India’s biggest pharmaceutical Initial Public Offer will hit the primary market on 9th November. Hyderabad-based Gland Pharma has received the (SEBI) Securities and Exchange Board of India’s approval to launch its Rs 6,000 crore IPO. This will give birth to India’s largest IPO in the pharmaceutical sector to date. This IPO will include a fresh issue of Rs 1,250 crore. The company filed its draft red herring prospectus with SEBI in July 2020. You can find it here.

About Gland Pharma

Gland Pharma was founded in 1978 to manufacture and market Heparin injection for the domestic market. It entered the US market in 2007. In 2013, its Oncology formulations facility at Visakhapatnam received USFDA acceptance which is very crucial for pharmaceutical companies.

Gland Pharma has seven manufacturing facilities in India. Out of the seven, four facilities are for finished formulations and the rest three are Active Pharmaceutical Ingredient (API) facilities. The company is present in sterile injectables, oncology and ophthalmic segments.

It follows a business-to-business model (B2B) and is present in over 60 countries such as the US, India, Russia, etc. It has a portfolio of products across various therapeutic divisions such as anti-malaria, anti-diabetic, anti-infectives and more.

Strong fundamentals

66% of the company’s presence is in the US market and only 18% of the total revenue comes from the Indian market. The company looks fundamentally robust. The following images tell you the growth story of the company.

Source: Annual Report

Gland Pharma’s revenue from operations increased by 28.81% to Rs 2,633.24 crores in FY20. This rise was driven by 51 new product launches in the United States, Europe, Canada and Australia. Higher revenues boosted their bottom line. Their profit after tax (PAT) increased by 71.02% to Rs 772.95 crores in FY20. The company EBITDA Margin has increased from 34.9% to 40% in two years.

Company net worth has increased by more than 1.5 times in the last two years. This shows that the company is fundamentally sound and can be a great opportunity for investors. The money generated from the primary market will be used to fund capital expenditure and an increase in working capital. This is another signal that the pharma company has more plans to expand in the near future.

Source: Annual Report

About the IPO

Investors have a keen eye on this company because it is one of the first companies with a Chinese parent to go for a public listing. It is majority-owned by China’s Shanghai Fosun Pharma. In 2017, private equity firm KKR got an amazing opportunity to exit from Gland Pharma. They sold their stake to Shanghai Fosun Pharmaceutical Group for over $1.2 billion. In return, Fosun Pharma acquired around 74% of the total stake in Gland Pharma.

The factor of a Chinese parent in the Pharma company is important to discuss because of two reasons. Firstly, this IPO is talked about at a time when there is huge uncertainty in Indo-China relations. Both the neighbouring countries were involved in the military standoff at the borders which led to casualties on both sides. India followed their stance with a digital strike by banning 250 Chinese apps.

Secondly, the pharma sector has seen large investments during Covid times. The companies are supported with good valuations due to the optimistic future of the industry. We have already seen a bunch of companies launching their IPOs this year. But no pharma companies have taken this road in 2020. Gland Pharma will be the first pharma company in India to take the primary market route this year.

The Details

IPO DateNov 9, 2020 – Nov 11, 2020
Price BandRs 1,490-1,500 per share
Issue SizeAggregating up to Rs 6,479.55 crore
Issue TypeBook Built Issue IPO
Offer for SaleAggregating up to Rs 5,229.55 crore
Fresh IssueAggregating up to Rs 1,250.00 crore
Face ValueRs 1 per equity share
Market Lot10 shares
Listing AtNSE, BSE

Kotak Mahindra Capital, Citi, Nomura and Haitong Securities are the book running lead managers for the issue.