Gland Pharma IPO Financial Analysis (Subscribe)

Gland Pharma IPO Company Strengths

  • Successful track record of operating the B2B model with leading companies in foreign countries, complemented by B2C model in the Indian market.
  • Extensive portfolio of complex products supported by internal R&D and regulatory capabilities.
  • Clean USFDA record.
  • Track record of robust profitability and cash flow generated from operating activities.

Gland Pharma IPO Company Challenges

  • Concentration risk is about two-thirds of the revenues come from the United States.
  • External risk in the form of geopolitical tensions between China and India.

About Gland Pharma

  • Established in 1978 in Hyderabad, Fosun Pharma (China-based)acquired 74% stake in Gland Pharma in the year 2017. Fosun Pharma industrial PTE Ltd and Shanghai Fosun Pharma (Group) Co. Ltd is the promoter of the company.
  • The company has an extensive track record in complex injectables development, manufacturing, and marketing, and a close understanding of the related sophisticated scientific, technical, and regulatory processes. It is present in sterile injectables, oncology, and ophthalmics, and focuses on complex injectables, NCE-1s, First-to-File products, and others.
  • Gland Pharma is the fastest growing generic injectables-focused companies by revenue in the United States from 2014 to 2019.
  • The Company has a wide spread of geographical presence in over 60 countries including the USA, Europe, Canada, India, etc.
  • It has seven manufacturing facilities in India, comprising four finished formulations facilities with a total of 22production lines and three API facilities. As of June 30, 2020, Gland Pharma had a manufacturing capacity for finished formulations of approximately 755 million units per annum.

Gland Pharma Financial Review/Financial Performance

Financial performance has seen an increasing trend in the last three fiscals (FY18-20). Revenue for FY20 has increased by 30% to Rs 2772.41 crore from Rs 2129.77 crore in FY19. This was mainly due to increased revenues from the rise in export sales to the US and Canada. PAT increased by 70% to Rs 767.64 crore in FY20. Operating and the net margins have remained robust for the last three fiscals as can be seen from the table below. RoNW is strong being 21.05% in FY20 and 15.78% in FY19.

The first-quarter result for FY21 has remained strong. The Company has posted PAT of Rs 312.56 crore against revenues of Rs 916.29 crore for Q1FY21.

Table 1 - Financials and Ratios (Amount in Rs Crore)
Title Q1FY21 FY2020 FY2019 FY2018
Total Revenue 916.29 2772.41 2129.77 1671.68
PAT 312.56 767.64 451.64 320.55
EBITDA 444.73 1094.64 792.07 584.08
Total Accets 4691.27 4086.04 3523.55 2929.47
Operation Margin(%) 48.54% 39.48% 37.19% 34.94%
Net margin(%) 34.11% 27.69% 21.21% 19.18%

Gland Pharma Valuation

The issue is fully priced at P/BV of 5.86 based on its NAV of Rs 255.79 (at upper price band) as on June 30, 2020. At price band of Rs 1500, P/E is 30.07 but has no comparable industry P/E ratio as it has no listed peers according to the RHP.

Table 2- Gland Pharma Valuation
Valuation Parameters EPS P/E NAV Industry P/E Industry P/BV
Total Revenue 49.88 30.07 235.32 NA 5.86

Conclusion

The pharma sector has remained in focus especially during the pandemic and has performed well with reasonable returns. Indian drugs are exported to more than 200 countries in the world with the USA being the key market. Generic drugs account for 20% of the global export in terms of volume, making India, the largest provider of generic medicines globally. The sector is benefited by the ‘Pharma Vision 2020’ by the Government’s Department of Pharmaceuticals which aims to make India a major hub for end-to-end drug discovery. Though these are the factors favorable for the overall Pharma sector in India but Gland Pharma is backed by a Chinese guardian and the current geopolitical tensions due to military aggression in Eastern Ladakh earlier this year between China and India remains a major concern for the investors. Amidst the nationwide boycotting of the Chinese apps and Chinese goods, it would be interesting to see how the investors react to this IPO!! If the management is to be believed, it was mentioned that Gland Pharma would not be affected by such external risks.

The company has strong financial performance since 2017 when Fosun took over a major stake; post-IPO its stake would come down to 58%. The IPO is worth investing in if the geo-political tension remains subdued. However, investors wary of external risk may consider investing based on their risk appetite.

Reviewer recommends Subscribing to the issue.

Review By CA Priyanka Choudhary on 3rd Nov 2020

Apply in an IPO and Save 90% on your brokerage

Do you know you could save the brokerage cost significantly by moving to online discount stock broker? Our expert team compare top share brokers in India to help investors like you. STOP paying Demat AMC, brokerage in %, PCM fee and high stamp duty today.

@
  NRI Form ⇒

Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.


Reference Topics

Enquire Trading Account:

Name 

 Phone 
Email   State 
City   

User Comments

avatar
1. CA Sachin Jain  11/6/2020 4:42:04 PM Reply
With face value [email protected] Rs, so actual price is 15,000 Rs. Very costly.Avoid.






Search topsharebrokers.com:

Translate topsharebrokers.com: