Mankind to be a Bharat-focused player in listed pharma space

Tight scrutiny by the drug regulator FDA and pricing pressures in the US market have made this an opportune time for Mankind Pharma to launch its initial public offering. Mankind Pharma’s domestic sales stand at 97 percent, unlike its listed peers that derive more than 40 percent of their topline from the US generics market.

“We began our journey from Meerut and our focus will continue to be Bharat,” Rajiv Juneja, vice chairman and managing director at Mankind Pharma said in a press conference. The company aims to increase its penetration in metro and class 1 cities, which currently contribute 53 percent to sales.

Mankind Pharma’s IPO, a pure offer for sale, opens on April 25 and closes on April 27. The pharmaceutical company has fixed price band for its IPO at Rs 1,026-1,080 per share.

Also Read: Mankind Pharma counts Dabur as its peers. Are the two truly comparable?

The company has zero debt and is cash-rich, said the management in the press conference. However, the red herring prospectus shows debt of ~Rs 167 crore as of December 2022 end against Rs 870 crore as of March 2022.

Its cash and cash equivalent in the nine-month period ended December 2022 stood at Rs 293.4 crore. So the money raised from IPO is simply to give an exit to existing investors and not business purposes.

That said, the management did share some key strategies for the company going ahead. “We are looking to increase our covered market presence by growing our chronic portfolio. Currently, this contributes to 34 percent of the pharma division’s sales,” said Juneja.

Mankind’s consumer healthcare segment, which houses Manforce Condoms and Prega News, will also be ramped up.

“Manforce already has a 30 percent market share, so people ask us what’s next. Our answer is premiumization. For instance, we launched Manforce Epic last year,” he added.

Also Read: Highest risk, maximum reward in healthcare lies in diagnostics, says Incred PMS’ Aditya Khemka

In FY22, Mankind Pharma’s revenue from operations and net profit came in at Rs 7,781 crore and Rs 1,433 crore, growing 25 percent and 13 percent year-on-year respectively. Operating margins stood at 26 percent.

Compared to that, operating margins have contracted to 22 percent for the nine-month period ended December 2022 on the back of lower other income and higher employee costs.

“We are among the few companies that hired new employees during the COVID-19 period,” said Juneja. He refrained from giving any timeline on when the operating margins will go back to normal levels.

Last year, the company had also announced the acquisition of Panacea Biotec’s formulations brands for Rs 1,872 crore. While the valuation had raised eyebrows, the management said that it remains open to other India-centric acquisitions as well.

Meanwhile, the company shares are trading at a single-digit premium in the grey market, dealers told Moneycontrol. With a price-to-earnings ratio of 32x based on annualised earnings, the valuations are at 10 percent premium to the listed players such as Sun Pharma, Cipla and Torrent Pharma, said analysts.

All eyes will now be on whether the IPO sails through with a full retail subscription or not.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.