Mankind Pharma Limited has Filed DRHP for an IPO with SEBI on 16.09.2022

Mankind Pharma Limited has filed DRHP with market regulator SEBI on 16th, September, 2022 to launch its IPO.

The IPO comprises Offer for Sale (OFS) of 40,058,844  equity shares.  

Business Model of Company 

The Company is India’s fourth largest pharmaceutical company in terms of Domestic Sales and second largest in terms of sales volume for the Financial Year 2022. The Company is engaged in developing, manufacturing and marketing a diverse range of pharmaceutical formulations across various acute and chronic therapeutic areas, as well as several consumer healthcare products. The Company is focused on the domestic market, as a result of which its revenue from operations in India contributed to 97.60% of total revenue from operations for the Financial Year 2022, which was one of the highest among peers.

The Company primarily has grown organically and is the youngest company among the five largest pharmaceutical companies in India, in terms of Domestic Sales in the Financial Year 2022. The Company operates at the intersection of the Indian pharmaceutical formulations and consumer healthcare sectors with the aim of providing quality products at affordable prices, and have an established track record of building and scaling brands. 

Who is the Management of the Company?

As on the date of this Draft Red Herring Prospectus, the following is the management of the company:

 (i) Ramesh Juneja is the Chairman and a Whole-Time Director of the Company. He is a founder and Promoter of the Company. He has been associated with the Company since its incorporation as a Director and Promoter. He does not hold any formal educational qualifications. He has experience of over 31 years in the pharmaceutical industry. He was awarded the finalist certificate for “Entrepreneur of the Year” by Ernst & Young in 2009.

(ii) Rajeev Juneja is the Vice-Chairman and Managing Director of the Company. He is also a Promoter of the Company and has been associated with the Company since December 22, 1992. He does not hold any formal educational qualifications. He has experience of over 29 years in the pharmaceutical industry. 

(iii) Sheetal Arora is the Chief Executive Officer and a Whole-Time Director of the Company. He is also a Promoter of the Company and has been associated with the Company since September 21, 2007. He holds a bachelor’s degree in commerce from the Sri Krishnadevaraya University, Anantapur. He has experience of over 14 years in the pharmaceutical industry

Why is the company raising funds via IPO?

The Company expects that listing of the Equity Shares will enhance the visibility and brand and provide liquidity to its existing Shareholders. Listing will also provide a public market for the Equity Shares in India. The Company will not receive any proceeds from the Offer. 

Is there any OFS in the IPO?

The IPO of Mankind Pharma Limited includes Offer for Sale (OFS) only. There is no Fresh Issue in the IPO of Mankind Pharma Limited. The IPO entirely comprises OFS of 40,058,844  equity shares. 

Details of Promoters and Investors selling their stakes:

1. Ramesh Juneja Promoter Selling Shareholder Up to 3,705,443 Equity Shares 

2. Rajeev Juneja Promoter Selling Shareholder Up to 3,505,149 Equity Shares 

3. Sheetal Arora Promoter Selling Shareholder Up to 2,804,119 Equity Shares

4. Cairnhill CIPEF Limited Investor Selling Shareholder Up to 17,405,559 Equity Shares 

5. Cairnhill CGPE Limited Investor Selling Shareholder Up to 2,623,863 Equity Shares

6. Beige Limited Investor Selling Shareholder Up to 9,964,711 Equity Share

7. Link Investment Trust Investor Selling Shareholder Up to 50,000 Equity Shares a

Financials of the company?  

As per the consolidated financial statements of the Company, in FY22, the total revenue of the Company increased 25% to Rs. 7977 crore as against Rs. 6385 crore in the previous financial year. The total expenses of the Company have also increased 28% to Rs. 6017 crore as compared to Rs.  4705 crore in the previous financial year. The Profit Before Tax of the Company also increased 17% to Rs. 1974 crore as against Rs. 1691 crore in the previous financial year. The net profit of the Company increased 12% to Rs. 1452 crore compared to Rs. 1293 crore in the previous financial year. 

In FY22, the total assets of the Company increased 44% to Rs. 9147 crore as against Rs. 6372 crore in the previous financial year. The total equity and liabilities of the Company also increased 44% to Rs. 9147 crore as against Rs. 6372 crore in the previous financial year.

In FY22, the net cash generated from operating activities of the Company was Rs. 919 crore as against Rs. 1137 crore in the previous financial year. The net cash used in investing activities of the Company was Rs. 1369 crore as against Rs. 1222 crore in the previous financial year. The net cash generated from financial activities of the Company was Rs. 604 crore as against Rs. 8 crore cash used in the previous financial year. Cash and cash equivalents at the end of the year of the Company was Rs. 283 crore as against Rs. 127 crore in the previous financial year. 

Risk in The IPO

Company is Subject to Extensive Government Regulations 

The Company operates in a highly regulated industry and  operations, including  development, testing, research, manufacturing, marketing and sales activities, are subject to extensive laws and regulations in India and other countries. The Company is subject to extensive government regulations which are also subject to change. If the Company fails to comply with the applicable regulations prescribed by the governments and the relevant regulatory agencies, the business, financial condition, cash flows and results of operations will be adversely affected.

Any Disruption in the Manufacturing or R&D

The business is dependent on the ability to 

manage the manufacturing and R&D operations, which are subject to various operating risks and factors including, among others, breakdown and/or failure of equipment or industrial accidents which may entail significant repair and maintenance costs, increases in raw materials, consumables and manpower costs, challenges in achieving targeted utilization levels at the manufacturing facilities, product quality issues, disruption in electrical power or water resources, timely grant or renewal of approvals etc. Any disruption, slowdown or shutdown in the manufacturing or R&D operations could adversely affect the business, financial condition, cash flows and results of operations.

Failure of Commercialization of New Products in a Timely Manner

The growth strategies and success of the Company depends significantly on its ability to develop and commercialize new niche and complex products or molecules, such as Dydrogesterone and Nitrofurantoin Macrocrystal, in a timely manner. The development and commercialization processes are both time consuming and costly, and involve a high degree of business risk. If the Company does not successfully develop or commercialize new products in a timely manner, or if the products that the Company commercializes do not perform as expected, the competition may hinder the Company’s ability to effectively plan the timing of the product development, which could have an adverse impact on the business, results of operations and financial condition of the Company.

The Availability of Counterfeit Drugs

Entities in India and abroad could pass off their own products as Company’s products, including counterfeit or pirated products. For example, certain entities could imitate the brand name, packaging materials or attempt to create look-alike products. As a result, the market share of the Company could be reduced due to replacement of demand for the products and adversely affect the goodwill. In the past, certain products of the Company in the anti-infectives therapeutic area were sold by third parties in counterfeit form. The Company has taken steps to prevent such incidents going forward, including incorporating certain security features such as QR codes in the packaging of the products for authenticity verification.  The proliferation of counterfeit and pirated products, and the time and attention lost to defending claims and complaints about counterfeit products could have an adverse effect on  the prospects, business, results of operations and financial condition.

Exposed to Government Price Controls

The Company is exposed to government price controls which could negatively affect  results of operations. In addition to normal price competition, the prices of certain of the products are or may be restricted by price controls imposed by governments and healthcare providers in India, or in other countries to which the Company exports its products. Price controls can operate differently across countries and can cause wide variations in prices between markets. The existence of price controls may limit the revenue that Company earns from certain of its products.