Glenmark Life Sciences IPO opens Today; grey market premium at 20%, should you subscribe?

Glenmark Life Sciences IPO opens tomorrow,

Glenmark Life Sciences’ Rs 1,514 crore initial public offering (IPO) opens for subscription today, July 27. A subsidiary of Glenmark Pharmaceuticals, Glenmark Life Sciences is a developer and manufacturer of select high value, non-commoditized active pharmaceutical ingredients. The public issue consists of a fresh issue of equity shares worth Rs 1,060 crore and an offer for sale by existing shareholders worth Rs 453 crore. Ahead of its IPO, Glenmark Life Sciences’ shares were trading at nearly 20% premium in the unlisted space. Glenmark Life Sciences’ public issue will be the fifth IPO to enter Dalal Street so far this month. The stock is likely to list on the bourses next month.

Investors can bid for Glenmark Life Sciences IPO at the fixed price band of Rs 695 – 720 per share in a bid lot of 20 shares. This translated to a minimum investment of Rs 14,400 on the higher end of the price band. Of the total issue size, 50% or shares worth Rs 756.8 crore are reserved for Qualified Institutional Buyers (QIB) and 15% or Rs 227 crore of the issue has been kept for Non-institutional Investors (NII). 35% of the issue or shares worth Rs 529 crore are available for retail investors to bid on. Glenmark Life Sciences said that it will use the fresh issue amount for the payment of outstanding purchase consideration for the spin-off of the API business and funding capital expenditure requirements.

Grey market premium weak

Shares of Glenmark Life Sciences were trading with a weak premium in the grey market ahead of the IPO, Manan Doshi, Cofounder of UnlistedArena, a firm dealing in unlisted & pre-IPO shares told Financial Express Online. “Currently the stock is trading at a premium of Rs 135 per share despite having strong fundamentals and bright prospects,” he added. Manan Doshi said that Glenmark Life Sciences’ issue price is reasonable for a company that could benefit from the China+1 strategy in the post-pandemic world. “Indian API players could benefit as Chinese manufacturers battle strict regulations. Glenmark Life Sciences’ CDMO business and strong also look attractive,” he added.

Should you subscribe?

Glenmark Life Sciences has a good performance execution and clean regulatory track record, according to ICICI Direct. “The company is also a leading developer and manufacturer of select high value, non-commoditised APIs in chronic therapies and works with 16 of the 20 largest generic companies globally,” the brokerage firm said in a note. Analysts at ICICI Direct value Glenmark Life Sciences at FY21 EV/EBITDA of 14.7x on upper band. ” The growth momentum also has a strong undercurrent of global API industry growth. We recommend ‘Subscribe’ to the issue,” they added.

“We assign a “Subscribe” rating for the issue on a long-term basis considering its strong focus on R&D, expansion plans (1726.6KL when completed), growth opportunity in CDMO services and expanding complex API portfolio,” said analysts at Geojit Financial Services. The brokerage firm said that at the upper price band of Rs 720, the company is available at a P/E of 25x (diluted) which appears fairly priced. However, with Glenmark’s promoter being it’s second-largest customer, analysts find a reason to be concerned. 

Glenmark Life Sciences is well placed in the API business (earns ~90% of revenue) with a product portfolio of 120 products including therapy areas like cardiovascular, CNS, diabetes, anti-infectives, said Religare Broking. “It has strong relationships with leading global generic pharmaceutical companies that have helped them expand its product offerings and geographic reach,” they added. Religare Broking said it has a positive view on the company with a long term perspective.

On successfully completing its IPO, the company could join the peers such as Divis Laboratories, Laurus Labs, ShilpaMedicare, and Solara Active Pharma Sciences