Mankind Pharma Ltd IPO

Published by Sharekhan Education | April 25, 2023

Amit Pathak | Sharekhan Education

Mankind Pharma Ltd IPO has an issue size Rs. 4110-4326 Cr. The price band is Rs. 1026-1080. The issue opens on Tuesday, 25th April’2023 and closes on Thursday, 27th April’2023

Company Overview:

Mankind Pharma is India’s 4th largest pharmaceutical company in terms of domestic sales. The company is engaged in developing, manufacturing, and marketing a diverse range of pharmaceutical formulations. It has popular brands across various acute & chronic therapeutic areas and consumer healthcare products. It is the leader in the condom category with the Manforce brand, followed by Prega News in the Pregnancy detection segment. Mankind has a pan-India marketing presence, with a field force of 11,691 medical representatives.

Objectives of Issue: 

The entire IPO is an offer for sale and the company will not receive any proceeds from it. The company expects that the listing of the equity shares will enhance its visibility and brand image. The listing will also provide liquidity to its shareholders and a public market for its equity shares in India. The minimum application is to be made for 13 shares and in multiples thereon. Post allotment, shares will be listed on both BSE and NSE.

Industry Overview:

The Indian Pharmaceutical Market (IPM) has grown at 10.9% CAGR over FY12-22. In IPM, six key therapy areas – oncology, gastrointestinal, central nervous system, anti-infectives, cardiovascular, and respiratory disorders account for around 75% of the total formulations market. The IPM benefits from defensiveness against recession in a high-growth potential market while international markets are typically characterized by headwinds such as regulatory pressures and geopolitical tensions. The consumer healthcare segment comprising vitamins and dietary supplements, OTC products across varied therapy areas, condoms & other contraceptive products, and herbal products is expected to witness value-growth in early double digits over coming years.

Competitive Strengths: 

Mankind operates at the intersection of the Indian pharmaceutical formulations and the consumer healthcare sector to provide quality products at affordable prices. The company’s efforts to establish “Mankind” as a well-recognized brand in India have helped them to build and scale brands in-house. Mankind has a pan-India marketing and distribution presence resulting in 80% of doctors in India prescribing their formulations. They implement a calibrated marketing strategy that emphasizes affordability and accessibility. They leverage their brand and leadership positions in their key therapeutic areas to launch related products, thereby capturing a wider molecule coverage.

Business Strategy: 

The company plans to grow its market share in Anti-diabetic, where they plan to foray into SGLT2 inhibitors and new gliptin drugs, Cardiovascular, where they plan to launch new formulations for the treatment of heart failure and critical care, where they plan to launch new anti-infectives. They recently completed the acquisition of a dermatology brand (Daffy) and respiratory brand (Combihale) from Dr. Reddy’s Laboratories which will strengthen their presence in these therapeutic areas. Mankind plans to grow its consumer healthcare business by expanding its distribution channel. They plan to expand their distribution reach through grocers and small stores.

Key Concerns: 

The Indian pharmaceutical market and consumer health industries are highly competitive. Mankind will face a challenge in sustaining its market share as it competes with regional and multinational companies. The company is having a higher percentage of acute products in its portfolio and its sales are subject to seasonality. It faces the risk of volatility in the prices of raw materials like excipients, manufacturing consumables, lab chemicals, and packaging materials which can hurt its cash flows and operations.

Financials:

The company has reported healthy Revenue, EBITDA, and PAT growth of 16%/ 29%/ 35% respectively over the past three years. It derives ~98% of its total sales from branded formulations. As of December 2022, it employed 4,121 manufacturing workers across 25 manufacturing locations and four R&D laboratories in India. With likely improvement in business mix towards the chronic segment, we expect RoCEs and EBITDA Margins to remain healthy in coming years. The post-issue P/E works out to be 32.5x on annualized FY23E EPS (at the upper end of the price band) which seems to be reasonable.

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