Please refer to important disclosures at the end of this report
1
Gland Pharma is one of the fastest growing generic injectable-focused
companies by revenue in the United States from 2014 to 2019 as per
IQVIA report. Company sells its products primarily under a B2B model
which accounted for 97% of FY2020 revenues. Company exports to over
60 countries as of June 30, 2020, including the United States, Europe,
Canada, Australia and the Rest of the world. The company has an
extensive track record in complex injectable development,
manufacturing and marketing.
Key Positives: (1) Gland Pharma is one of the fastest growing generic
injectable companies in this USA, which accounted for 67% of the company’s
revenues in FY2020. (2) The company has a differentiated business model
and focuses on high margin injectable business. (3) The company exports its
products to over 60 countries with export revenues accounting for 82% of its
revenue from exports. (4) The company has registered very strong revenue
growth of 27% CAGR over the last three years while profits have registered a
growth of 55% CAGR during the same period.
Investment concerns: (1) One of the key concerns is that the company will
need to inure large Capex in near future given that its last capex cycle was
completed in 2016. (2) Moreover the company has a very high working capital
cycle of over 200 days, which is significantly higher as compared to peers.
(3) The company could also face regulatory issues from the USFDA.
Outlook & Valuation: based on FY2020 the IPO is priced at PE of 30.1x at
the upper end of the price band and is at a slight premium as compared to
mid-cap pharma peers. Similarly the company is also trading at EV/Sales of
8.1x and EV/EBITDA of 20.1, which is also at a premium as compared to
peers. Given that we have certain concerns regarding premium valuations
and elongated working capital cycle we are assigning a “NEUTRAL”
recommendation to the issue.
Key Financials
Y/E March (` cr)
FY19
FY20
Net Sales
2,044
2,633
% chg
26.0
28.8
Net Profit
452
773
% chg
40.7
71.0
EBITDA (%)
38.8
41.6
EPS (as stated)
29.2
49.9
P/E (x)
51.4
30.1
P/BV (x)
8.1
6.4
Ronw (%)
15.8
21.2
RoCE (%)
15.1
20.7
EV/EBITDA
28.5
20.1
EV/Sales
11.1
8.3
Source: DHRP, Angel Research
NEUTRAL
Issue Open: November 09, 2020
Issue Close: November 11, 2020
Offer for sale: `5,230cr**
QIBs 50% of issue
Non-Institutional 15% of issue
Retail 35% of issue
Promoters
58.4%
Others
41.6%
Fresh issue: ` 1,250cr
Issue Details
Face Value: `1
Post Issue Shareholding Pattern
Issue size (amount): `6480cr**
Price Band: `1490-1500
Lot Size: 10 shares and in multiple
thereafter
Post-issue implied mkt. cap: *`24,329cr -
**`24,492cr
Promoters holding Pre-Issue: 74%
Promoters holding Post-Issue: 58.4%
*Calculated on lower price band
** Calculated on upper price band
Book Building
Yash Gupta
+022 39357600, Extn: 6872
Research Analyst
yash.gu[email protected]
GLAND PHARMA LIMITED
Ltd
IPO Note | Pharma
November 07, 2020
Gland Pharma Limited | IPO Note
November 07, 2020
2
Company Background
Mr. PVN Raju formed company in 1978 in Hydrabad. The visionary
technocrat pioneered Heparin technology in India in 1960, and set up the
country’s first state-of-the-art Pre-Filled Syringe (PFS) facility for LMWHs in
1998. It was under his guidance that the facility received USFDA acceptance
in 2003, another first in India. Company is one of the fastest growing generic
injectables-focused companies by revenue in the United States from 2014 to
2019 (Source: IQVIA Report). Company sell its products primarily under a
business to business (“B2B”) model in over 60 countries as of June 30, 2020,
including the United States, Europe, Canada, Australia, India and the Rest of
the world.
Company has a consistent compliance track record with a range of regulatory
regimes across these markets. We also have an extensive track record in
complex injectable development, manufacturing and marketing and a close
understanding of the related sophisticated scientific, technical and regulatory
processes. Fosun Singapore and Shanghai Fosun Pharma are the current
promoter of the company.
Key Highlights of Gland Pharma Limited
Gland Pharma has grown over the years from a contract manufacturer of
small volume liquid parenteral products, to become one of the largest and
fastest growing injectable-focused companies.
A holistic objective of dispensing health through a portfolio of injectable
products across various therapeutic segments and delivery systems.
Company having seven manufacturing facilities in India, with a capacity
of approximately 750 million units. These include four facilities with 22
production lines for finished formulations and three Active Pharmaceutical
Ingredient (API) facilities.
Company present in sterile injectables, oncology and ophthalmic
segments, and focus on complex injectables including NCE-1s, First-to-
File products and 505(b)(2) filings.
with a global footprint across 60 countries, including the United States,
Europe, Canada, Australia, India and other markets. We operate primarily
under a business to business (B2B) model.
In financial year 2020, 82% of company’s revenues came from Export.
Gland Pharma Limited | IPO Note
November 07, 2020
3
Geographical distribution of revenues
The company has a track record of delivering revenue growth and profitability
across geographies like United States, Europe, Canada, Australia, India and
the Rest of the world. The following table sets forth the revenue from
operations based on the customer location as a percentage of total revenue
from operations for the years.
Exhibit 1 Geography wise revenue
Country
FY 2018
FY 2019
FY 2020
USA
71.3%
62.5%
66.7%
India
18.5%
19.0%
17.7%
Europe
3.4%
5.4%
4.4%
Canada
1.1%
1.1%
1.8%
Australia
0.7%
0.4%
0.5%
Rest of the world
5.1%
11.6%
8.8%
Total
100.0%
100.0%
100.0%
Source: DHRP, Angel Research
Issue Details
Gland Pharma is raising `1250 Cr through fresh issue & Offer For Sale of `5,230
Cr (3,48,63,635 shares), price band of `1,490-1,500.
Exhibit 2 Pre & Post issue Shareholding
Particular
Pre issue
%
Post issue
%
Promoter
11,46,62,620
74.00%
9,52,93,934
58.4%
Public
3,17,10,870
20.47%
1,62,15,921
9.9%
Other
85,76,000
5.53%
5,17,72,968
31.7%
Total
15,49,49,490
100.00%
16,32,82,823
100.00%
Source: DRHP, Angel Research
Objects of the offer
Fresh Issue of `1,250 Cr for capex of `168 Cr and to meet working capital
requirement of the company and general corporate purpose.
Offer for sale from promoter and other shareholders of `5,230cr.
Gland Pharma Limited | IPO Note
November 07, 2020
4
Key Management Personnel
Srinivas Sadu is the MD and CEO of our Company. He holds a bachelor’s
degree in pharmacy from Gulbarga University, a master’s degree in science from
Long Island University, New York and a master’s degree in business
administration from University of Baltimore. He has previously worked at Natco
Pharma Limited at Hyderabad, India, and is presently a director on the board of
Sadu Advisory Services Private Limited. He has over 21 years of experience in
business operations and management. He joined our Company as the general
manager – exports in 2000, and was elevated to position of senior general
manager in 2002, vice president in 2003, director in 2005, and chief operating
officer in 2011. He was appointed as the MD and CEO with effect from April 25,
2019.
Yiu Kwan Stanley Lau is the Chairman and Independent Director of our
Company. He holds a bachelor’s degree in pharmacy from the The School of
Pharmacy, University of London. He is a director on the board of directors Solasia
Pharma K. K. and TaiLai Bioscience Ltd. He was previously the chief executive
officer of Amsino Medical Group, the chief operating officer of Eddingpharm
Investment Co. Ltd, and the president of China Biologic Products, Inc. He has
also worked with Merck Sharp & Dohme (Asia) Ltd and Baxter (China) Investment
Co., Ltd.
Qiyu Chen is a Non-Executive Nominee Director of our Company. He holds a
bachelor’s degree in genetics from Fudan University and a master of business
administration from China Europe International Business School. He is the global
partner of the Fosun group. He is also a non-executive director on the board of
Shanghai Fosun Pharmaceutical (Group) Co., Ltd. He was appointed as an
executive director of the Fosun group in May 2005.
Dongming Li is a Non-Executive Nominee Director of our Company. He holds a
bachelor’s degree in science from Fudan University. He has served as the vice
president of Shanghai Fosun Pharmaceutical Industrial Development Co., Ltd
since September 2020. He is also the co-president of Shanghai Fosun
Pharmaceutical (Group) Co., Ltd. He previously worked at Shanghai
Pharmaceuticals (Group) Co., Limited, and at Shanghai Roche Pharmaceutical
Co., Ltd. from May 2008 to November 2013.
Xiaohui Guan is a Non-Executive Nominee Director of our Company. She holds
a master’s degree in professional accountancy from the Chinese University of
Hong Kong. She is also a member of the ACCA (Association of Chartered
Certified Accountants) and a non-practising member of the Chinese Institute of
Certified Public Accountants. She joined the Fosun group in May 2000. She is the
executive president and chief financial officer of Shanghai Fosun Pharmaceutical
(Group) Co., Ltd. and non-executive director of Sinopharm Group Co., Ltd, a
company listed on the Hong Kong Stock Exchange. Previously, she was the
supervisor at the China National Accord Medicines Corporation Ltd.
Gland Pharma Limited | IPO Note
November 07, 2020
5
Consolidated Income Statement
Y/E March (` cr)
FY18
FY20
Total operating income
1,623
2,633
% chg
-
28.8
Total Expenditure
1,087
1,678
Raw Material cost
664
1,102
Employee Benefit Expense
179
278
Other Expenses
245
298
EBITDA
536
956
% chg
-
35.2
(% of Net Sales)
33.0
36.3
Depreciation& Amortisation
78
95
EBIT
457
861
% chg
-
37.9
(% of Net Sales)
28.2
32.7
Interest & other Charges
4
7
Other Income
49
139
(% of Sales)
3.0
5.3
Exceptional items
0
0
Recurring PBT
502
993
(% of Net Sales)
30.9
37.7
Tax
180
220
PAT (reported)
321.4
773.3
% chg
-
71.0
(% of Net Sales)
19.8
29.4
EPS (as stated)
20.7
49.9
% chg
-
71.1
Source: DRHP, Angel Research
Gland Pharma Limited | IPO Note
November 07, 2020
6
Consolidates Balance Sheet
Y/E March (` cr)
FY18
FY20
SOURCES OF FUNDS
Equity Share Capital
15
15
Other equity
2,395
3,631
Shareholders Funds
2,410
3,646
Total Loans
140
81
Total Liabilities
2,550
3,727
APPLICATION OF FUNDS
Net Block
1,043
1,156
Current Assets
1,732
2,846
Sundry Debtors
475
602
Cash &Bank Balance
674
1,340
Other Assets
70
148
Current liabilities
379
359
Net Current Assets
1,353
2,487
Other Non Current Asset
156
84
Total Assets
2551.2
3727.7
Source: DHRP, Angel Research
Consolidated Cash Flow Statement
Y/E March (`cr)
FY18
FY20
Restated Profit before tax
501
993
Depreciation
78
95
Change in Working Capital
(76)
(140)
Interest Expense
3
6
Direct Tax Paid
(157)
(244)
Others
(0)
6
Cash Flow from Operations
202
701
(Inc.)/ Dec. in Fixed Assets
(85)
(171)
Investment in bank deposits (net)
(298)
(639)
Interest received
24
43
Cash Flow from Investing
(359)
(766)
Repayment of Long Term Borrowing
(0.4)
(0.5)
Dividend paid on equity shares
(3)
(6)
Others
(0.2)
(0.2)
Cash Flow from Financing
(4)
(7)
Inc./(Dec.) in Cash
(160)
(72)
Opening Cash balances
533
236
Closing Cash balances
373
169
Source: DRHP, Angel Research
Gland Pharma Limited | IPO Note
November 07, 2020
7
Key Ratios
Y/E March
FY18
FY20
Valuation Ratio (x)
P/E
72.4
30.1
P/CEPS
56.6
27.8
P/BV
9.6
6.4
EV/Sales
14.0
8.3
EV/EBITDA
38.9
20.1
Per Share Data (`)
EPS (fully diluted )
20.72
49.88
Cash EPS
26.5
54.0
Book Value
155.6
235.3
DPS
-
-
Number of share
15.49
15.49
Returns (%)
RONW
13.3
21.2
ROCE
12.6
20.7
ROE
13.3
21.2
Turnover ratios (x)
Asset Turnover (net)
1.9
2.7
Receivables (days)
107
83
Inventory Days
186
174
Payables (days)
106
57
Working capital cycle (days)
187
200
Source: DRHP, Angel Research
Gland Pharma Limited | IPO Note
November 07, 2020
8
Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com
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