Emcure Pharmaceuticals has launched its Initial Public Offering (IPO), opening for subscription from Wednesday, July 3, and available until Friday, July 5. Emcure Pharmaceuticals, a well-established Indian pharmaceutical company known for its wide range of pharmaceutical products, is offering shares at a price range of Rs 960-1,008 per share. Investors are required to apply for a minimum of 14 equity shares.
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Overview of the Emcure Pharma IPO
The Emcure Pharma IPO involves a total stake sale worth Rs 1,952.03 crore. The net proceeds from the fresh issue will be primarily utilized for the repayment or prepayment of certain outstanding borrowings of the company and for general corporate purposes.
Before the Emcure Pharma IPO, Emcure Pharma raised Rs 582.6 crore through its anchor book by allocating 57,79,850 shares to anchor investors at Rs 1,008 per share. The anchor investors include notable names such as the Abu Dhabi Investment Authority, Goldman Sachs, Morgan Stanley, and various mutual fund houses including SBI, HDFC, ICICI Prudential, Whiteoak Capital, Axis, Kotak, Nippon Life India, Mirae, and Motilal Oswal.
Company Background of Emcure Pharma IPO
Emcure Pharmaceuticals was incorporated in 1981 and has since grown to become a significant player in the pharmaceutical industry. The company ranks 13th in domestic sales among pharmaceutical companies in India for the MAT (Moving Annual Total) period ending September 2023 and holds the fourth position in market share within its covered markets for the same period. Additionally, Emcure leads the market in the gynecology and HIV antiviral therapeutic areas as of MAT September 2023.
The company operates 13 manufacturing facilities across India and employs 552 scientists as of September 30, 2023. It also manages five research facilities in the country and has filed over 1,800 documents globally, including 204 in the European Union (EU) and 133 in Canada. Emcure Pharma has 201 granted patents, 33 pending patent applications, and has submitted 102 drug master files.
For the financial year ending March 31, 2024, Emcure reported a net profit of Rs 527.58 crore and a revenue of Rs 6,715.24 crore. This marks a slight decline from the previous financial year 2022-23, where the company recorded a net profit of Rs 561.85 crore and a revenue of Rs 6,031.72 crore.
Emcure Pharma IPO Allocation and Management
The company has reserved 1,08,900 shares for its eligible employees, who will receive a discount of Rs 90 per share. The issue is structured with 50% reserved for qualified institutional bidders (QIBs), 15% for non-institutional investors, and the remaining 35% for retail investors. The IPO’s book-running lead managers include Kotak Mahindra Capital Company, Axis Capital, JP Morgan India, and Jefferies India, with Link Intime India serving as the registrar for the issue. The shares are expected to be listed on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) with a tentative listing date of Wednesday, July 10.
Detailed Company Analysis
Manufacturing and R&D Capabilities
Emcure Pharmaceuticals boasts extensive manufacturing and R&D capabilities. With 13 manufacturing facilities, the company has a strong production backbone that allows it to meet the diverse needs of its broad product portfolio. The facilities are strategically located across India, ensuring optimal logistics and supply chain management.
The company’s R&D infrastructure is also noteworthy. Employing 552 scientists and managing five research facilities, Emcure is well-equipped to drive innovation and development within the pharmaceutical sector. Its focus on research is evident from the filing of over 1,800 documents globally, indicating its commitment to maintaining a strong intellectual property (IP) portfolio. With 201 granted patents and 33 pending applications, Emcure demonstrates a robust pipeline of new products and therapies.
Financial Performance
Analyzing the financial performance, Emcure Pharmaceuticals has shown resilience and steady growth. For the financial year ending March 31, 2024, the company reported a net profit of Rs 527.58 crore and a revenue of Rs 6,715.24 crore. Despite a slight decline from the previous year’s figures, this performance underscores the company’s ability to generate substantial revenues and profits consistently.
The slight dip in profitability from Rs 561.85 crore in FY 2022-23 to Rs 527.58 crore in FY 2023-24 can be attributed to various factors, including increased operational costs and market conditions. However, the company’s strategic focus on high-growth therapeutic areas and efficient cost management practices are expected to drive future profitability.
Brokerages’ Opinions on Emcure Pharma IPO
Several brokerage firms have analyzed the Emcure Pharma IPO and provided their ratings based on the company’s strengths, market position, and future growth prospects.
Anand Rathi Research
Rating: Subscribe for long term Anand Rathi Research highlights Emcure’s extensive range of pharmaceutical products across several therapeutic areas and notes the company’s potential for business improvement supported by industry tailwinds and scalability. They emphasize the company’s strong R&D-driven approach and a differentiated product portfolio, which includes orals, injectables, and biotherapeutics. This diverse portfolio enables Emcure to target markets across over 70 countries, particularly in India, Europe, and Canada. Anand Rathi believes the issue is fairly priced and recommends subscribing for the long term.
Reliance Securities
Rating: Subscribe Reliance Securities recognizes Emcure as a top player in its covered markets and a market leader in the gynecology therapeutic area. The brokerage notes that Emcure’s focus on chronic therapeutic areas is expected to drive higher growth compared to acute areas over the next five years. Significant investments in new manufacturing facilities and sales force effectiveness are expected to propel growth. With increasing life expectancy, rising incidence of chronic diseases, and improved awareness, domestic growth is anticipated to remain strong. Thus, Reliance Securities assigns a ‘subscribe’ rating.
Arihant Capital Markets
Rating: Subscribe Arihant Capital Markets points out Emcure’s niche products and global market presence. The company is well-positioned to leverage its market position for rapid expansion. While there has been a dip in profitability due to high finance costs, the planned repayment of borrowings is expected to improve the bottom line substantially. At the upper price band, the issue is valued at 36.07 times P/E based on FY24 earnings. They recommend subscribing to the issue.
Nirmal Bang Securities
Rating: Subscribe Nirmal Bang Securities acknowledges Emcure’s steady performance with a topline growth of 6-7% CAGR, though profitability has seen a decline due to increased employee costs and other operating expenses. The repayment of borrowings is expected to enhance profitability. The issue is valued at an EV/Ebitda of 16.7 times based on FY24 financials, which is at a discount compared to peers’ average valuation of 27.4 times. The focus on the chronic segment is expected to drive future growth, and thus they assign a ‘subscribe’ rating.
Swastika Investmart
Rating: Subscribe for long term Swastika Investmart commends Emcure’s large and diversified product portfolio, strong brand-building capabilities, and robust R&D infrastructure. While profitability has recently declined due to interest expenses and depreciation, the pharmaceutical industry’s regulations and potential supply chain disruptions are risks. However, given Emcure’s strengths and the potential for debt reduction, they view the valuation as reasonable and recommend subscribing for the long term.
StoxBox
Rating: Subscribe StoxBox highlights Emcure’s leadership position in key therapeutic areas, established international presence, and strong manufacturing capabilities. The company’s plan to repay borrowings with the proceeds is anticipated to significantly improve the bottom line. The issue is valued at a P/E of 36.6 times on the upper price band based on FY24 earnings, which they deem fair. Therefore, they recommend subscribing to the issue.
SBICap Securities
Rating: Subscribe for long term SBICap Securities values Emcure at an FY24 P/E multiple of 36.1 times based on the post-issue capital. They note the company’s strong domestic presence and leadership positions across key brands. Increased geographic penetration is expected to drive topline growth, while debt reduction from the issue proceeds will augment profitability. Thus, they assign a ‘subscribe for long term’ rating.
Canara Bank Securities
Rating: Subscribe Canara Bank Securities notes Emcure’s diversification into the generic medicine market across multiple therapeutic areas. Emcure is positioned as a resilient player in the global pharmaceutical sector, leveraging its market leadership in India, international footprint, strong R&D focus, and prudent financial management for sustained growth and profitability. With a P/E ratio of 36.6x, the issue is reasonably priced compared to peers, leading to a ‘subscribe’ rating.
Sushil Finance
Rating: Subscribe with caution Sushil Finance points out that Emcure is asking for a PE multiple of 36.6 times on the upper end of the price band, which seems fully priced. The P/BV is at 6.17 times for FY24. Considering the factors, risks, and opportunities, they suggest investors subscribe to the issue with a medium to long-term view.
Conclusion
The Emcure Pharma IPO has garnered a positive outlook from various brokerage firms, with most recommending a ‘subscribe’ rating. Emcure’s strong market position, diversified product portfolio, and robust R&D infrastructure are significant positives. The company’s leadership in key therapeutic areas, such as gynecology and HIV antiviral therapies, highlights its competitive edge in the pharmaceutical industry.
Moreover, Emcure’s strategic focus on chronic therapeutic areas, which are expected to grow faster than acute areas, aligns with the rising incidence of chronic diseases and increased healthcare awareness. The company’s extensive global presence and established manufacturing and R&D capabilities further strengthen its position.
While the Emcure Pharma IPO is fairly valued, potential investors should be aware of the high valuations and regulatory risks associated with the pharmaceutical industry. Additionally, the slight decline in profitability due to high finance costs and operational expenses should be considered. However, the planned repayment of borrowings using the Emcure Pharma IPO proceeds is expected to improve the company’s financial health significantly.
Overall, the Emcure Pharma IPO is seen as an attractive investment for those with a medium to long-term perspective, offering potential for substantial returns based on the company’s strong fundamentals and growth prospects.
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