As Mankind Pharma gears up to go public, its 544-page draft IPO paper throws up an interesting name, Dabur India.
One wonders why would a century-old fast-moving consumer goods (FMCG) major be counted as a pharma company’s peer? While Dabur is known for its hair care products, Mankind is famed for its Manforce condoms. Chalk and cheese, to say the least.
But a closer look at the details suggests that there might be more to this than meets the eye.
First, what does the DRHP say?
In the ‘listed industry peers’ section of its draft red herring prospectus (DRHP), Mankind Pharma has positioned Dabur India at the 11th spot, above Procter & Gamble Health and Zydus Wellness. Sun Pharma, Cipla, Zydus Lifesciences and Torrent Pharma take the first four spots.
In FY22, Mankind Pharma’s revenue from operations and EPS (earnings per share) came in at Rs 7,781 crore and Rs 35.7, respectively. Meanwhile, Dabur India’s topline stood at Rs 10,888 crore and EPS at Rs 9.8. The DRHP does not list Mankind’s valuation as the price band has not been announced yet.
Also Read: Chrys Capital-backed Mankind Pharma may float Rs 4,200-4,700 crore IPO in April
Return on net worth (RoNW) for Mankind stood at 23.29 percent in FY22, while the same metric for Dabur was 20.75 percent.
The similarities
As one of its main objectives in the DRHP, the company has mentioned “manufacturing, development and sale… of Ayurvedic and Unani medicines by extraction of plant products.” Though this takes the last spot under ‘main objectives’, it is directly comparable to Dabur’s mainstay Ayurvedic identity.
Mankind Pharma’s Gas-O-Fast is an Ayurvedic oral antacid powder, used to relieve symptoms of acidity, heartburn, and indigestion. In FY22, this product clocked sales of Rs 112 crore, which contributed 1.4 percent to the topline. The company also has Health OK, which is a multivitamin tablet and AcneStar, which is a skincare cream.
If one draws parallels to Dabur India, then Pudin Hara and Activ Antacid in digestives, Shilajit Gold in multivitamins and Gulabari brand in skincare go head-to-head with Mankind Pharma’s earlier mentioned products.
Moreover, both companies have a similar urban-rural split. Sales from class II-IV cities and rural areas contributed 47 percent to Mankind Pharma’s domestic sales in FY22. Dabur also derives 47 percent of sales from rural markets.
Also Read: Dabur India: What’s ailing this FMCG major?
The differences
That said, the companies cannot be compared on an ‘apples-to-apples basis’, believes Siddharth Oberoi, founder and chief investing officer at Prudent Equity.
“Since Mankind derives the majority of its revenues from therapeutic sectors while Dabur derives all of its revenues from FMCG products, the two businesses cannot be compared,” he said.
Anubhuti Mishra, equity research analyst, Swastika Investmart, said, “Healthcare contributes approximately 35 percent to Dabur India’s revenue while Mankind's consumer healthcare segment makes for only 9 percent of its topline.”
This includes Mankind’s Manforce condoms, which command a 30.2 percent market share. Manforce with Rs 451 crore worth of sales and Prega News with Rs 153 crore in sales make for the biggest contribution to the company’s consumer healthcare segment.
But Oberoi pointed out that the pharma company might get aggressive in the D2C Ayurveda segment in the coming months. “It has acquired a majority stake in health and wellness brand Upakarma Ayurveda to expand its product portfolio,” he said. Upakarma has its own range of Shilajit resin, beauty products and immunity boosters.
So, the future might be anyone’s game. As of now, one thing is clear, investors won’t like it if Mankind Pharma demands a valuation anywhere close to Dabur India’s 55x P/E, with which it has little in common.
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