The initial public offering (IPO) of Mankind Pharma (MPL), one of the largest pharma firms in India, opens for subscription today and will close on April 27.
The price band has been set at ₹1,026-1,080 per share. Investors can bid for 13 shares in one lot and in multiples thereof.
About the IPO
The public offering, which comprises of a pure offer-for-sale (OFS) of 40,058,844 equity shares by the promoters and other existing shareholders, has a face value of Re 1 per equity share. The company intends to raise a maximum of ₹4,326.36 crore at the upper band of the price range.
The offer is being made through the book-building process, in which not less than 15 percent of the offer must be made available to non-institutional investors and not less than 35 percent of the offer must be made available to retail individual investors. Not more than 50 percent of the offer may be allocated to qualified institutional buyers.
Objectives
The objectives of the offer are to (i) carry out the offer for sale by the selling shareholders and (ii) achieve the benefits of listing the equity shares on the stock exchanges.
All of the offer proceeds will be received by the selling shareholders in proportion to the offered shares that each selling shareholder sold as part of the offer; the company will not receive any of the offer proceeds.
About the firm
Mankind Pharma Ltd. (MPL), incorporated in 1991, is a well-known and fastest-growing player in the Indian pharma market and the 4th largest in terms of domestic sales and 3rd largest in terms of domestic sales volume as on Dec’22 MAT (Moving Annual Total). With 97% of its revenue from India, MPL sells pharmaceutical formulations and consumer healthcare goods and operates 25 manufacturing sites and a specialised R&D center with four divisions.
MPL develops and manufactures pharma formulations across various acute and chronic therapeutic areas and owns several consumer healthcare brands. MPL has around 36 brands including Manforce, Prega News, Unwanted -72, Moxikind and Nurokind, with several products ranking in the Top 10 in the covered markets.
Anchor investors
Ahead of its IPO, Mankind Pharma has allocated 1.2 crore equity shares to 77 anchor investors, which included some marquee foreign and domestic institutions.
The anchor allocation was done at ₹1,080 per share, under which Goldman Sachs, Canada Pension Plan, the Government of Singapore, and Fidelity Investment Trust, among others, participated.
Brokerage views
Most brokerages have advised 'subscribing' to the issue on the back of market leadership, brand recognition, good financial performance and a strong distribution network, among others.
Aditya Birla Capital - SUBSCRIBE
"At the upper price band, MPL is available at PE of ~33x its expected FY23 EPS. As of FY22, the D/E stands at 0.09x while its Net Working Capital Cycle was at 49 days. We believe that MPL’s market leadership and brand recognition coupled with Management’s bet on the recent acquisition of Panacea Biotech’s formulations may provide a huge growth opportunity for the company. We have a SUBSCRIBE recommendation to this issue," said the brokerage.
Key risks: 1) Any price control reforms from government may affect margins.
2) High competition in the generic segment.
3) Highly regulated industry.
Geojit Financial Services - SUBSCRIBE
At the upper price band of ₹1,080, MPL is available at a P/E of 30x (FY22), which appears reasonably priced compared to peers. Considering the under-penetration of healthcare services and lower consumer expenditure in healthcare in India, MPL’s focus on chronic therapeutic areas, emphasis on increasing penetration in metro and Class I cities, growth in the consumer healthcare business, good financial performance and strong distribution network, it has assigned a “Subscribe” rating on a long term basis.
Key risks: 1) Limited geographical diversification/ risk of over-reliance.
2) 13 percent portfolio fall under NLEM (National List of Essential Medicines), subject to price control.
3) Ongoing acquisitions may enhance its business portfolio, but there is a possibility of higher costs without a proportionate increase in revenues.
ICICI Direct - SUBSCRIBE
ICICI Direct assigns a SUBSCRIBE rating on the back of 1) opportunities from its newer acquired products and its plan to backward integrate into its power brands, 2) Structural preference for domestic branded formulations among broader healthcare themes.
Key risks: 1) Competition from well-established players in newer therapies.
2) Concentration toward top revenue-generating brands
3) Volatility in API prices
4) Dependence on key personnel
Marwadi Financial Services - SUBSCRIBE
"We assign a “Subscribe” rating to this IPO as the company has a diversified portfolio with market-leading rankings across key therapeutic areas and wide market and distribution coverage with a focus on affordability and accessibility. Also, it is available at reasonable valuation as compared to its peers," it said.
Swastika Investmart - SUBSCRIBE FOR LONG-TERM
The brokerage noted that MPL has pan-India distribution with a focus on affordability, accessibility, and strong brand recall. In the past three years, the company has demonstrated robust growth in its financial performance, with a near doubling of its net worth and a stable increase in revenue and net profit, it informed. Furthermore, the company has strategies to increase its presence in the chronic therapeutic area and grow the consumer healthcare business, it added.
However, the pharmaceutical industry is fiercely competitive, and secondly, regulatory risk and stricter norms pose a potential challenge, cautioned the brokerage. Coming to the IPO valuation, the issue's P/E ratio of 30x appears fully priced, and given the pure offer-for-sale nature of the issue, only high-risk investors are advised to consider a long-term investment in this, it suggested.
