3 min read.Updated: 05 Nov 2020, 07:44 AM ISTLeroy Leo
In its IPO, Gland Pharma plans to raise ₹1,250 crore through issue of primary shares, and also have an offer for sale of up to 34.9 million shares
The company plans to use proceeds from the primary stake sale for capital expansion and working capital needs
NEW DELHI :
Pharmaceutical firm Gland Pharma Ltd that will hit the stock markets with its initial public offering (IPO) next week, plans to expand into China, the world’s second largest pharmaceutical market, and Africa by taking help from its Shanghai-based promoter Fosun Pharma Pte. Ltd, which has a strong presence in these markets.
Gland Pharma will be the first company to be listed on the Indian exchanges with a Chinese promoter. Fosun acquired a 74% stake in Gland Pharma in 2017 for over $1.1 billion. It was the largest acquisition of an Indian company by a Chinese firm.
“We're looking at the China market itself. We never entered that. With the recent regulation in China of a new fast-track mechanism, we have (filed for) five to six products and more will be filed through that mechanism. The China market is one other area where we're going to increase our presence by taking help of Fosun," Gland Pharma managing director Srinivas Sadu told Mint in an interview.
He added that in Africa, it will be selling more products through Fosun apart from its own distribution network.
Gland Pharma’s IPO comes at a time when relations between the two neighbours are at rock bottom following deadly border clashes earlier this year. This was followed by the Indian government banning several Chinese apps and restricting the flow of Chinese capital and goods into India.
However, the Hyderbad-based drugmaker’s management does not expect its China-based promoter to be a significant worry for both the IPO and its business.
“As a business, we don't see any issues at the ground level before or now. We continue to do business as usual... We have not seen any change happening. We are in healthcare, in essential drugs, and I think the impact may not be that high," Sadu said when asked if there were concerns about the impact of torrid India-China relationship.
Instead, he expects the company to witness strong response from “marquee investors" during its IPO, especially during the anchor investments that are expected to happen on Friday.
The Hyderabad-based drugmakers Rs6,480 crore IPO will open for bidding on Monday. Gland Pharma Ltd has set the price band for its initial public offering at ₹1,490-1,500 per share. The issue will close on Wednesday.
In its IPO, Gland Pharma plans to raise ₹1,250 crore through issue of primary shares, and also have an offer for sale of up to 34.9 million shares. The secondary stake sale will include up to 19.4 million from Fosun Pharma, 10 million shares from continuing shareholder Gland Celsus Chemicals Pvt Ltd. The rest will be sold by two trusts who are also continuing shareholders in the company.
The company plans to use proceeds from the primary stake sale for capital expansion and working capital needs. About ₹200 crore will be used for improving its infrastructure like adding new lines and warehousing at its Pashamylaram plant near Hyderabad. At its Visakhapatnam plant, the company will be adding a new active pharmaceutical ingredient manufacturing facility for vertical integration.
Unlike other pharmaceutical companies, which use business-to-consumer model, Gland Pharma provides business-to-business services for firms like pharmaceutical giants like Eli Lilly and Mylan. The approach is different from simple contract manufacturing, as Gland Pharma is paid a sum for research and development of a product as well and not just manufacturing.
The frontending of R&D payments by customers helps Gland Pharma to maintain its own R&D expenses at 3-5% of sales, according to the management, even as the company is trying to focus on speciality injectables, a segment where other firms spend twice the amount.
Also, supply contracts are of 3-5 year tenures, which provide stability to revenue, and as the risks are shouldered by the customers, litigation risk is less, the management said in a press conference.
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