Untangling the Glenmark Life Sciences IPO

“There is always a winner in the hour of crisis”. It is not a hard nut to crack that the entire health industry (including its ancillary business verticals) has been the beneficiary of the COVID-19 pandemic, while the entire world was suffering. If IPO, instead of being 'Initial Public offering', would have been 'Immune Public Opportunity', pharma companies would have surely got mega listings; however, chances are that one of them might still get one.

In this blog, we shall decode the roving story of “Glenmark Life Sciences”, a company that is operating in the currently flourishing health industry and is making the headlines.

 But before that, let's disintegrate the name and the products it deals with!

Glenmark Life Sciences IPO

Glenmark + Life Sciences = Glenmark Life Sciences. So, is Life Science a perfect synonym of Pharma?

No, it isn’t!

When a newly innovated medicine enters the marketspace to test its luck around, it is categorized as a “branded drug”. Further, when the formulation of that drug is copied to manufacture other multiple drugs, it is categorized as “generic medicines”. However, when that branded drug chemistry is used to manufacture another medicine that contains some elements of living organisms, it will be called a “Life Science”,.i.e., biosimilar category.

Glenmark Life Science specializes in API manufacturing, which is its core competency and its major revenue-generating activity. API’s (Active Pharmaceutical Drugs) are the ingredients of any medicine. For example, if we talk about a pain killer, then the pain-relieving element is its API. 

Let us now take a deep sighted glance at some other information about the company and its IPO.

About the Company

Glenmark Life Sciences is a research and development (R&D) drive that was incorporated in 2011. It is a wholly-owned subsidiary of Glenmark Pharma and is the leading manufacturer of selected APIs (Active Pharmaceutical Drugs) in chronic therapeutic areas. 

It is omnipresent and has a global reach, forming collaborations and partnerships with 16 of the top 20 generic companies in the world. This makes it easier for them to serve a wide market base in multiple countries, including North America, Japan, Europe, Latin America, India, and many others.

Regardless of a cutthroat, fierce competitive scenario around the API industry in the likes of companies like Divi's Lab, Laurus Labs, Aurobindo Pharma, Aarti Drugs; Glenmark Life Sciences has managed to capture the majority of market share.

"Loyalty is one's biggest royalty" and this holds true in the case of the customers of Glenmark Life Sciences. History has provided several shreds of evidence that the biggest asset of Glenmark Life Sciences (one of those not mentioned in its balance sheet) is its relationship with its customers. It is because of its committed relationship that Glenmark has managed to have a lucrative portfolio of 120 API's which are supplied to more than 540 pharma countries around the globe.

Details of the IPO

About the IPO

This IPO proceeds dominantly constitute of fresh issue and a mere offer for sale of 453.6 Cr. Post the IPO, promoter holding shall be 82.84%, which is a good number (high promoter holdings imply that promoters have faith in the growth prospects of the company.)

Besides, here’s how the company plans to utilize the issue proceeds:

 1)      To make payment of outstanding purchase consideration to the promoter for the spin-off of the API business from the promoter into the company.

2)      To finance CAPEX (Capital expenditure requirements).

3)      To meet general corporate purposes.

Okay, here comes the part you’ve been reading this blog for.

Should you invest in Glenmark Life Sciences IPO?

A SWOT (Strength, Weakness, Opportunity, Threat) analysis will reveal the true picture:

It is empirical to note that Glenmark Life Sciences has outperformed almost all its peers when it comes to key financial metrics having exploding sales and profit growth of 15.8% and 17.3% for a period of 3 years, which is proof of its operational efficiency. Not only the sales and profit growth are lucrative but also the ROE and ROCE are very eye-catchy. It is an indicator of the fact that the company has been excessively efficient in managing the funds employed by its promoters, investors and borrowers.

Peer Comparison

One of the most important metrics of a fundamentally sound company is a reasonable PE Ratio. PE Ratio depicts the amount that an investor needs to pay for every Re. 1 of earning. Glenmark Life Sciences has a PE of 25 which, given its volume of operations and profits, seems reasonable in comparison to its peers. Also, from the above image, it is perceptible that Glenmark has the highest RONW (Return on Net Worth) of 46.71%. So, brownie points for that as well.

Cashflow Analysis

Cash Flow from Operations depicts the cash revenue generated by the company from its core activities. A Cash Flow Statement helps analysts to have a reflection of a company's liquidity position. The point of focus in the cash flow above is that the cash flow from operations of Glenmark rose to 388.11 Cr from 195.01 Cr, almost 2X which depicts that they improved their revenue realization policies and operational effectiveness. The net cash flow also surged by 13.28 times from 7.94 Cr to 105.60, which leads us to the fact that the overall position of Glenmark Life Sciences Ltd has shown positive improvements in the near past.

To Sum Up

Getting listed on the stock market with high listing gains is a spellbinding dream of every promoter, who wishes to fill his pockets by captivating the investors. After weighing the pros and cons of Glenmark Life Sciences and its market positioning, the IPO provides a decent opportunity for rational investors to generate wealth over a long time.

However, a rational investor must be wise enough to conduct thorough research and only then, decide whether to invest or not to invest in a particular venue.

Invest wisely!