Glenmark Life Science’s Plans To Invest In Complex API

By Angel One | Published on 30th July 2021 | 13

Glenmark Life Science's Plans To Invest In Complex API May Lead To Share Value Re-rating

Glenmark Life Science, a high-value active pharmaceutical ingredients (API) manufacturer, opened its IPO offer on July 27, 2021. On the first day of the subscription period, which will continue till July 29, 2021, the offer received a 2.78x subscription. Investors in the retail quota subscribed 5.16 times the quota available to them. Non-institutional investors too subscribed heavily for almost 90 percent of the 15 percent quota available to them.

Incorporated in 2011, Glenmark Life Science, a subsidiary of Glenmark Pharmaceutical Ltd., is a critical player in producing high-value APIs for chronic therapeutic diseases. They develop and manufacture high-value, critical API components for cardiovascular disease (CVS), central nervous system disease (CNS), pain management, diabetes, gastrointestinal disorders, anti-infectives, and other therapeutic areas. Further, they operate in the Contract Development and manufacturing operations (CDMO), developing critical components for specialty pharmaceutical companies.

Operating in the highly specialised segment of CDMO, Glenmark Life Science has a proven track record and strong financials, which attracted investors to the initial public offer. They are a research and development (R&D) driven company and a critical player in its domain. They have four research and manufacturing units in Gujarat and Maharashtra, with a total installed capacity of 725.8 KL as of December 2020. They enjoy a close partnership with several global players, exporting to Europe, Latin America, North America, Japan, and more.

In the DRHP, the company informed its plans to invest the proceeds from the sale of the new issues in reducing interest payment burden and building an R&D pipeline to address the opportunities in oncology, peptides and iron compounds.

Most analysts are optimistic about the company’s prospects and attached ‘subscribe’ status to the IPO. Glenmark Life Science, a spinoff of Glenmark Pharmaceuticals, is well placed in its domain with an impressive list of long-term customers.

Competitive strength

  • A critical player in manufacturing specialised APIs for chronic therapeutic areas
  • Global supplier to Europe, Latin America, North America, Japan, and many other countries
  • Strong partnership enjoyed with leading global generic companies
  • Robust performance and solid financial records
  • Well-diverse high-quality product portfolio and strong R&D pipeline

After considering adjusted EPS of Rs 28.69 post-issue in FY 21, Glenmark Life Science shares at the upper price band offer 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 respectively at a P/E of 64.0, 36.1 and 36.5.

The endnote

Glenmark Life Sciences IPO opened on July 27, 2021, will remain available for subscription until July 29, 2021. Investors can bid for a minimum lot of 20 shares or increase their bid size up to 13 lots, comprising 260 shares and a maximum investable amount of Rs 187,200. The total issue size of Rs 1,513.60 crore comprises both fresh scrips aggregating up to Rs 1,060.00 crore and an offer for sale of Rs 453.60 crore equity shares. Shares are available in the price band of Rs 695-720.

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