approved by international drug agencies like USFDA, EDQM, TGA Australia, KFDA-Korea, PMDA-Japan, NMPA (previously known as SFDA)- China, Health Canada.
  • The company is export-oriented, with only 22.53% of total revenue coming from India for FY21. Its products were exported to 86 countries to 1,296 customers including 346 distributors. In all, Asia (excluding India) contributed to 29.3% of the total revenue, followed by Latin America at 19.2%, Europe at 17.4%, and North America at 4.8%. 
  • At present, the company is entirely owned by the Wagh Family. Chairman Satish Wagh, his mother Asha Waman Wagh, wife Smita Satish Wagh, daughters Shivani and Saloni Wagh are the sole promoters in the company. 

Financial Performance

  • The company has witnessed consistent growth in Total Revenue, Profit After Tax, and Total Asset holdings. 
  • The company’s total income, EBITDA, and profit after tax grew at a CAGR of 17.73 %, 56.47%, and 77.23%, respectively, from Fiscal 2019 to Fiscal 2021.
  • As of September 30, 2021, the company had total borrowings of Rs 70.9 crore, down from a debt of Rs 89.8 crore in FY19. 

IPO Details in a Nutshell

The company plans to raise a total of Rs 700 crore through the IPO. It would get Rs 200 crore in hand, and the remaining Rs 500 crore would go to the promoter Satish Waman Wagh. According to the company’s ‘Objects of the Offer’, it plans to use the money for the following purposes:

  • Rs 92.3 crore to be used for funding capital expenditure requirements of the company.
  • Rs 60 crore would be used for repayment or prepayment of borrowings or debt.

The Way Ahead

Supriya Lifescience will be one of the many pharmaceutical companies that get listed this year. The company’s diversified product portfolio and global market reach make it a relatively safer bet than others. It has even managed to diversify geographically, ensuring that geopolitical instability in a particular region does not impact the company’s performance. The company has shown strong growth in terms of Revenue, Net Profit, and Asset Holdings. 

Through this IPO, the company plans to pay off ~85% of its total borrowings and still have a great amount for capital expenditure. Supriya Lifesceinces’s IPO shares are trading at a Grey Market Premium (GMP) of 91%. This means that the shares are trading at 91% more than their upper issue price band of Rs 247. It is advised that investors do thorough research before investing in all IPOs. You can check the official Red Herring Prospectus over here.

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Ami Organics IPO: All You Need To Know

ami organic

The IPO frenzy continues! This time it is one of the many IPO stocks to debut this year. We are talking about Ami Organics. Ami Organics has announced its IPO starting September 1 (Wednesday) and closes 2 days later on September 3 (Friday). In this piece, we discuss the business model of Ami Organics, its finances, and its sustainability in the long term. 

Business Model

  • Ami Organics is a Research and Development driven pharmaceutical company that manufactures mainly two things – Pharmaceutical Intermediates and Speciality Chemicals. 
  • Pharma Intermediates are used to manufacture Active Pharmaceutical Ingredients (APIs), which are in turn used to manufacture medicines or drugs. Specialty Chemicals on the other hand can be used for other purposes like manufacturing agrochemicals or fine chemicals. 
  • The company has developed and commercialized over 450 Pharma Intermediates for APIs across 17 key therapeutic areas since inception and NCE, with a strong focus on R&D across the select high-growth high-margin areas. These include anti-retroviral, anti-inflammatory, anti-psychotic, anti-cancer, anti-Parkinson, anti-depressant, and anti-coagulant medicines. Therapeutic areas like anti depressants, anti-retrovirals, and anti-coagulants contributed to nearly 57% of total revenue 
  • In fiscal 2021, the Pharmaceutical Intermediates segment contributed close to 88.4% to total revenue of Rs 301.1 crore. The remaining came from Speciality Chemicals and other sources. 
  • The company’s revenue is highly dependent on exports. Its revenues from exports have grown at a CAGR of 21.84% between Fiscals 2019 and 2021. In fiscal 2021, close to ~51% of the total revenue of the company came from exports. The highest going to Italy. 
  • The company is also amply dependent on imports for raw materials. In 2021, 26.7% of total raw material purchases were from imports on which the company spent Rs 51.02 crores. Close to 9.39% of the total import purchases came from China. 
  • Its top five customers account for 44.6% of total revenue, while the top 10 forms 60.9% of it.
  • The company had one plant initially in Sachin GIDC, Surat, Gujarat. Recently it has acquired two plants of Gujarat Organics Limited, Ankleshwar and Jhagadia in Gujarat, for Rs 93 crore. This took the total manufacturing capacity up to 6,060 million tonnes per annum.

Finances 

The total revenue for fiscal 2021 was Rs 340 crore. However, this does not include the revenue generated from the acquisition of two new plants at Ankleshwar and Jhagadia. The Net Profit of the company grew at a CAGR of 32.44% over a period of three years to Rs 53.9 crore. 

IPO in a Nutshell

Conclusion

Ami Organics as a company has a strong and diversified product portfolio supported by strong R&D. The company also has patented many formulations. A patent is an exclusive right granted for an invention, it also gives the owner the legal right to exclude others from making, using, or selling an invention.

The company has a strong presence in developed pharmaceutical markets like Europe, the US, and China. Moreover, the company operates in a market that has high entry barriers. Manufacturing specialty chemicals and pharmaceuticals require lots of licenses and approvals from domestic and international organizations. 

Supported by healthy financial performance, Ami Organics has experienced sustained growth in terms of Revenue, Profit After Tax and Total Assets acquired. It has maintained a robust financial position with a strong balance sheet and increased profitability. Taking a closer look at its ‘Financial Performance’, we see that there was a major spurt in growth between fiscals 2020 and 2021. The strong balance sheet and positive operating cash flows coupled with low levels of debt can enable it to expand in the developing pharmaceutical sector in India. 

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Glenmark Life Sciences IPO: All You Need to Know

glenmark life sciences ipo

The IPO frenzy continues! Glenmark Life Sciences has launched its three-day IPO today— July 27. It is a subsidiary of Glenmark Pharma, one of the leading Indian pharmaceutical companies. In this article, we take a closer look into the company and its IPO.

Company Profile – Glenmark Life Sciences Ltd

Glenmark Life Sciences Ltd (GLSL) is a leading manufacturer of Active Pharmaceutical Ingredients (APIs). Basically, APIs are the biologically active component of drugs (tablets, capsules, and injectables) that produces the intended effects. GLSL develops, manufactures, and supplies high-quality APIs for cardiovascular disease (CVS), central nervous system disease (CNS), and pain management. They also manufacture APIs for diabetes, gastrointestinal disorders, and anti-infectives (drugs for treating infections).

Glenmark Pharmaceuticals Ltd established its API business in 2001. As part of a reorganisation strategy, the company decided to convert its API segment into a new and separate entity in 2019. This led to the creation of Glenmark Life Sciences. The API unit was sold to GLSL at a slump-sale value of Rs 1,100 crore. Thus, GLSL operates as an independent, professionally-run global API firm with a strong focus on research & development (R&D).

Currently, the company has ~120 APIs in its portfolio. Their products are extensively sold in India and exported to countries across Europe, North America, Latin America, and Asia. Over the years, GLSL has established strong relationships with some of the leading generic pharmaceutical companies in the world. Moreover, they provide contract development and manufacturing operations (CDMO) services to specialty pharma companies. 

GLSL operates four multi-purpose manufacturing facilities located at Ankleshwar and Dahej in Gujarat and Mohol and Kurkumbh in Maharashtra. As of March 31, 2021, the aggregate annual installed capacity of the units stood at 726.6 kilolitres (KL). They are planning to set up a greenfield facility in Solapur, Maharashtra, which will double its capacity by 2024.

About the IPO

Glenmark Life Sciences aims to raise Rs 1,513.6 crore through its initial public offering (IPO). The public issue opens on July 27 and closes on July 29. The price band for the IPO has been fixed at Rs 695-720 per share. 

The fresh issue of shares (of the face value of Rs 2 each) aggregates to Rs 1,060 crore. The IPO also consists of an offer for sale (OFS) by Glenmark Pharma (the promoter), which aggregates up to Rs 453.6 crore. Individual investors can bid for a minimum of 20 equity shares (1 lot) and in multiples of 20 shares thereafter. You will need a minimum of Rs 13,900 to apply for this IPO. A retail investor can bid for a maximum of 260 equity shares (or 13 lots).

Glenmark Life Sciences will utilise the net proceeds from the IPO for three main purposes:

  1. For making payment of outstanding purchase consideration of Rs 800 crore to the promoter, for the acquisition of the API business.
  2. To meet capital expenditure (capex) requirements of ~Rs 155 crore. They have announced plans to enhance the existing production capacities of its Ankleshwar and Dahej facilities.
  3. The remaining amount will be used for general corporate purposes.

The total promoter holding in the company will decrease from 100% to 82.84% post the IPO.

Financial Performance

GLSL has posted consistent growth in revenues and profits over the past three financial years. From FY19-21, the total income has grown at a compounded annual rate (CAGR) of 15.84%, while profits have grown at 17.35%. The company has posted an average Earnings Per Share (EPS) of Rs 30.09 during this period. The Return on Net Worth (RoNW) stands at 46.7%, which is high compared to its peers. RoNW shows how well the company uses shareholders’ capital (equity) to generate profits. 

Risk Factors

  • The company’s operations are subject to strict inspections/audits by its customers and regulatory agencies. The failure to meet quality standards or non-compliance with regulations may lead to loss of business. This could negatively impact its reputation and financial results.
  • The revenue derived from Glenmark Life Sciences’ top 5 customers account for ~55.8% of the total sales income (as of FY21). The loss of any of these customers or a reduction in their purchases will negatively affect financial results.
  • Nearly 90% of GLSL’s total revenue comes from its API business. If the key products across its limited number of therapeutic categories fail to perform as expected, the company’s financial performance would be adversely affected.
  • Unplanned slowdowns or shutdowns of the GLSL’s manufacturing operations (due to socio-political disruptions, natural calamities) may lead to delays in supplies or new product launches.
  • Any delay, interruption, or reduction in the supply of raw materials would harm the company’s operations.  
  • There are outstanding legal and regulatory proceedings involving GLSL, its promoter, and directors.
  • The company has significant working capital requirements with respect to manufacturing operations and development of new products. If they fail to maintain cash flows or obtain sufficient credit, there may be an adverse effect on the firm’s overall performance.

IPO Details in a Nutshell

The book-running lead managers to the public issue are Kotak Mahindra Capital, BofA Securities India, Goldman Sachs (India) Securities, DAM Capital Advisors, BOB Capital Markets, and SBI Capital Markets. Glenmark Life Sciences had filed the Red Herring Prospectus (RHP) for its IPO earlier this month. You can read it here.

Ahead of the IPO, the company was able to raise Rs 454 crore from prominent anchor investors on July 26. This includes HSBC Global Investment Funds, Oaktree Emerging Markets Equity Fund LP, Kuber India Fund, Societe Generale-ODI, etc.

Conclusion

The Indian API market has registered a steady growth of 9.1% since FY19. As per reports, it is expected to grow at a CAGR of 9.6% from 2021-26, outpacing the global market growth for APIs. Earlier this year, our government had approved a production linked incentive (PLI) scheme worth Rs 6,940 crore to promote domestic manufacturing of essential drug intermediates and APIs. Glenmark Life Sciences could benefit immensely from all of this— provided that they launch new and improved products. 

The company has announced strategic plans to expand generic API production and grow its oncology production pipeline. [Oncology is the branch of medicine that deals with the study and treatment of cancer]. They will continue to invest in R&D and focus on enhancing their production capabilities. Large pharma firms such as Glenmark, Teva Pharmaceutical Industries, Torrent Pharma, and Aurobindo Pharma are highly dependent on GLSL. Thus, one could invest in the company based on its future growth prospects.

Once its shares get listed, GLSL will be directly competing with firms such as Divis Labs, Laurus Labs, Shilpa Medicare, Aarti Drugs, and Solara Active Pharma.

Before applying for the IPO, we will wait to see if the portion reserved for institutional investors gets oversubscribed. Looking at the recent trend, most IPOs are providing a select few with amazing listing gains. As always, consider the risks associated with this company and come to your own conclusion.

What are your opinions on this IPO? Will you be applying for it? Let us know in the comments section of the marketfeed app.