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Gland Pharma gets Sebi approval for Rs 6,000-crore IPO, set for first listing of an Indian firm with a Chinese parent

The IPO is a mixture of primary and secondary issue of shares with both China’s Fosun group and the founders of Gland Pharma due to dilute shares. Gland Pharma may look to launch the IPO in November 2020

October 22, 2020 / 12:30 PM IST

Gland Pharma, which is majority owned by China’s Shanghai Fosun Pharmaceutical (Fosun Pharma), has received a crucial nod from market regulator Sebi to launch an initial public offering (IPO) to raise up to Rs 6,000 crore, people familiar with the matter told Moneycontrol.

If the listing plans of the Hyderabad-based injectable drug maker fructify, it would mark the first major IPO by an Indian company that has a Chinese parent.

The nod from the Securities and Exchange Board of India (Sebi) comes amid a buoyant phase of valuations in the pharma sector and frosty diplomatic ties between India and China due to military aggression in Eastern Ladakh earlier this year, leading to casualties on both sides.

A series of IPOs have been launched in recent months. but no pharma company has listed on the Indian bourses this year. The last IPO by an Indian drugmaker—Eris Lifesciences— was more than three years ago in June 2017.

On July 11, 2020, Moneycontrol was the first to report that Gland Pharma had filed its draft red herring prospectus with Sebi for the proposed IPO. Earlier, Moneycontrol was also the first to report on Gland Pharma shortlisting investment bankers as part of preliminary preparations on July 19, 2019.

“The final observations from Sebi came in earlier this week, and the company has got the nod from the regulator. An updated offer document incorporating feedback from Sebi and the latest factual position will be filed shortly. Then the RHP (red herring prospectus) will be filed with RoC,” said one of the persons cited above.

Another person with direct knowledge of the matter confirmed the same.

“Valuations are good in the pharma sector currently and Gland Pharma would like to launch the IPO as soon as possible. Based on feedback from the market and investors, the company may possibly look to launch the IPO in November, but no final call has been taken as yet,” a third person added.

After Sebi reviews the DRHP and shares its comments, Gland Pharma has a one-year window to launch the IPO.

All the three individuals spoke to Moneycontrol on the condition of anonymity. Moneycontrol could not immediately connect with Fosun and Gland Pharma and is awaiting their response to an email query. This article will be updated as soon as we hear from them.

The IPO is a mixture of primary and secondary issue of shares with both Fosun group and the founders of Gland Pharma slated to dilute shares as part of the issue. Most of the IPO proceeds will be used for capex and working capital for its Indian operations. The offer is likely to comprise a fresh issue aggregating up to Rs 1,250 crore and an offer for sale of up to Rs 4,750 crore.

Citi, Kotak Mahindra Capital, Nomura, and Haitong Securities are the merchant bankers working on the issue. Law firm Cyril Amarchand Mangaldas is advising Gland Pharma, Khaitan and Co is advising the promoters, and S&R Associates is advising the merchant bankers.

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.

Gland 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 and 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.

Ashwin Mohan
first published: Oct 21, 2020 10:08 pm