Hyderabad-based injectable drugs maker Gland Pharma, which is majority owned by China’s Shanghai Fosun Pharmaceutical (Fosun Pharma), has filed a draft red herring prospectus (DRHP) with market regulator SEBI for an initial public offering (IPO), sources told Moneycontrol.
If the listing plans fructify, this could arguably be the first major domestic IPO of an Indian company with a Chinese parent.
On July 19, 2019, Moneycontrol reported that Gland Pharma had shortlisted merchant bankers and begun preliminary preparations for an IPO.
“Gland Pharma’s DRHP filing happened on July 10. The issue aims to raise around Rs 5,000 to Rs 6,000 crore, but the size may change closer to the launch. Citi, Kotak Mahindra Capital, Nomura and Haitong Securities are the merchant bankers working on the issue,” a source said.
“The IPO market is slowly and steadily picking up. Gland Pharma may look at a launch in the second half of FY21 depending on market conditions. Both Fosun group and the founders are likely to dilute shares as part of the issue,” a second source said.
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“COVID-19 hasn’t hit the operations of Gland Pharma and it’s been business as usual for the firm. The firm will inform the Chinese regulators and authorities as well regarding the DRHP filing,” a third individual told Moneycontrol.
Most of the IPO proceeds will be used for capex and working capital for its Indian operations. It will be a mixture of primary and secondary issues of shares,” a fourth person familiar with the listing plans said. “Law firm Cyril Amarchand Mangaldas is acting as the counsel to the company, while law firm S&R Associates is advising merchant banks,” this fourth person added. After Sebi reviews the DRHP and shares its comments, Gland Pharma will have a one-year window to launch the IPO.
All the four individuals spoke to Moneycontrol on condition of anonymity. Citi declined to comment in response to an email query. Moneycontrol couldn’t immediately reach Gland Pharma, Nomura, Kotak Mahindra Capital, Haitong Securities, Cyril Amarchand Mangaldas and S&R Associates for a comment. Email queries have been sent to the company and others and this article will be updated as soon as we hear from them.
Diplomatic relations between India and China have been frosty in recent months due to military aggression in the Eastern Ladakh, leading to casualties on both sides. Both nations have conducted a series of talks to diffuse tensions at the border. In fact, on June 29, the Indian government banned as many as 59 China-origin mobile apps that included the likes of TikTok, WeChat and SHAREit.
A closer look at Gland Pharma
Hong Kong-listed Fosun acquired around 74 percent in Gland Pharma for around $1.09 billion in October, 2017, offering an exit to private equity firm KKR. Much of the residual stake remained with founder promoters, who continued on the company’s board after the deal.
Gland Pharma is a pure-play generic injectable pharmaceutical products company founded in 1978 by PVN Raju. Dr Ravi Penmetsa, who has been the Vice Chairman and Managing Director of the firm since 1999, took up an advisory role in 2019 to support the management, which is currently led by MD and CEO Srinivas Sadu. The company earns a bulk of its revenues from the US and European markets. It had pioneered Heparin (an anti-coagulant that is used during surgeries and in the treatment of heart attacks) technology in India.
The company has seven manufacturing facilities: four at Hyderabad and three at Visakhapatnam. Gland Pharma has established a portfolio of products across various therapeutic segments such as anti-diabetic, anti-infectives, anti-malaria, anti-neoplastics, blood-related, cardiac, gastro-intestinal and hormones through a combination of delivery systems including liquid vials, lyophilized vials, pre-filled syringes, ampoules, bags and drops. It sells its products primarily under a business to business (“B2B”) model in over 60 countries as of March 31, 2020, including the United States, Europe, Canada, Australia, India and rest of the world. As of March 31, 2020, Gland Pharma employed 3,791 people across its facilities in India.
Gland Pharma’s manufacturing facilities have been approved by the US Food & Drug Administration (USFDA), Medicines and Healthcare Products Regulatory Agency (UK MHRA) and other regulators.
"Gland Pharma was acquired by the Group in 2017. In 2018, it benefited from the growth of major products such as vancomycin, enoxaparin injection and caspofungin and recorded a 26.62 percent year-on-year increase in revenue as compared to 2017. Net profit rose 39.92 percent YoY," said the 2018 annual report of Fosun Pharma.
On February 28, 2019, Frank Yao, Co-Chairman, Fosun Pharma, told Moneycontrol that the integration process of Gland Pharma with Fosun is over and that the company has plans to expand its manufacturing footprint and add more products to its pipeline.