India's largest pharma IPO worth Rs 6,500 cr set to hit market next week

Fosun-owned Gland Pharma sets price band for its IPO at Rs 1,490-1,500 per share

Hyderabad-based Gland Pharma is set to launch its initial public offering (IPO) on November 9 to raise Rs 6,500 crore. One of the largest IPOs in the pharmaceutical sector in recent times, it will comprise a fresh issue of Rs 1,250 crore and an offer to sell up to 34.9 million shares. 

The price band has been fixed at Rs 1,490-1,500 per share for the issue that will close on November 11. The primary issue is to raise Rs 1,250 crore, which the company plans to utilise for funding incremental working capital requirements of the company and funding capital expenditure requirements. 

China’s Fosun Pharma Industrial Pte. is offering to sell 19 million equity shares. Gland Celsus Bio Chemicals is planning to sell 10 million shares. The other two shareholders — Empower Discretionary Trust and Nilay Discretionary Trust — are offloading 3.5 million and 1.8 million shares, respectively.  

Fosun Singapore — a subsidiary of Shanghai Fosun Pharmaceutical Co. — holds 74 per cent stake in the company. Other investors of the company include Gland Celsus Bio Chemicals, which owns 12.97 per cent, while Empower Discretionary Trust and Nilay Discretionary Trust own 5.08 per cent and 2.42 per cent stake, respectively.

One of the largest pharma IPOs in recent times was Eris Lifesciences in 2017, which raised Rs 1,741 crore. Alkem Laboratories and Laurus Labs hit the capital markets in 2015 and 2016, respectively. 

Shanghai-based Fosun had picked up 74 per cent stake — the largest such acquisition of an Indian company by a Chinese firm — in 2017 for around $1.2 billion. Interestingly, the IPO comes at a time when India-China relations are tense. The firm, however, claimed it runs its business independently and has had many investors on its board earlier. The bilateral relations of the two companies do not affect the day-to-day operations or business. 

Gland Pharma reported a revenue of Rs 2,772.4 crore in 2019-20 (FY20) and a profit of Rs 772.8 crore. The revenue from operations has grown at a compound annual growth rate (CAGR) of 27.4 per cent between 2017-18 and FY20, while earnings before interest, tax, depreciation, and amortisation has grown at a CAGR of 36.9 per cent. 

Established in 1978, the company has presence in sterile injectables, oncology, and ophthalmics and also focuses on first-to-file opportunities in the US.

The future plan 

The Hyderabad-based pharma firm draws 97 per cent of its revenue from the business-to-business (B2B) model, and the US is the biggest market, contributing around 63 per cent of revenue in the first quarter this financial year. 

In India, apart from a B2B business, it has a targeted business-to-consumer segment, too, and operates mainly in the hospitals segment. 

Speaking to Business Standard, Srinivas Sandu, managing director and chief executive officer of Gland Pharma, said its business model involves focusing on margins. “We make all products at sites that are US Food and Drug Administration-approved. They are not always competitive in the Indian market,” he said. 

One-third of its employees works on quality assurance and control. He also pointed out that they are scouting for opportunities in the fermentation-based bulk drug space. “We look at setting up a facility that may take years. We are open to acquiring a facility that makes fermentation products, which may be in India or outside the country. It can be Italy or China as well,” he added. 

The merger and acquisition activities, however, will not be funded through the IPO proceeds but through internal accruals and debt.