Published on 9/11/2020 12:08:39 PM | Source: Geojit Financial Services Ltd

IPO Note - Gland Pharma Ltd By Geojit Financial

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A China-backed U.S-Focused B2B Business…

Gland Pharma Ltd (GPL), incorporated in 1978, is one of the fastest growing generic injectables-focused companies, developing products primarily for the U.S. Headquartered in Hyderabad, the company sells products mainly under a Business to Business (“B2B”) model in over 60 countries. The 7 manufacturing facilities are situated in Andhra Pradesh & Telangana and includes 2 sterile injectables facilities, 1 dedicated Penems facility, 1 oncology facility and 3 Active Pharmaceutical Ingredient (API) facilities. In 2017, Shanghai Fosun Pharma, a global pharmaceutical major with established presence in China and Africa, which are key growth markets for injectables, acquired 74% stake in the Company.

 In B2B model, GPL has tie ups with leading pharmaceutical companies such as Sagent Pharmaceuticals, Inc. and Apotex Inc. In India, the company operates on a B2C model.

 As of June 30, 2020, GPL along with its partners had 267 ANDA filings in the United States, of which 215 were approved and 52 were pending approval.

 Consistent regulatory compliance track record and all facilities approved by the USFDA, with no warning letters since the inception of each facility.

 For FY18-20, revenue grew at a CAGR of 27% while PAT grew by 55% CAGR. In FY20, GPL reported PAT of Rs.773cr on revenue of Rs.2,633cr.

 EBITDA margin was at 36% as of FY20. Minimal debt with debt/equity ratio at 0.01 in FY20.

 As of June 30, 2020, 67% of the revenue is generated from US, 15% from India and rest from other countries.

 Top five customers in FY20 accounted for 49%, of the total revenue from operations.

 The Enforcement Directorate has instructed GPL to transfer the six million shares (3.87%) owned by companies promoted by the erstwhile Satyam Computers to an escrow account.

 Strong record of new launches with 51 products launched in FY20 and 18 in Q1FY21.

 At the upper price band of Rs.1500, GPL is available at a PE of 20x on an annualized basis, which appears attractive. With a solid business model, no listed peers and the positive outlook for pharma, we assign a Subscribe rating for the issue


Purpose of IPO

The offer comprises of fresh issue and offer for sale. The proceeds of the offer for sale shall be received by the selling shareholders. The net proceeds of the fresh issue will be utilized for funding working capital requirements, capital expenditure requirements and General corporate purposes.


Key Risks

* Failure or delay in obtaining necessary permits or approvals.

* Raw material supply disruptions due to COVID-19 pandemic and the strained India-China relations.


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