Most analysts are positive on the company’s future prospects and suggest subscribing to the issue. They believe the company, which is a spin-off of Glenmark Pharma, is well placed in the Active Pharmaceutical Ingredient (API) business.
Considering the FY-21 adjusted EPS of Rs 28.69 on post issue basis, the upper price band implies a P/E of 25.09 with a market cap of Rs 8,822 crore, while its peers namely Divi’s Laboratories, Laurus Labs and Shilpa Medicare are trading at a P/E of 64.0, 36.1 and 36.5, respectively.
“We recommend ‘subscribe’ to this IPO as the company is a leader in select high value, non-commoditized APIs in chronic therapeutic areas with quality focused and compliant manufacturing, R&D infrastructure; and it is available at reasonable valuation as compared to its peers,” said Saurabh Joshi and Ridhima Goyal of Marwadi Shares and Finance.
It currently operates four multi-purpose manufacturing facilities which are situated on leasehold properties located at Ankleshwar and Dahej in the state of Gujarat, and Mohol & Kurkumbh in the state of Maharashtra.
The global API market was estimated to be around $181.3 billion in FY20 and is expected to grow at a CAGR of 6.2 per cent by FY26. Glenmark Life’s key customers include Glenmark, Teva Pharma Industries, Torrent Pharmaceuticals, Aurobindo Pharma, Krka, etc.
The price band of the offer has been fixed at Rs 695-720. Out of shares available for sale, 50 per cent will be reserved for qualified institutional investors, 35 per cent for retail and 15 per cent for HNIs.
The proceeds from the offer for sale will go to the selling shareholders, while the amount received from the sale of fresh issue will be utilized for payment of outstanding purchase consideration to the promoter for the spin-off of the API business (Rs 800 crore), funding capital expenditure requirements (Rs 153 crore) and general corporate purposes.
Since 2015, the company’s facilities have been subject to 38 inspections and audits by regulators including the USFDA and others. It has not received any warning letters/import alerts from regulatory authorities. Its facilities have also been subject to 432 inspections by customers during this period.
“Glenmark Life 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. The growth momentum also has a strong undercurrent of global API industry growth,” said Siddhant Khandekar of ICICI Securities who recommends subscribing to the issue.
Analysts at Geojit Financial Services and Religare Broking also have positive views on the IPO.