Mankind Pharma's Rs 4,326-cr public issue keeps analysts upbeat on local flavour

The Mankind Pharma public issue kept analysts bullish all along the course of its launch today to garner Rs 4,326 crore.

Mankind Pharma Ltd (MPL) develops and manufactures formulations across various acute and chronic therapeutic areas and owns a host of consumer healthcare brands. MPL has around 36 brands in its kitty, including Manforce, Prega News, Unwanted -72, Moxikind and Nurokind, with many of them featuring in the Top 10 league in the covered markets. Perhaps the strongest point for the company is that it is almost entirely focussed on the domestic market with 97.6 percent of sales coming from India.

“We believe that MPL’s market leadership and brand recognition, coupled with the management’s bet on the recent acquisition of Panacea Biotech formulations, may provide a huge growth opportunity for the company,” said Mihir B Manek, a research analyst with Aditya Birla Capital. He has a ‘subscribe’ rating on the issue.

The company has priced the issue in the range of Rs 1,026-1,080 per share. It mobilised Rs 1,297.9 crore from a clutch of anchor investors including CPPIB, GIC, ADIA, Fidelity, Goldman Sachs and Blackrock, on April 24, a day before the float.

According to Manek, at the upper price band, MPL is available at a PE of about 33x at its expected FY23 EPS. As at FY22, the debt-to-equity ratio stands at 0.09x while its Net Working Capital Cycle was at 49 days.

Akshay R Pradhan, a research analyst at Canara Bank Securities, assigned the ‘subscribe’ tag on the issue for long-term investors, and underlined that the company has grown its revenues at an annual average of 15 percent for FY20-22 with an EBITDA margin of 25-27 percent. Though he added that the nine-month FY23 numbers were impacted on account of high API prices, one off because of acquisition and rise in hiring of MRs. “The company seems fairly valued in comparison to its peers considering its decent return ratios,” Pradhan said.

The issue comprises only an offer-for-sale of over four crore shares and there is no fresh issue portion. Hence, all the money will go to selling shareholders (promoters and investors), and the company will not receive funds from the offer. This, some analysts pointed out, could be a cause for concern for conservative investors.

However, the rosy outlook trumps over such concerns, others chimed. “Mankind Pharma benefits from its strong foothold in domestic branded formulations with emphasis on affordable product offerings,” said Siddhant Khandekar of ICICI direct. He sees two themes plating out for the company in future: one, opportunities from its newer acquired products and its plan to backward integrate in its power brands, and two, structural preference for domestic branded formulations among broader healthcare themes.

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