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IPO-bound bulk drug manufacturer Glenmark Life Sciences is on track to more than double its capacity over the next four years at a cumulative investment of over Rs 600 crore.
Glenmark Life Sciences is the arm of drug major Glenmark Pharmaceuticals.
Two-and-half-year-old Glenmark Life Sciences is hitting the primary markets with an initial public offering (IPO) next week. The share sale consists of a fresh issue of equities worth Rs 1,060 crore and an offer for sale by promoter Glenmark Pharma for Rs 453 crore. The Rs 1,513-crore issue will open on July 27.
Glenmark Pharmaceuticals entered API manufacturing in 2001-02 with a facility in Kurkumbh in Maharashtra, and later the pharma major spun it off, creating Glenmark Life Sciences in 2019.
The capacity expansion is on the back of our plan to enter more regulated growth markets like Brazil, Mexico, Russia, Korea, Taiwan and Saudi Arabia, Glenmark Life Sciences chief executive and managing director Yasir Rawjee told PTI in an interaction.
The move is also part of our bid to cash in on from many global formulation makers (tablets, capsules, injectables, syrups etc.) bid to de-risk their procurement strategies by creating a new raw material source other than China (China plus one), which has led to a major spike in demand for active pharmaceutical ingredients (APIs) from the country, he explained.
Currently half of its revenue comes from exports, primarily to the highly regulated North America, Europe, Latin America and Japan.
According to media reports, Glenmark Life Sciences also sources raw materials like chemicals and intermediates from China to the tune of 35-40 per cent but is now fast developing alternative suppliers.
Over the years, the company has developed a 120-strong API portfolio (including those developed as part of the parent), and is adding on average 8-10 new molecules annually with its over 200 scientists/researchers, Rawjee said.
This has helped it grow in a non-commoditised manner exponentially, clipping annually at 15-16 per cent (and 22 per cent in FY21), with an industry-leading operating margin of over 30 per cent, as it operates in the more complex molecules market, he added.
On the Capex and capacity expansion, Rawjee said currently we have a brownfield expansion underway at Dahej in Gujarat, with a proposed Capex of over Rs 150 crore, which will drive up our capacity by 200 kilo-litres (kl) from the existing 726 kl capacity. This expansion will be fully funded by the IPO proceeds.
Also, we have just finalised a large greenfield project in Solapur in Maharashtra in the vicinity of our Mohol plant. To be spread over 40 acres, this plant is expected to add around 800 kl of fresh capacity over the next four years. When completed fully this project will take our overall capacity to 1,726 kl, Rawjee said.
It will involve an investment of over Rs 600 crore, which is an aggregate of Rs 150 crore of there about every year, he added.
Glenmark Life Sciences operates four plants --Ankleshwar, Gujarat (511 kl), Dahej (141.9 kl), Mohol in Maharashtra (49.1 kl) and Kurkumbh in Maharashtra with (24.6 kl).
The global API market is expected to grow from USD 190 billion in 2021 to USD 260 billion by 2026, according to an industry forecast.
Glenmark Life Sciences is into select high value, non-commoditised APIs in chronic therapeutic areas like the cardiovascular, central nervous system, pain management and diabetes, apart from gastro-intestinal disorders, anti-infectives etc.
It is also into contract development and manufacturing operations services to a range of multinational and speciality pharma firms, and Rawjee said this business was slightly hit by the pandemic and clocked a topline of Rs 153 crore in FY21.
It supplies around 50 per of the total production of 726 kl to domestic companies, of which 35 per cent is to the parent Glenmark, he said.
Rawjee ruled out manufacturing in offshores, saying massive cost efficiencies, quality of the manpower and backward integration that it enjoys here cannot be matched in any other market.
As of May 2021, it owns/co-owns 39 patents and has 41 pending patent applications in several countries and six pending provisional applications in the country.
For FY21, its revenue from regulated market products stood at Rs 1,237.4 crore, which was 65.6 per cent of its total revenue from operations. The global market of its 120 molecules globally was around USD 142 billion in 2020.
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