China’s Fosun-owned Gland Pharma IPO opens today— Here’s all you need to know about India’s largest pharmaceutical IPO

China’s Fosun-owned Gland Pharma IPO opens today— Here’s all you need to know about India’s largest pharmaceutical IPO
Gland Pharma
  • Gland Pharma has set an issue price band of ₹1490 -₹1500 per share.
  • The company is backed by China’s Fosun Pharma, making it one of the biggest offerings by a company with a Chinese parent in India.
  • The recent geopolitical tension between India and China remains a big risk factor, and may not play out well for Gland Pharma.
The ₹6,500 IPO of Hyderabad-based Gland Pharma is now open for subscription. The company is backed by China’s Fosun Pharma, making it one of the biggest offerings by a company with a Chinese parent in India. Gland Pharma has set an issue price band of ₹1490 -₹1500 per share. While most analysts have a ‘subscribe’ call on it, some advise caution due to the stretched valuation.

Ahead of the IPO, the company already raised ₹1,944 crore from anchor investors at the price of ₹1,500 per equity share. Some of the marquee names among the anchor investors include the Government of Singapore, Nomura, Goldman Sachs, Morgan Stanley, SBI Mutual Fund and Axis Mutual Fund.

Investment experts recommendations for Gland Pharma IPO
BrokeragesRecommendations
GEPL CapitalSubscribe
SharekhanSubscribe
Kotak SecuritiesNot Rated
ChoiceSubscribe with Caution
BP WealthSubscribe
Axis SecuritiesNot Rated

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The company said the proceeds from the issue would be utilised for funding incremental working capital requirements, capital expenditure requirements and general corporate purposes. And, it is worthy to note while the company will not receive any money from the offer for sale portion.

Post the IPO, the promoter shareholding will fall to 58% from current 74%.The offer for sale comprises 1.93 crore shares by promoter Fosun Pharma Industrial, and 1 crore equity shares by Gland Celsus Bio Chemicals, 35 lakh shares by Empower Discretionary Trust and 18 lakh by Nilay Discretionary Trust.

China’s Fosun-owned Gland Pharma IPO opens today— Here’s all you need to know about India’s largest pharmaceutical IPO

In the offering, no more than 50% of the stake will be given in qualified institutional placements (QIP), while at least 35% will be available for retail investors and the rest will be available for non-institutional bidders.
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Here’s what makes the share sale attractive

Business spread over 60 countries

With its business spread over 60 countries, the company has a great track record of revenue delivery and profitability across the United States, Europe, Canada, Australia, India and the rest of the world, according to Axis Securities.

As of June 30, the company earns nearly 63% of its revenue from the US and nearly 15% from India — these two countries are the biggest market for Gland Pharma. The expansion in various other countries helps in offsetting the slowdown impact in a particular region or a country.
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China’s Fosun-owned Gland Pharma IPO opens today— Here’s all you need to know about India’s largest pharmaceutical IPO

The sector is poised to grow, and its listed peers are proof of that

The coronavirus pandemic has already shown how important the pharma industry is. And, from here onwards the sector is slated to touch new high heights. According to Sharekhan, the global formulations market grew at a compound annual growth rate of 5.8% from 2014 to reach $1,096 billion in 2019. The market is further estimated to clock a CAGR of 4.4% to reach $1,359 billion by 2024.

The gains in other listed Indian pharma stocks are proof of safety that investors have found in the sector.
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StocksGains since March 31
Cipla81.00%
Aurobindo Pharma88%
Lupin56%
Cadila Healthcare61%
Dr Reddy57%

The company’s strong customers base and diversified revenue base, which make it an interesting bet for investors

Gland Pharma has a successful track record of operating a B2B model with leading pharmaceutical companies such as Sagent Pharmaceuticals and Apotex as well as Fresenius Kabi USA and Athenex Pharmaceutical Division in the United States and the Rest of the world. It also has 7 manufacturing facilities that are situated in southern India including 2 sterile injectables facilities, 1 dedicated Penems facility, 1 oncology facility and 3 API facilities.

According to Axis Securities, the company’s revenue base is diversified by the business model as well as by key customers and markets. Its top 5 customers in Fiscals 2018, 2019 and 2020 and the 3 months ended June 30, accounted for 49.92%, 47.86%, 48.86% and 44.45%, respectively, of the total revenue from operations for the relevant period.
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China’s Fosun-owned Gland Pharma IPO opens today— Here’s all you need to know about India’s largest pharmaceutical IPO

Risk factors to consider before subscribing

Geopolitical tension in the Asia region

The recent geopolitical tension in the Asia region between India and China may not play out well for Gland Pharma. However, the company denied any impacts on its business because of having a Chinese promoter. But Choice research report highlighted that anti-Chinese sentiment after the recent geopolitical tension in the Galwan valley may disrupt its business.

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Fierce competition in the industry

Although the pharma sector is deemed to grow, what remains challenging is the cut-throat competition in the industry. “The markets in which Gland Pharma sells its generic injectable products are highly competitive. According to the IQVIA Report, injectable manufacturers face entry barriers such as high capital investments, operational costs, manufacturing complexities, stricter compliance requirements (because of the sterile nature of products) and high-quality standards resulting in limited competition in the market,” the Sharekhan report said.

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