Mankind Pharma IPO: Should you invest?

Investors have greatly contributed to the success of Initial Public Offerings (IPO) in the country. IPOs have been a popular way for companies to raise capital and offer shares to the public. 
I would say that investing in IPOs is like a game of treasure hunt, with investors searching for hidden gems among the sea of offerings. And we have yet another offering. 

With India surpassing China to be the highest populated country in the world, at a number of 142.8 crores.

The rising population will lead to unhealthy lifestyle habits such as poor nutrition, lack of exercise, and increased stress levels. These, in turn, may increase the prevalence of chronic diseases such as diabetes, hypertension, and cardiovascular diseases. Thus indicating that the pharmaceutical companies will play a crucial role in developing and producing drugs to manage and treat these diseases.

Pharmaceutical Industry Overview

The Indian pharmaceutical industry stands at 3rd position in the world in terms of volume. The industry comprises a vast network of about 3,000 drug companies. It contributes to about 2% of the GDP and about 8% of the country’s total merchandise exports.

The economic survey of 2022-23 stated that the Indian domestic pharmaceutical market is estimated to grow to ₹5.32 lakh crore by 2024 and is further expected to reach ₹10.64 lakh crore by 2030. 

India is the largest provider of generic medicines in the world. Also, the size of the Indian pharmaceutical market is estimated to grow at a CAGR of 10-11% by the financial year 2027.

You may wonder how all this information is going to benefit you, let me tell you. With the Indian pharma industry experiencing significant growth, there comes an attractive investment opportunity for investors like us. It presents an opportunity for the pharma companies to expand their market, which can result in higher revenue and profits for investors.

Mankind Pharma Company Analysis

Mankind Pharma Limited is India’s fourth-largest pharmaceutical company in terms of domestic sales. The company is engaged in developing, manufacturing and marketing a diverse range of pharmaceutical formulations across various products that are used in Acute and Chronic therapeutic areas and various consumer healthcare products.

The company was incorporated in the year 1991 and has evolved gradually ever since. They have a very focused approach and practice deep penetration in the markets they focus on. Currently, the business model that they focus on is domestic, and about 97.60% of their revenue comes from India.

The company has grown organically and aims at providing quality products at affordable prices and also manufactures about 75% of its products in-house. It gives the company two advantages: they can conduct multiple quality checks, and the other is that they end up saving up to 20% margins which otherwise goes to the third party.

The company entered the consumer healthcare industry in the year 2007 and has ever since established brands in the condoms, pregnancy detection, emergency contraceptives, antacid powders, vitamin and mineral supplements and anti-acne preparations categories. 

The business and operations are led by a qualified and experienced management team and Board of Directors who come from diverse backgrounds with expertise in various fields. Mr. Ramesh Juneja, who is the Chairman and Whole-Time Director, has over 31 years of work experience in the pharmaceutical industry.

Their principal competitors within India include leading pharmaceutical companies operating in similar therapeutic areas and product categories, such as Alkem Laboratories Limited, Abbott India Limited, Aristo Pharmaceuticals Private Limited, Sun Pharmaceuticals Industries Limited, and Torrent Pharmaceuticals Limited.

Mankind Pharma's Product Portfolio

They have created a diversified portfolio with market-leading ranking across key therapeutic areas. 

With about 36 brands which have achieved over ₹50 crores in Domestic sales in FY2022. Well known brands include Manforce Condoms, Prega News, Gas-O-Fast, Nurokind, Telmikind, Dydroboon, Acne star to name a few. 

They are the category leaders in:

• Manforce Brand: The male condom category.
• Prega News Brand: The pregnancy detection kit category.
• Unwanted 72: The emergency contraceptives category.

Mankind Pharma Financials

Reading the financial statements can get boring at times, but worry not, I have got you covered by mentioning a few of the important metrics that one must definitely look for:
Domestic sales for the FY 2020-22 period grew at a CAGR of approximately 16%, whereas the Indian Pharmaceutical Market (IPM) grew at a CAGR of 11% over the same period. The market share in terms of domestic sales went up from 4.0% to 4.4%, which represents the fastest growth in market share among the 10 largest corporates in the IPM.

• Revenue from Operations went up from ₹5,865 crore in FY 2020 to ₹7,781  crore in the year 2022, with a total income of ₹7,977 crore.
• ROCE went down from 35.86% to 25.50%. This was a result of recent capital expenditure that the company engaged in.
• EBITDA increased from ₹1,448 crore in 2020 to ₹2,003 crore in 2022.
• PAT increased from ₹1,056 crore in 2020 to ₹1,452 crore for the year 2022.

For a more detailed analysis of the IPO, head on over to Mankind Pharma on Ticker.

The Bottom Line

The growth of the Indian pharmaceutical industry, favourable regulatory environment, competitive advantage, innovation, and favourable valuations are some of the factors that can help us achieve higher returns.

Overall the key financials of the company are improving, the market share has also gone up, and the company has promising growth prospects. The debt is not very significant, with less than 2.5% of the revenue generated from foreign countries, there is a possibility of expansion. Although some are expressing concerns over the high valuation, it is notable that the company’s valuation is comparatively favourable to its industry peers. 

However, as with any investment, investors should conduct thorough research and due diligence to identify the most promising opportunities and manage their risk effectively.

*Disclaimer: The stock discussed above aren't recommendations from Finology, and shall not be construed as a replacement for professional advice. Consult a professional or conduct the necessary research before making an investment decision.