5 Reasons to invest in Glenmark Life Sciences IPO
As the Glenmark Life Sciences gets set to open on 27 July, let us look at whether there are some really strong arguments in favour of the IPO. But, first a quick stack of the IPO details. Glenmark Life Science IPO will open for subscription on 27 July and close on 29 July. The company is offering around 2.1 crore shares in all in the price band of Rs.695-720 to raise Rs.1,514 crore through a mix of fresh offer and OFS. At upper price band, the market cap is Rs.8,820 crore.
5 reasons to invest in Glenmark Life Sciences IPO
Obviously, any IPO investment must be done in consultation with your financial advisor after ensuring the investment is in sync with your goals. However, here are 5 compelling reasons you may find the IPO an attractive proposition.
- Glenmark Life Sciences is the Active Pharma Ingredients (API) arm of Glenmark Pharma and has been accounting for about 30-35% of its overall value. Glenmark Pharma has been a listed stock for over 20 years and has a reputation for delivering solid long term returns. The Glenmark Life Sciences IPO provides an opportunity to participate in the high-growth API segment, which is expected to grow at 8.5% CAGR over next 5 years.
- APIs are inputs that go into making medicines. Glenmark Life Sciences derives 90% of its revenues from APIs and 10% from CDMO. Within APIs, Glenmark Life is present in the mid-margin generic API segment and the higher margin complex API segment. Most of the APIs manufactured by Glenmark Life are non-commoditized and cater to specialized areas like cardio vascular, central nervous system, diabetes, pain management etc.
- Glenmark Life has a blue chip global clientele. As of 2020, 16 out of the 20 largest generic manufacturers in the world are customers of Glenmark Life. Nearly 70% of the global customers of Glenmark Life are repeat customers indicating high loyalty coefficient. Its client list include Teva Pharmaceuticals, Torrent Pharma, Aurobindo Pharma, KRKA and a host of other generic leaders across the world.
- Glenmark has consistently delivered on numbers and its top line and bottom line speak for themselves. Revenue from operations has more than doubled in the last 2 years to Rs.1,886 crore in FY21. EBITDA margins in the last 2 years have grown from 28% to 31.40% putting it in top league of API margins. Net profits are up 80% over last 2 years and the ROCE has increased from 18.21% in FY19 to 32.69% in FY21.
- Let us finally look at valuation benchmarks. In the API peer group, Glenmark Life has RONW of 46.7%, while the others in the peer group like Laurus and Aarti Drugs are in the range of 30-35%. In terms of P/E ratios, Glenmark is priced at 22.3x FY21 EPS at the upper end of the price band of Rs.720. This compares very favourably with the median API sector PE ratio of around 33-34X. That leaves enough room for listing upsides.
Read: What is Pharma API
The Glenmark IPO brings a good story on the product, client franchise and on valuations. That surely makes it an attractive proposition.
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