Glenmark Life Sciences IPO: Information analysis

Glenmark Life Sciences is involved in the development and manufacturing of high-value, non-commoditised active pharmaceutical ingredients (APIs) - raw materials used in making medicines. The company has a portfolio of 120 products that have a market size of $142 billion. These products are used in various therapy areas, such as cardiovascular, central nervous system, diabetes, anti-infective and others. Besides, over the years, the company has scaled up its contract development and manufacturing operations (CDMO), accounting for around 8 per cent of the overall revenue in FY21. Currently, the company has a total capacity of 726.6 kilolitres (kl) across its four facilities located in Gujarat and Maharashtra. Glenmark Life Sciences is a wholly-owned subsidiary of Glenmark Pharmaceuticals. In 2018, it entered into a business purchase agreement with Glenmark Pharma under which its API business was spun off into the company for Rs 1,162 crore. Through the IPO, the company is raising around Rs 1,514 crore. Out of this, Rs 453 crore is for a fresh issue, Rs 800 crore will be used for paying off the debt against the above-mentioned business purchase agreement and around Rs 150 crore will be utilised for the expansion of its existing plants by 200 kl. Going forward, the management intends to grow its API business by introducing more molecules and expand its CDMO business for which it has planned the capacity expansion of 800 kl by the end of FY23. The global API market was estimated to be around $181.3 billion in 2020. The US (35.1 per cent) and China (32.4 per cent) dominate the market, while India accounts for 6.1 per cent of it. At present, India imports around 68 per cent of APIs from China. However, to promote local manufacturing and cut this dependence, the government has announced various schemes and financial packages for the sector. The availability of skilled manpower, low operation costs and the government's focus on API manufacturing can act as growth catalysts for the sector. Strengths Although the API business is a high-volume, low-margin business, Glenmark Life Sciences has built capabilities in niche and technically complex molecules, thereby commanding higher margins. The company has had long-term relationships with its customers. With its seven largest customers, its association has been for around five to 15 years. The company has more than 30 per cent market share in some of its key products, which together contribute around 44 per cent to the total API business. The company has a portfolio of 120 molecules with a total market size of $142 billion. Additionally, it has filed 403 Drug Master Files (DMFs) and has 39 patents granted (owned and co-owned). Risks/weak