Mankind Pharma IPO: All You Need To Know

Mankind Pharma Ltd. will launch its maiden public offering on Tuesday to raise Rs 4,326 crore.

The domestically inclined pharma manufacturer will make an offer for the sale of around 4 crore shares. The Delhi-based company is eyeing a market value of Rs 43,264 crore at the upper end of the price band of Rs 1,026–1,080 apiece.

The company has set aside 35% of the net offer for individual investors, 50% for qualified institutional buyers, and 15% for non-institutional buyers.

The issue size is 10%, and ChrysCapital and Capital International are divesting 2.5% of their holdings each. Post-offer, the promoter's shareholding will be 76.5%.

• Issue opens: April 25.

• Issue closes: April 27.

• Issue size: Rs 4,326.4 crore.

• Face value: Re 1 apiece.

• Lot size: 13 equity shares and multiples.

• Listing: BSE and NSE.

• Lead managers: Kotak Mahindra Capital, Axis Capital, IIFL Securities, Jefferies, J.P. Morgan India.

• The issue is an offer-for-sale and the company will not receive any money.

Mankind Pharma operates at the intersection of the Indian pharmaceutical formulation and consumer healthcare sectors.

Mankind Pharma is India’s fourth-largest pharmaceutical company in terms of domestic sales and third largest in terms of sales volume, according to IQVIA MAT December 2022.

The company has one of the largest distribution networks of medical representatives -- a field force of 11,691 medical representatives and 3,561 field managers, as of December 31, 2022 -- in the Indian pharmaceutical market, and over 80% of doctors in India prescribed its formulations for MAT December 2022, as per IQVIA.

Pharma

The company is engaged in developing, manufacturing, and marketing a diverse range of pharmaceutical formulations across various acute and chronic therapeutic areas, including anti-infectives, cardiovascular, gastrointestinal, anti-diabetic, neuro/CNS, vitamins/minerals/nutrients, and respiratory.

• The company is focused on the domestic market.

• In FY22, 97.6% of their total revenues from operations were from India.

• This was one of the highest among peers identified by IQVIA.

• Their international sales come from products sold across 21 countries such as the United States, Latin America, Southeast Asia, Africa, the Middle East, and the Commonwealth of Independent States.

• The company has primarily grown organically.

• It has created 36 brands in their pharmaceutical business that have each achieved over Rs 50 crore in domestic sales for MAT December 2022.

Between FY20 and MAT December 2022, the company's domestic sales grew at a CAGR of approximately 12%, while the Indian pharma market grew at a CAGR of approximately 10% over the same period.

Consumer Healthcare

The company's consumer healthcare products range from condoms, pregnancy detection, emergency contraceptives, antacid powders, vitamin and mineral supplements to anti-acne preparations categories.

As per MAT December 2022, Mankind Pharma's brands were the category leaders in:

1. the male condom category, where Manforce brand sales represented a market share of approximately 29.6%.

2. the pregnancy detection kit category, Prega News brand sales had a market share of approximately 79.7%.

3. the emergency contraceptives category, where Unwanted-72 brand's domestic sales represented a market share of approximately 61.7%.

Manufacturing And Procurement

The company operates 25 manufacturing facilities across India and had 4,121 manufacturing personnel as of Dec. 31, 2022.

Of these, three facilities are subject to U.S. FDA inspection.

As of Dec. 31, 2022, these 25 facilities have a total combined installed capacity of 42.05 billion units per annum across a wide range of dosage forms, including tablets, capsules, syrups, vials, ampoules, blow-fill-seal, soft and hard gels, eye drops, creams, contraceptives, and other over-the-counter products.

The company also manufactures key APIs for some of its key products and is vertically integrated to some extent. Some of its manufacturing facilities are supported by its own packing material sites.

Their raw material suppliers are primarily located in India and China. For FY2020 to FY2022 and in the nine months ended December 2022, no single raw material supplier accounted for more than 5% of total expenses. The company resorts to 93.08% domestic sourcing of raw materials, while 4.95% come from China. The balance of 1.97% is from other countries.

It does not have any long-term contracts with suppliers, and prices are typically negotiated for each purchase order.

R&D

The company has a dedicated R&D centre with four units located in IMT Manesar, Gurugram, Haryana, and Thane, Maharashtra. The R&D operations comprise several divisions, including drug discovery, generic APIs, formulations, and biotechnology. As of Dec. 31, 2022, it had over 600 scientists, with about 40 holding Ph.D. The R&D expenditure stood at 2.09% of revenue for the nine months ended December 2022.

Mankind Pharma has listed peers such as Sun Pharmaceuticals Industries Ltd., Cipla Ltd., Zydus Lifesciences Ltd., Torrent Pharmaceutical Ltd., Alkem Laboratories Ltd., JB Chemicals & Pharmaceuticals Ltd., Eris Lifesciences Ltd., Ipca Laboratories Ltd., Abbott India Ltd., Glaxosmithkline Pharmaceuticals Ltd., Dabur India Ltd., Procter & Gamble Health Ltd., and Zydus Wellness Ltd. as per its red herring prospectus.

• Eighteen of the 25 manufacturing facilities are located in Himachal Pradesh as on December 2022. Any disruption, slowdown, or shutdown in manufacturing due to strikes, lockouts, fire, or in research and development operations could adversely affect business.

• A delay in the supply of inputs or an increase in costs could impact operations and profitability.

• The company is heavily focused on India, and hence revenue is dependent on political, economic, and regulatory conditions in India.

• The company has around 213 products under the National List of Essential Medicines, from which 13% of its revenue is derived. Exposure to the Drug Prices Control Order, 2013 would involve price regulation, and non-compliance or overcharging would attract fines and prosecution.

• Operations are labour-intensive, and there is a risk of strikes, work stoppages, or increased wage demands by employees or those of the suppliers.

• Increased competition could affect revenues and profits. Pricing pressure from competitors, including low-cost alternative medicines on the market, could affect market share.

• Registered offices and some manufacturing facilities are on lease. There is a risk of lease renewal, relocation, and shut down.

• Does not have long-term agreements with suppliers for raw materials; therefore, they are subject to cost volatility.

• Risk of product liability claims in cases of non-compliance with applicable quality standards or causing side effects.

• Risk of intellectual property violations and counterfeit products.

• Outstanding legal cases against the company.

• Any socio-political or economic disruption, natural calamities, or civil disruptions can impact manufacturing.

• Non-compliance with and changes in government, state, and local environmental, health and safety, labour, and other laws and regulations.

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