Glenmark Life Sciences IPO to open on Tuesday; should you subscribe?
The public issue will have a fresh issue of equity shares worth up to Rs 1,060 crore and sale of up to 63 lakh equity shares by Glenmark Pharma
Glenmark Life Sciences will launch its three-day initial public offering (IPO) on July 27 to raise around Rs 1,513 crore from the primary market. The company has fixed a price band of Rs 695-720 a share for its initial share sale. The issue will conclude on July 27.
The public issue will have a fresh issue of equity shares worth up to Rs 1,060 crore and sale of up to 63 lakh equity shares by Glenmark Pharma. The company has the objective to utilise proceeds from the fresh issue towards payment of outstanding purchase consideration to the promoter for the spin-off of the API business and for funding the capital expenditure requirements.
Glenmark Life Sciences (GLS), a subsidiary of Glenmark Pharmaceuticals, is a leading developer and manufacturer of select high value, non-commoditised active pharmaceutical ingredients (APIs) in chronic therapeutic areas, including cardiovascular disease, central nervous system disease, pain management and diabetes.
Brokerages view on the IPO:
GEPL Capital: Subscribe
GLS sees complex API business as a key growth opportunity and intends to leverage its proven expertise in the area of synthetic chemistry and analytical characterisation to aggressively expand the existing technology platforms to manufacture and grow their complex API portfolio in oncology, peptides and iron compounds, thereby expanding our existing portfolio of API products.
The company’s API portfolio comprises specialised products, including niche and technically complex molecules, which reflects GLS’ ability to branch into other high-value products Although product concentration remains a key risk where top 10 products contribute 66.36%, GLS aims to reduce the dependence with planned capex in FY22. The offer is priced at around 22 times FY21 PE. GEPL Capital recommends a ‘Subscribe’ rating to the issue, considering strong R&D capabilities, clean regulatory history, strong promoter backing with synergies and planned capex to drive medium-term growth.
Marwadi Shares and Finance: Subscribe
Considering the FY21 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, 36.1 and 36.5 respectively. We recommend to “Subscribe” this IPO as the company is a leader in select high value, non-commoditised APIs in chronic therapeutic areas with quality-focused and compliant manufacturing/ R&D infrastructure and is available at reasonable valuation as compared to its peers.
Anand Rathi Shares and Stock Brokers: Subscribe
Given the company’s leadership in select high-value non- commercialised APIs in chronic therapeutic areas, cost leadership, strong management, strong balance sheet, growing business, high return on net worth of 46.71% in the fiscal ended March 31, 2021 and reasonable valuations, Anand Rathi Shares and Stock Brokers gives “Subscribe” rating to the IPO.