India’s largest pharmaceutical IPO by Gland Pharma hit the primary market on Monday. The Rs 6,480 crore issue is being sold in Rs 1,490-1,500 price range. The IPO is a mix of fresh issue of Rs 1,250 crore worth shares and an offer for sale of up to 3.49 crore shares.
While China’s Fosun Pharma Industrial Pte is offering to sell 1.9 crore equity shares, Gland Celsus Bio Chemicals is planning to sell 1 crore shares. The other two shareholders, Empower Discretionary Trust and Nilay Discretionary Trust, are offloading 35.73 lakh and 18.45 lakh shares, respectively.
The Shanghai Fosun Pharma-owned company raised a total of Rs 1,943.86 crore from 70 anchor investors. The issue will close on November 11. While analysts are upbeat on the prospects of the company and recommend subscribing to the issue, a few believe the valuations are a bit on the expensive side.
Here’s what the top brokerages are saying about the issue:
Geojit Financial Services: Subscribe
This brokerage noted that the company has a strong record of launches with 51 products alone launched in FY20 and 18 in the June quarter of FY21. At the upper price band of Rs 1,500, the stock is available at a PE of 20 times on an annualised basis, which the brokerage finds attractive. “With a solid business model, no listed peers and a positive outlook for the pharma sector, we assign a Subscribe rating for the issue,” the brokerage said.
Sharekhan: No rating
Sharekhan said the offer is priced at 29.8-30 times its FY2020 EPS at lower and upper price bands. The company, it said, is present in one of the fastest-growing generic injectables space, with an extensive vertical integration and follows a B2B model across markets.
“Gland is expanding its manufacturing footprint, has a strong pipeline of filed ANDAs and is also expanding its geographical presence in new markets. Looking at the strong domain expertise, a sturdy and consistent earnings track record and healthy return ratios, the future looks good,” it said.
Choice Broking: Subscribe with caution
Choice Broking advised investors to subscribe with caution, as even though the fundamentals of the business were strong, the valuation appeared stretched. At the higher price band of Rs 1,500 per share, Gland Pharma’s share is valued at a trailing 12-month P/E multiple of 31.7 times, which is in-line with pharma industry P/E of 32.3 times, Choice Broking said in a note.
BP Equities: Subscribe for long term gains
BP Equities recommended subscribing to the issue from a medium to long term perspective, citing the niche presence of the company, superior business performance, healthy balance sheet, complex nature of the business and a strong product pipeline.
GEPL Capital: Subscribe
This brokerage noted that the drug maker has a focus on complex injectables which has high entry barriers and strategic partnerships to penetrate new markets like China which can prove to be a lucrative opportunity for the company.
“With a strong product pipeline and more complex products under development, focus on B2B expansion and licensing and opportunities to enter more therapy areas, the offer looks attractive,” it added.