Please refer to important disclosures at the end of this report
1
Glenmark Life Sciences Limited (“GLS”) was incorporated on 23rd June, 2011.
GLS is a wholly-owned subsidiary of the Promoter, Glenmark Pharmaceuticals
Ltd. GLS operates two business lines Generic APIs (generics and complex
APIs) and CDMO (including specialty). GLS is a leading developer and
manufacturer of select high value, non-commoditized active pharmaceutical
ingredients (“APIs”) in chronic therapeutic areas, including cardiovascular
disease (“CVS”), central nervous system disease (“CNS”), pain management
and diabetes.
Positives: (a) Good track record of regulatory compliance, company has not
received any warning letter since 2015. (b) Leading manufacturer of selected
specialized APIs for chronic therapeutic areas like CVS, CNS, diabetes, and
pain management. (c) 16 of the 20 largest generic companies globally were
customers, maintains a strong relationship with leading global generic
companies.
Investment concerns: a) Dependence on Repetitive orders- approximately
69% of their customers were repeat customers. (b) Company will be increasing
its capacity by 25% in FY2022 and underutilization will impact the return ratio.
(c) Company will require new working capital for the growth as company
having a high working capital cycle of 238 days.
Outlook & Valuation: Based on FY-2021 PE of 22x and EV/EBITDA of 12.9x at the
upper price band of the IPO price, valuations are slightly better than the peer
companies. Similarly, the company has one of the best ROCE of 32.7%.
Company has a healthy balance sheet and will be Net Debt free after the IPO.
We expect the upcoming expansion plan in Ankleshwar & Dahej will be the
next growth driver for the company. We are assigning a “Subscribe”
recommendation to the issue.
Key Ratio
Y/E March ( Cr)
FY20
Net Sales
1,537.3
% chg
73.4
Net Profit
313.3
% chg
60.0
EBITDA (%)
31.5
EPS (as stated)
29.0
P/E (x)
24.8
P/BV (x)
19.3
Ronw (%)
77.9
RoCE (%)
30.8
EV/EBITDA
16.0
EV/Sales
5.0
Source: Company, Angel Research
SUBSCRIBE
Issue Open: July 27, 2021
Issue Close: July 29, 2021
QIBs 50% of issue
Non-Institutional 15% of issue
Retail 35% of issue
Promoters 82.8%
Others 17.2%
Fresh issue: ₹ 1060 Cr.
Issue Details
Face Value: ₹ 2
Present Eq. Paid up Capital: ₹ 1.96 Cr
Offer for Sale: ₹ 454 Cr
Post Issue Shareholding Pattern
Issue size (amount): ₹1514 Cr**
Price Band: ₹ 695-720
Lot Size: 20 shares and in multiple thereafter
Post-issue mkt. cap: *₹ 8552 cr - **₹ 8822 cr
Promoters holding Pre-Issue: 100%
Promoters holding Post-Issue: 82.84%
*Calculated on lower price band
** Calculated on upper price band
Book Building
Expected Listing date - 06/08/2021
Yash Gupta,
+022 39357600, Extn: 6872
Research Analyst
Yash.gupta@angelbroking.com
IPO Note
July 26, 2021
GLENMARK LIFE SCIENCES LIMITED
GLS | IPO Note
July 26, 2021
2
Company background
The company was incorporated in June, 2011 at Pune. The company was
acquired by Glenmark Pharmaceuticals Ltd pursuant to the Share Purchase
Agreement dated July 4, 2018. The Promoter - Glenmark Pharmaceuticals
Ltd currently holds 100% of the pre- Offer issued Equity Share capital. GLS
operates two business lines Generic APIs (90.6% of total revenue) and
CDMO (8.1% of total revenue). Company’s API business comprises of the
development, manufacture and sale of select high value, non-
commoditized APIs in chronic therapeutic areas, including CVS, CNS, pain
management and diabetes. The CDMO business currently comprises of
applying for and procuring permission to market products in regulated
markets as well as contract manufacturing of APIs for utilization by
pharmaceutical companies to make formulations
Exhibit 1Company Revenue Break-up
2021
2020
2019
Revenue
%to Sales
Revenue
%to Sales
Revenue
%to Sales
CVS Therapeutic Area
776.3
45.4%
668.2
51.6%
543.9
43.1%
CNS Therapeutic Area
167.7
9.8%
128.0
9.9%
122.0
9.7%
Diabetes Therapeutic Area
61.9
3.6%
57.1
4.4%
79.5
6.3%
Pain Management
70.6
4.1%
72.7
5.6%
68.5
5.4%
APIs in Other Therapeutic
631.9
37.0%
367.9
28.4%
448.9
35.6%
Total
1708.4
100.0%
1293.9
100.0%
1262.7
100.0%
Source: Company, Angel Research
Issue details
The issue size is ` 1541 Cr, which comprises of fresh issues of `1060 crore &
offer for sale of ` 454 Cr in the price band of `695-720 per share
Pre & Post Shareholding
Pre-issue
Post-issue
Particular
No of shares
%
No of shares
%
Promoter
10,78,04,950
100.%
10,15,04,950
82.8%
Other
0
0.%
2,10,22,222
17.2%
Total
10,78,04,950
100%
12,25,27,172
100%
Source: Company, Angel Research
GLS | IPO Note
July 26, 2021
3
Objectives of the Offer
Payment of outstanding purchase consideration to the Promoter for
the spin-off of the API business from the Promoter into the company
pursuant to the Business Purchase Agreement.
Funding the capital expenditure requirements.
General corporate purposes.
Key Management Personnel
Glenn Saldanha is the Chairman and non-executive director of the
company. He is also the chairman and managing director of the Promoter,
Glenmark Pharmaceuticals Ltd.
V.S Mani is the non-executive director of the company. He is also an
executive director and global chief financial officer of the Promoter,
Glenmark Pharmaceuticals Ltd.
Yasir Rawjee is the Managing Director and Chief Executive Officer of the
company. He leads the overall operations of the company and is
responsible for the overall business strategy of the company.
Sumantra Mitra is the executive director and vice president human
resources department of the company and has been associated with the
company since October 11, 2018. He is responsible for talent acquisition,
talent management, capability development, organizational development
and industrial relations, besides other aspects of the human resources
agendas for the company.
Sridhar Gorthi is the independent director of the company. He is a
partner at Trilegal. His areas of expertise at Trilegal include mergers and
acquisitions, joint ventures, private equity and venture capital.
Manju Agarwal is the independent director of the company. She has
approximately 34 years of experience in State Bank of India.
Taruvai Laxminarayanan Easwar is the independent director of the
company. He is currently engaged as an advisor to the Boston Consulting
Group (BCG) and is also a consultant with pharmaceutical companies.
Gita Nayyar is the independent director of the company. She is also serving
as an independent director on the board of Taj-SATS Air Catering Ltd,
Transport Corporation of India and Oriental Hotels Ltd.
GLS | IPO Note
July 26, 2021
4
Consolidated Profit & Loss account
Y/E March ( Cr)
FY19
FY20
FY21
Total operating income
886.4
1,537.3
1,885.1
% chg
-
73.4
22.6
Total Expenditure
638.6
1,065.3
1,293.9
Raw Material cost
352.3
690.5
905.4
Employee Benefit Expense
106.2
142.2
149.1
Other Expenses
180.1
232.6
239.4
EBITDA
247.8
472.0
591.2
% chg
-
90.5
25.3
(% of Net Sales)
28.0
30.7
31.4
Depreciation& Amortisation
19.2
29.3
33.3
EBIT
228.6
442.7
557.9
% chg
-
93.7
26.0
(% of Net Sales)
25.8
28.8
29.6
Interest & other Charges
0.6
33.5
87.5
Other Income
0.4
12.0
0.8
(% of Sales)
0.0
0.8
0.0
Exceptional items
0
0
0
Recurring PBT
228.4
421.2
471.2
(% of Net Sales)
25.8
27.4
25.0
Tax
32.6
107.9
119.3
PAT (reported)
195.8
313.3
351.9
% chg
-
60.0
12.3
(% of Net Sales)
22.1
20.4
18.7
EPS (as stated)
24.64
29.05
32.80
% chg
-
17.9
12.9
Source: Company, Angel Research
GLS | IPO Note
July 26, 2021
5
Consolidated Balance Sheet
Y/E March ( Cr)
FY19
FY20
FY21
SOURCES OF FUNDS
Equity Share Capital
2
2
2
Other equity ( Includes Preference shares)
86
400
751
Shareholders Funds
88
402
753
Total Loans
7
16
23
Other liabities
-
-
-
Total Liabilities
95
418
775
APPLICATION OF FUNDS
Net Block
537
557
587
Current Assets
930
1,160
1,399
Sundry Debtors
448
639
620
Cash &Bank Balance
8
31
143
Other Assets
74
78
123
Current liabilities
1,380
1,307
1,221
Net Current Assets
(449.6)
(147.2)
178
Other Non Current Asset
14
16
19
Total Assets
95
418
775
Source: Company, Angel Research
GLS | IPO Note
July 26, 2021
6
Consolidated Cash Flow Statement
Y/E March (cr)
FY19
FY20
FY21
Restated Profit before tax
228.2
421
470.9
Depreciation
19.2
29.3
33.3
Change in Working Capital
(93.2)
(190.2)
(107.6)
Interest Expense
0.6
33.5
87.4
Direct Tax Paid
(23.5)
(92.5)
(108.5)
Others
(119.9)
26.5
99.5
Cash Flow from Operations
10.4
195.0
387.7
(Inc.)/ Dec. in Fixed Assets
(9.3)
(50.9)
(66.3)
Investment in bank deposits (net)
-
-
(2.8)
Interest received
0.4
0.3
0.4
Cash Flow from Investing
(8.9)
(50.6)
(68.7)
Proceeds from fresh issue
1.5
-
-
Dividend paid on equity shares
0.9
(136.5)
(213.7)
Others
-
-
-
Cash Flow from Financing
2.4
(136.5)
(213.7)
Inc./(Dec.) in Cash
1.9
7.9
105.3
Opening Cash balances
-
2.0
10.0
Closing Cash balances
1.9
9.9
115.3
Source: Company, Angel Research
GLS | IPO Note
July 26, 2021
7
Key Financial Ratio
Y/E March
FY19
FY20
FY21
Valuation Ratio (x)
P/E (on FDEPS)
29.2
24.8
22.0
P/CEPS
35.0
22.1
19.8
P/BV
88.1
19.3
10.3
EV/Sales
8.8
5.0
4.1
EV/EBITDA
31.3
16.0
12.9
Per Share Data (Rs)
EPS (fully diluted )
24.64
29.05
32.80
Cash EPS
20.6
32.7
36.3
Book Value
8.2
37.3
69.8
DPS
-
-
-
Number of share
10.78
10.78
10.78
Returns (%)
RONW
99.3
77.9
46.7
ROCE
18.2
30.8
32.7
Turnover ratios (x)
Asset Turnover (net)
1.9
2.8
3.3
Receivables (days)
184.5
151.6
119.9
Inventory Days
415.2
218.2
207.0
Payables (days)
189.3
106.2
89.2
Working capital cycle (days)
410.4
263.5
237.7
Source: Company, Angel Research
GLS | IPO Note
July 26, 2021
8
Research Team Tel: 022 - 39357800 E-mail: r[email protected] Website: www.angelbroking.com
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