Glenmark Life Sciences IPO is nearly as big as its debt but the funds will go into expanding its plants

Glenmark Life Sciences IPO is nearly as big as its debt but the funds will go into expanding its plants
BCCL
  • Glenmark Life Sciences, subsidiary of Glenmark Pharmaceuticals is all set to raise ₹1,060 crore through its IPO.
  • The IPO will open for subscription on July 27 and close on July 29 with a price band of ₹695 to ₹720.
  • The company intends to use some of the proceeds from the IPO for the growth of contract development and manufacturing organisations (CDMO) business.
Glenmark Pharmaceuticals’ subsidiary Glenmark Life Sciences is all prepped up to launch its ₹1,060 crore initial public offering (IPO). From the overall IPO proceeds, ₹ 800 crore will go to the promoter Glenmark Pharmaceuticals as payment for the spin-off. In 2019, the API manufacturing business of Glenmark was spun off into Glenmark Life Sciences as part of a broader reorganisation focusing on the API business.

Further, the company has a debt of ₹916 crore, but Chief Executive Officer Yasir Rajwee told Business Insider that the money from the IPO will go into expanding two of its plants because he expects a fresh wave of demand.

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but Chief Executive Officer Yasir Rajwee told Business Insider that the money from the IPO will go into expanding two of its plants because he expects a fresh wave of demand.

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The subscription for the IPO will start on July 27 and close on July 29. It has set a price band of ₹695 to ₹720.

Glenmark Life Sciences is a leading developer and manufacturer of select high value ingredients that go into drugs for treating chronic illnesses, including cardiovascular disease, central nervous system disease, pain management and diabetes, according to the company’s IPO prospectus filed with the regulator.

These are the important dates to remember for Glenmark Life Sciences IPO:

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Issue details
Price band₹695-₹720
IPO open dateJuly 27
IPO close dateJuly 29
Allotment dateAugust 3
Initiation of refundsAugust 4
Credit of shares to demat accountAugust 5
IPO listing dateAugust 6
Minimum lot20

The company intends to use the proceeds from the IPO for capital expenditure requirements which includes the expansion of capacity at the Dahej (Gujarat) manufacturing site to meet the anticipated future demand of its generic active pharmaceutical ingredients (API) products.

Active pharmaceutical ingredient (API) means the active ingredient, which is contained in a medicine. For example, an active ingredient to relieve pain is included in a painkiller.

“Except for one antimalarial product segment, our demand outlook I mean demand that we are getting from customers from the last five quarters has been extremely solid. See no one is saying that we are buying less from China and more from India, but it is very clear to see that kind of demand. So I believe China Plus One is a real thing.”

Yasir Rajwee, CEO of Glenmark Life Sciences.

China Plus One is the business strategy to avoid investing only in China and diversify business into other countries.
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The government has also approved, early this year, a production linked incentive (PLI) scheme worth ₹6,940 crore ($955 million) to promote domestic manufacturing of essential key starting materials, drug intermediates, and active pharmaceutical ingredients (APIs).

The Indian API market has shown steady growth of 9.1% since FY19 and is expected to further grow at a compound annual growth rate (CAGR) of 9.6% from 2021-26 outpacing the global market growth. This is on account of increased focus on newer geographies in the global pharmaceutical industry, transition to specialty segments and strong domestic demand as per the management of the company.

Glenmark Life Sciences IPO is nearly as big as its debt but the funds will go into expanding its plants

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The other business that Glenmark Life Sciences is into

Some part of the proceeds will also go towards the growth of contract development and manufacturing organisations (CDMO) business.

CDMO is a drug development and manufacturing services facility provided by a pharma company. Pharmaceutical companies partner with CDMOs as a way to outsource drug development and drug manufacturing.

As emerging markets are growing, global companies lacking robust manufacturing capabilities would look for competent CDMOs that can provide readily available expertise and infrastructure to support their growing need for both customised and generic APIs, the company said in its DRHP filing.
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The increasing outsourcing trend by small and large pharmaceutical companies represents a promising opportunity for CDMOs, said a report. As pharma shifts its focus to more research and development and less in-house manufacturing, CDMOs are well positioned to fill the gap between their clients and the patient.

“From a business perspective, the CDMO coming in is going to make a huge difference, I mean in the last three years alone it has regarded 8-10%. Actually this year was a dip, if you see FY20 revenue, the contribution was 13% already so our topline and bottomline were even better,” said Rawjee.

The company received 8% of its revenue from CDMO in the last financial year, while it expects the number to trend upwards with the rising demand.
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“This year because of a dip in one business on the CDMO side it actually went down to 8% but that is a temporary blip. Overall the CDMO is an extremely nice area for us to grow. It is a very big driver for us,” added Rawjee.

The Indian CDMO industry has seen several success stories in the recent past. Players like Syngene, Anthem Biosciences, GVK BIO and Sai Life Sciences have demonstrated strong revenue growth and have established a track record of quality and delivery.

SEE ALSO: BYJU’s acquires US-based Epic, plans to invest $1 billion in the North American market
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