One may subscribe to Glenmark Life Sciences IPO because of clean regulatory history, strong promoter backing and good track record, say analysts

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One may subscribe to Glenmark Life Sciences IPO because of clean regulatory history, strong promoter backing and good track record, say analysts
BCCL
  • Glenmark Pharmaceuticals’ subsidiary Glenmark Life Sciences IPO to open on July 27 and close on July 29.
  • It is looking to raise ₹1,060 crore through IPO on a price band of ₹695 to ₹720.
  • From the overall IPO proceeds, ₹800 crore will go to the promoter Glenmark Pharmaceuticals as payment for the spin-off.
After a strong listing by food delivery firm Zomato last week, Glenmark Pharmaceuticals’ subsidiary Glenmark Life Sciences is another one in line to launch its initial public offering (IPO).

The IPO is likely to open on July 27 and close on July 29. Shares of the company are expected to list on bourses on August 6.

Glenmark Life Sciences is a manufacturer of active pharmaceutical ingredients (APIs) catering to chronic therapeutic areas such as cardiovascular disease, central nervous system disorders, pain management, and diabetes, among others.

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Glenmark Life Sciences has announced to raise ₹1,060 crore through the 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 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 API products.

Here are the important details to note:
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

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Some analysts have recommended subscribing to the IPO because of the company’s good performance over the years, clean regulatory history and the fact that it has a strong promoter holding.

“Glenmark Life Sciences has a good performance execution and [a] clean regulatory track record. The company is also a leading developer and manufacturer of select high value, non-commoditised APIs in chronic therapies and works with 16 of the 20 largest generic companies globally. The growth momentum also has a strong undercurrent of global API industry growth. We recommend subscribing to the issue,” said a report by broking firm ICICI Direct.

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Although product concentration remains a key risk where top 10 products contribute 66.36%, the company aims to reduce the dependence with planned capex in FY22, said a report by GEPL Capital Research. “We recommend a subscribe rating to the issue, considering strong research and development (R&D) capabilities, clean regulatory history, strong promoter backing with synergies and planned capex to drive medium term growth,” the report added.
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Moreover, the company is benefiting from an anti-China product strategy going around the globe.

“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,” said Yasir Rajwee, chief executive officer (CEO) of Glenmark Life Sciences in an interview with Business Insider.

China Plus One is a business strategy to avoid investing only in China and diversify business into other countries.
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“Going forward, based on our quick estimate, we are anticipating an 18.7% CAGR [compound annual growth rate] rise in the top-line [revenue] over FY21-24 and margins are also expected to expand… Considering the business growth outlook and almost stable operating margins, we assign a “Subscribe” rating for the issue,” said Choice broking in a report.

Further, a report by SMC Finance recommended the IPO for long term on its expansion plans in the next two fiscal years.

“Glenmark Life Sciences has generated strong revenue and margin growth in the last 3 years… Moreover, the company intends to increase its API manufacturing capabilities at Ankleshwar facility during FY22, and Dahej facility during FY22 and FY23 by an aggregate annual total installed capacity of 200 kilolitre (KL). This additional production capacity is expected to help the company further expand generic API production and also grow the oncology product pipeline. A long-term investor may opt for the issue,” said the report.
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