Glenmark Life Sciences, the API (active pharmaceutical ingredients) vertical of leading drug maker Glenmark Pharmaceuticals has filed a DRHP (draft red herring prospectus) with market regulator, the Securities and Exchange Board of India (SEBI), for its IPO. The firm intends to raise up to Rs 1,160 crores via a fresh offer plus an additional offer for sale component which could hike the final size based on valuations.
Moneycontrol was the first to report the firm’s listing plans on March 9, 2021.
The move is being seen as a value-unlocking exercise in a niche segment which is fetching attractive valuations and will provide investors the option of betting on a pure play API business. It will also help reduce the debt burden at the parent level.
Kiran Mazumdar Shaw-led Biocon is also exploring an IPO for its niche pure play biosimilars company Biocon Biologics.
Glenmark Pharmacuticals confirmed the move in a disclosure to the exchanges.
“We wish to inform you that Glenmark Life Sciences Limited, a wholly owned subsidiary of Glenmark Pharmaceuticals Limited, has today, i.e. on April 16, 2021, filed a draft red herring prospectus with the Securities and Exchange Board of India for an initial public offer, comprising of a fresh issue of up to Rs 11,600 million and an offer for sale of up to 7,305,245 equity shares of Rs 2 each of Glenmark Life Sciences Limited, by Glenmark Pharmaceuticals Limited. The IPO will be subject to market conditions, receipt of applicable approvals and other considerations,” the firm said.
According to the DRHP filing, Kotak Mahindra Capital, BofA Securities, Goldman Sachs, DAM Capital, SBI Capital and BoB Capital are the investment bankers working on the IPO. Trilegal & S&R Associates are the legal advisors.
The proceeds from the IPO will be used for:
a) Payment of outstanding purchase consideration to the promoter for the spin-off of the API business
b) Funding capital expenditure requirements
c) General corporate purposes
“Net debt remains elevated at Rs 3,600 crore, although Glenmark managed to reduce it by Rs 180 crore during the quarter,” said Emkay Global in its report on Glenmark Pharma released in August 2020
GLENMARK PHARMA: THE API ANGLE
Two years ago, Glenmark Pharmaceuticals had attempted to sell a minority stake in its API business to private equity funds but those plans did not fructify. According to its website, Glenmark Lifesciences supplies over 130 APIs to more than 700 customers across 65 countries in North America, Europe, Japan, Latin America, MENA, Asia, Russia and the Commonwealth of Independent States. It has five manufacturing plants in India with an annual production capacity of over 450 metric tonnes.
Post the Q3FY21 results, the management had indicated that the API growth outlook remains strong for the next two-three years owing to a favourable demand-supply scenario. It also shared that the firm is in talks regarding the monetisation of R&D assets and/or a stake sale of Ichnos Science (currently a 100 percent subsidiary).
For the third quarter of FY 2020-21, Glenmark’s consolidated sales was at Rs 2,761 crore as against Rs 2,657 crore recording an increase of 3.88 percent. In the same quarter, Glenmark Life Sciences Limited registered consolidated revenue including captive sales of Rs 501 crore as against Rs 409 crore, recording a growth of 22.35 percent.
“The India API business grew over 50 percent and the Latam business grew in excess of 30 percent in the third quarter. GLS continues to look for opportunities for the Favipiravir API and has already started supplying in a few countries. During the quarter, GLS submitted nine new DMFs (drug master files) across various operating markets. The company is looking to file at least 10 -12 DMFs in the fourth quarter of the financial year,” the firm said in its results announcement.