Glenmark Life Sciences IPO sails through; should you subscribe?

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Glenmark Life Sciences IPO got fully subscribed on the first day of the offer. The public offer has received bids for 2,51,70,260 shares so far against 1,50,18,279 shares offered by the company. It 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 has a fresh issue of equity shares worth up to Rs 1,060 crore and the 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:

Geojit Financial Services: Subscribe The brokerage assigned a “Subscribe” rating for the issue on a long-term basis considering its strong focus on R&D, expansion plans (1726.6KL when completed), growth opportunity in CDMO services and expanding complex API portfolio.

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.