Glenmark Life Sciences IPO Opens Today: Should You Subscribe?

After the blockbuster listing of Zomato unicorn IPO, Glenmark Life Science IPO shall open from today for public subscription. Here is a low down on the IPO details together with brokerage calls on the same:

1. IPO details:

The company through the IPO will look to mobilize Rs. 1513.6 crore. Price band for the issue is pegged between Rs. 695-720 per share

IPO offer period: July 27- July 29

BRLM: Kotak Mahindra Capital Company, BofA Securities India and Goldman Sachs (India) Securities are the global co-ordinators and book-running lead managers to the offer.

Issue details: Fresh issuance of 1.47 crore equity shares and an offer for sale of up to 63 lakh equity shares by promoter Glenmark Pharmaceuticals.

Market lot: 20 equity shares and retail investors can apply for up to 13 lots. Up to 35% of the quota is reserved for retail investor class.

2. About the company:

Glenmark Life Sciences is a leading developer and manufacturer of active pharmaceutical ingredients (APIs). The company is a fully owned subsidiary of Glenmark Pharmaceuticals. The company works with 16 of the 20 largest generic companies globally. (Source: A Year of Surprises Shakes Up Off-Patent Industry" | Informa, 2020)

The company provides APIs for cardiovascular disease (CVS), central nervous system disease (CNS), pain management and diabetes.

The company's portfolio comprises 120 APIs and through employing innovative approach as well as operational excellence for delivering reliability as well as consistent product quality. Powered by its massive, world-class manufacturing and research capabilities, the company supplies high-quality APIs to over 540 pharma companies in multiple countries.

3. Issue objectives:

As per the Business Purchase Agreement (BPA), the company will use the mobilized funds for payment of outstanding purchase price to the promoter for the spin-off of the API business from the promoter into the company amounting to as much as Rs. 800 crore, financing capital expenditure requirements (Rs 152.76 crore), and for general corporate purposes.

 

4. Financials and Grey market premium:

Glenmark Life Sciences for the Fy21 period logged a net profit of Rs 351.58 crore and revenue of Rs 1,885.16 crore.

In the grey market or market for unlisted securities, shares of Glenmark Life Science are available at a premium of Rs. 110 per share, which indicate the shares of Glenmark Life Science on listing may provide good listing gains.

 

5. Brokerage recommendations on Glenmark Life Sciences' IPO:

Ashika Research has given a 'Subscribe' rating to the IPO issue of Glenmark IPO considering the fact that In terms of the valuations, on the higher price band, GLS demands a P/E multiple of 25.1x based on FY21 post issue fully diluted EPS. Almost all listed peers are trading in the range of 30x - 60x and industry average is at 40x. GLS is valued at discount to peers. Thus, issue appears attractive for investment, said Ashika Research. Further on the financials the brokerage said its performance has been quite impressive on all counts. Revenue and EBITDA recorded a CAGR growth of 15.8% and 17.3%, respectively through FY18- FY21, its net profit recorded a 9.6% CAGR over the same period. EBITDA margin has remained stable at ~31%.

ICICI Securities has given a 'Subscribe' rating to the IPO issue of Glenmark Life giving the rationale that priced at FY21 EV/EBITDA of 14.7x on upper band. GLS has a good performance execution and 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 SUBSCRIBE to the issue, added the brokerage research firm.

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