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Salient features of the IPO:

* Pharmaceutical formulations contract developer and manufacturer Windlas Biotech Ltd. (WBL), is planning to raise up to Rs. 400cr through an IPO, which opens on 4th Aug. and closes on 6th Aug. 2021. The price band is Rs. 448 - 460 per share.

* The issue is a combination of fresh and OFS. The company will not receive any proceeds from the OFS portion. Of the net proceeds from the fresh issue, Rs. 50cr will be utilized for capacity expansion and addition of injectable dosage facility at its existing facilities, Rs. 47.5cr will be used to fund the working capital requirement and another Rs. 20cr will be used to repay/prepay certain debt availed by the company

* Through the OFS, Tano India Private Equity (investor selling shareholder) is fully offloading its 22% stake.

Key competitive strengths:

* CDMO player with focus on the chronic therapeutic category

* 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

* Consistent track record of financial performance

* Experienced promoters and senior management with a professional and technically qualified team

Risk and concerns:

* Unfavorable government policies and regulatory actions

* Continued lower capacity utilization

* Difficulty in adding new customers

* Unfavorable movements in key raw material prices

* Competition

Below are the key highlights of the company:

Pharmaceutical companies are increasingly outsourcing development and manufacturing of new products, and as a result the domestic formulations CDMO (contract development and manufacturing organization) market has grown at a higher rate of approximately 13% CAGR compared to the growth rate of approximately 8.6% of the domestic formulations market in the past five years. It is expected to continue this trend over the next five years. Domestic formulations CDMO is projected to grow at approximately 14% CAGR (to a market size of Rs. 370-410bn), while domestic formulations segment is expected to grow at approximately 11% during FY20-25.

In FY20, 31-33% of the total domestic formulations market was catered by CDMO players. Anti-diabetic and cardiac therapies account for a major share and constituted approximately 25% and 15% share in the domestic formulations CDMO market.

With a revenue market share of 1.5%, WBL is amongst the top five players in the pharmaceutical formulations CDMO market in India. It focuses on therapeutic areas like cardiovascular, anti-diabetics, neurology, gastrointestinal, vitamins, minerals and nutrients. With over two decades of experience in manufacturing both solid and liquid pharmaceutical dosage forms and significant experience in providing specialized capabilities, the company provides comprehensive range of CDMO services ranging from product discovery, product development, licensing and commercial manufacturing of generic products, including complex generics. WBL also sells its own branded products in the trade generics and OTC markets as well as export generic products to several countries. In FY21, the CDMO services & products, domestic trade generics & OTC brands and exports segment contributed 85.2%, 10.3% and 4.5%, respectively, to the total revenue.

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