Glenmark Life IPO attractively priced

ET Intelligence Group: Glenmark Life Sciences (GLS), which is set to hit markets with ₹1,514-crore initial public offering on Tuesday. is engaged in manufacturing of active pharmaceutical ingredients (APIs) and contract development and manufacturing (CDMO). A payment of ₹800 crore from the IPO proceeds shall be made to its parent Glenmark Pharma as consideration for the purchase of API business while ₹150 crore would be used to increase production capacities.

Business and Financials
With a portfolio of 120 molecules, GLS is a leading developer of select high-value, non-commoditised APIs in chronic therapies. It earns one-third of its revenues from supplying APIs to its parent and the rest from regulated markets as GLS works with 16 of the 20 largest generic companies in the world.

The company has charted a strong growth trajectory with no warning letters or import alerts from regulatory authorities. Its net sales have grown at a compound annual growth rate (CAGR) of 16% over the past three years and profit at 15%. For FY21, its Ebitda margin stood at 31%, return on capital employed at 33% and return on net worth at 47%.Growth Prospects, Valuations
Diversifying customer base, new product forays and CDMO business offer strong growth prospects for the company.

The IPO values the company at 25 times its FY21 earnings. These are fair valuations when compared to similar-sized peers such as Aarti Drugs, Shilpa Medicare and Solara Active Pharma Sciences — leaving value on the table for investors. GLS has the potential to unlock value for its parent Glenmark Pharma as Syngene International did for Biocon.