Glenmark Life Sciences IPO Analysis

Glenmark Life Sciences Details:

IPO Date: July 27th to July 29th, 2021

­Total Shares for subscription: ~2 Cr

IPO Size: ~Rs. 1,500 Cr

Lot Size: 20 shares

Price Band: Rs. 695–720/ share

Market Capitalization: ~8,800 Cr

Recommendation: Subscribe for risk takers

About Glenmark Life Sciences Limited

Glenmark Life Sciences Limited (“GLS”) is a Rs. 2,000 Cr developer and manufacturer of select active pharmaceutical ingredients (“APIs”) in chronic therapeutic areas. It is a subsidiary of Glenmark Pharmaceuticals.

Predominantly it manufactures cardiovascular disease (“CVS”), central nervous system disease (“CNS”), pain management, and diabetes. Almost 45% comes from the CVS segment.

The API portfolio comprises specialized and profitable products, including niche and technically complex molecules, which reflects their capability to branch into other high-value products. Glenmark Life Sciences has a strong market share in select specialized APIs such as Telmisartan (anti-hypertensive), Atovaquone (anti-parasitic), Perindopril (anti-hypertensive), Teneligliptin (diabetes), Zonisamide (CNS), and Adapalene (dermatology). Almost 45% of total sales come from products with more than 20% market share. This ensures a higher margin from economies of scale and a relatively high barrier to entry from the competition.

They are also increasingly providing contract development and manufacturing operations (“CDMO”) services to a range of multinational and specialty pharmaceutical companies. Currently contributes 8% of total sales.

Financials of Glenmark Life Sciences Ltd:

Glenmark Life Sciences has sales of Rs. 1,885 Cr and net profit of Rs. 354 Cr. Since it was recently demerged from the parent company into a wholly-owned subsidiary, the company did not report a long-term track record of only the API segment.

If we compare with all predominantly API companies, Glenmark Life Sciences size is in the middle range with API business earning above-average operating margin. We believe the tall ask for Price/Sales is in line with better profitability. We believe that part of the profitability is sustainable as 45% of the sales come from API with a high market share, giving it economies of scale to sustain and fight competition.

Read more here.

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