The initial public offering (IPO) of Windlas Biotech, one of the top five players in the contract development and manufacturing organisation (CDMO) segment, has received a subscribe rating from all brokerage houses, considering the innovative portfolio of complex generic products, robust R&D capabilities, efficient and quality-compliant manufacturing facilities, long-term relationships with Indian pharmaceutical companies, and a consistent track record of financial performance.
The offer opened for subscription on August 4 and will close today (August 6). The company plans to raise Rs 401.53 crore through the public issue at the upper end of price band of Rs 448-460 per share, comprising a fresh issue of Rs 165 crore and an offer for sale of Rs 236.53 crore by Vimla Windlass, and Tano India Private Equity Fund II.
Proceeds from the fresh issue will be utilised for purchasing the equipment required for capacity expansion of its existing facility at the Dehradun plant – IV, addition of injectables dosage capability at existing facility at Dehradun plant – II, working capital requirements, and repayment of borrowings.
"Windlas Biotech is a leading CDMO, with a focus on the chronic therapeutic category. Further, its innovative portfolio of complex generic products, supported by robust R&D capabilities, efficient and quality-compliant manufacturing facilities with significant entry barriers, long-term relationships with Indian pharmaceutical companies and a consistent track record of financial performance provide for further growth visibility," said BP Equities.
The brokerage further said: "Considering all these positive factors, we give a 'subscribe' rating for the long term, though on the valuation front, at the upper price band, the issue is aggressively priced at 64.4x P/E, considering the diluted equity shares and FY21 annualised earnings."
Choice Broking also feels that, considering its return ratios and profitability, the issue seems to be fully priced. But factoring in the growth drivers of the CDMO sector and opportunities available for the company, the brokerage assigned a 'subscribe for long term' rating.
Windlas Biotech is engaged in contract manufacturing of formulations in various high-growth therapeutic areas, including chronic and sub-chronic segments, such as anti-diabetic, cardiovascular, neuropsychiatry, respiratory health and nutraceuticals; and the acute segment, in gastroenterology, vitamins, minerals and supplements (VMS), analgesic, dermatological and cough/ cold.
The company has three distinct strategic business verticals (SBVs) - CDMO services and products; domestic trade generics and over-the-counter (OTC) brands; and exports, which respectively accounted for 84.66 percent, 10.22 percent and 4.45 percent of the total revenue in FY21.
Pfizer, Sanofi India, Cadila Healthcare/ Zydus Healthcare, Emcure Pharmaceuticals, Eris Lifesciences, Intas Pharmaceuticals and Systopic Laboratories are some of the marquee customers of Windlas Biotech.
Marwadi Financial Services also assigned a 'subscribe' rating to this IPO as the company is one of the leading CDMO players, with an innovative portfolio of complex generic products supported by robust research & development (R&D) capabilities and has quality-compliant manufacturing facilities with significant entry barriers.
The company has four manufacturing facilities located at Dehradun, with an installed operating capacity of 706.38 crore tablets/ capsules (5.446 crore pouch/ sachets), and 6.108 crore liquid bottles.
The domestic injectables CDMO industry is expected to grow at a CAGR of 11.5 percent to 12.5 percent between FY20 and FY25 on account of the growth in chronic therapeutic areas, such as anti-diabetic and oncology, and a strong demand from outsourcing for these therapeutic segments by the large pharmaceutical companies.
Hence, GEPL Capital, Hem Securities, KR Choksey and Angel Broking also recommend a subscribe rating to the issue.
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