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Glenmark Life Sciences IPO  Fundamental Analysis

Key Business Highlights

  • As part of a reorganization of Glenmark Pharma and to accelerate its growth, the API manufacturing business of Glenmark Pharma was sold and spun off into Glenmark Life Sciences Limited in the year 2019. Following the spin-off, the company operates as an independent, professionally managed global API business.
  • A leading developer and manufacturer of selected high-value APIs. APIs are sold domestically and offered as exports in multiple countries in Europe, North America, Latin America, and Japan among other countries. The Issuer currently operates four multi-purpose manufacturing facilities which are situated on leasehold properties located at Ankleshwar and Dahej in the state of Gujarat, India, and Mohol and Kurkumbh in the state of Maharashtra.
  • Strong relationship with the customers. The issuer’s key customers are Glenmark, Teva Pharmaceutical Industries, Torrent Pharmaceuticals, Aurobindo Pharma, and Krka. Approximately 69% of the customers were period-on-period repeat customers for the last three fiscals.
  • As part of expansion plans, the company plans to increase the API manufacturing capabilities by enhancing the existing production capacities at Ankleshwar facility by FY22 and Dahej facility by FY22-FY23 to an aggregate annual total installed capacity of 200 KL.

Glenmark Life Sciences Financial Review

Total revenue for the FY21 increased by 21.73% to Rs 1885.98 crore as against Rs 1549.31 crore in FY20 due to increase in sales. Glenmark Life sciences posted PAT of Rs 351.58 crore, an increase of 12.3% from the previous financial year. Profitability margins have been strong and stable throughout the three fiscals. Net margin has fallen slightly to 18.64% in FY21 from 20% during the last two fiscals.

Debt to equity ratio is 1.27x as on 31st March 2021. Return on net worth is 46.71% for fiscal 2021.

Table 1 - Financials and Ratios (Amount in INR Crore)
Particulars FY21 FY20 FY19
Total Revenue 1885.98 1549.31 1405.49
PAT 351.58 313.10 292.67
EBITDA 591.88 483.96 429.27
Total Assets 1997.08 1725.6 1475.4
EBITDA Margin 31.38% 31.24% 31.24%
Net Margin 31.24% 20.21% 20.82%

Valuations and Peer Comparison

With EPS of 32.61 as on 31st March 2021, the Issue is valued at 22.08x calculated at the upper price band of Rs 720 per share. The Issue price is 10.31 times of NAV of 69.82 per share. Average P/E of the sector is 36.74x. Hence, the Issue appears to be reasonably priced.

As per the RHP, peers of the issuer are Divis Lab, Lauras Lab, Shilpa Medicare, Aarti Drugs and Solara Active Parma Sciences. The key details of the peers can be seen in the peer comparison table.

Table 1 - Comparative Analysis of Glenmark Life Science with Competitors
Particulars Divis Lab Lauras Lab Shilpa Medicare Aarti Drugs Solara Active pharma Glenmark Life Sciences
Face Value per share 2 2 1 10 10 2
Total Income for FY21 (INR Crores) 7031.96 4835.9 931.3 2159.3 1645.7 1886.0
EPS 74.75 18.36 18.13 30.09 69 32.61
NAV per share 350.12 48.41 181.37 98.01 442.12 69.82
Return on net worth 21.35% 37.87% 9.99% 30.70% 13.93% 46.71%
P/E 63.65 36.59 33.37 24.28 25.83 10.31

Conclusion

Glenmark Life Sciences has a niche and specialized product portfolio with its reach expanding into new geographies. The Issuer has maintained high customer loyalty with a high rate of customer retention.

The Issuer has a good track record of financial performance with strong profitability margins and growth in its topline. Glenmark Life has plans to expand the API portfolio and grow its CDMO business through expanding production capacities in the future. The Issue is reasonably priced in terms of price to its earnings ratio when compared to its peers. Hence, investors may subscribe to the IPO.

Reviewer recommends Subscribe to the issue.

Review By CA Priyanka Choudhary on 3rd Jul 2021

Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.


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