Small & medium pharma firms hit the float road

A host of small and medium pharmaceutical companies are gearing up tap the primary market to raise equity.

The list of pharma companies planning initial public offerings (IPO), according to investment banking sources, includes Intas Pharma, Alkem Laboratories, Micro Labs, Mangalam Drugs, Aristo Pharma, Li Taka Pharmaceuticals and Galpha Laboratories.

Some of these companies have not yet made public announcement on their plan to tap the market but they have indeed kicked off discussions with lead managers.

The domestic pharmaceutical companies are making efforts to align themselves in a product patent regime. While in most cases, the fund raising programmes aim at expansion of the bulk drugs and formulations manufacturing facilities, many firms intend to enhance their research and development (R&D) capabilities.

The issue sizes range between Rs 15 and over Rs 100 crore, depending on the growth plans. Most of them are planning to tap the market in the next financial year beginning April 2005.

With the increasing trend of multinational drug makers outsourcing to Indian pharmaceutical manufacturers, expansion has become necessary.

These companies are also upgrading their existing facilities to international standards to get manufacturing mandates from international pharma outfits.

Lucrative un-regulated export markets for pharmaceutical products like Africa, the CIS countries and South East Asia have also encouraged these companies to chalk out growth plans.

"With R&D as a key component of our business model, growth would largely depend on our ability to attract and retain a scientific talent pool and skilled manpower. Also, we plan to use the IPO proceeds towards enhancing our production capabilities," said GM Dhoot, director Mangalam Drugs and Organics.

The company wants to take advantage of the demand and supply gap in the anti-malarial drugs and aluminium chloride market. It is raising around Rs 15 crore from the primary market.