Pharma Companies Tap into IPO Market Riding on Bullish Investors

Succeeding an enormous wave of investor interest in the healthcare sector, five pharma companies have decided to tap into the initial public offering (IPO) market over the next couple of weeks in order to raise over Rs 8,000 crore.

The list includes the Rs 4,000-crore IPO by the Bain Capital-backed Emcure Pharma, the Rs 1,500-crore issue by Vijaya Diagnostic Centre, diagnostic firms Krsnaa Diagnostics (Rs 1,200 crore) and Mumbai-based bulk drugs maker Supriya Lifesciences (Rs 1,200 crore), and pharma formulations contract development and manufacturer (CDMO) Windlass Biotech's Rs 400 crore issue.

Investment bankers estimate these five companies to together raise over Rs 8,300 crore through the public offerings this month.

According to data available with the stock exchanges, so far, this fiscal, 12 firms have raised Rs 27,000 crore from IPOs, and Rs 70,000-crore more issues are in the pipeline. The entirety of FY21 saw only 30 IPOs raising Rs 31,277 crore.

Apart from these pharma firms, Devyani International and and Exxaro Tiles are opening on August 4, shortly accompanied by issues from consumer-focused companies like Paytm, Mobikwik, Policybazaar, Cartrade, Delhivery and Nykaa. According to marketmen, as many as 40 issues are lined up for the rest of the year, all of which are looking to raise Rs 70,000 crore.

While 12 companies raised Rs 27,052 crore through IPOs in the first four months of the current fiscal, and PowerGrid InvIT has mopped up Rs 7,735 crore through its IPO.

As against this, the entire FY21 saw only 30 issues raising Rs 31,277 crore, Rs 20,352 crore by 13 companies in FY20, 14 firms raising Rs 14,719 crore in FY19 and 45 main-board IPOs collectively mobilising Rs 82,109 crore in FY18.

That there is tremendous investor appetite is clear from the way the issues from Tatva Chintan Pharma Rolex Rings, GR Infraprojects, Clean Science & Technology, Shyam Metalics & Energy, India Pesticides, Dodla Dairy, Glenmark Life Sciences and Zomato were subscribed -- 29 times to 180 times.

Pharma stocks have been in the limelight since the pandemic broke out last year, and the BSE healthcare index has been ruling at all-time highs for a long while now. Recent healthcare listings have also performed well, as evinced by the Rs 2,144-crore KIMS Hospitals issue which since listing gained over 45 per cent. The Rs 1,514-crore Glenmark Life Sciences issue, closed on July 29, received the highest number of retail applications since 2008.

Pharma companies have also been gaining from the tailwinds to the API market, and the China plus one strategy, in which India is the key focus.

"New product launches, aging population and sedentary lifestyles leading to increased prevalence of chronic diseases, new drug discovery methods, and an increase in drug usage are some of the key growth drivers for the industry," says an analyst with a brokerage that is working on some of these issues.

Some of these companies will be benefitting from their proven capabilities in contract manufacturing, which is, in turn, set to gain from the increased R&D outsourcing in the industry, said another i-banker.

Windlas Biotech, one of the leading CDMOs with a focus on the chronic therapeutic segment, and having strong and long-term relationships with leading pharma companies like Pfizer, Sanofi, Cadila, Zydus Healthcare, Emcure Pharmaceuticals, Eris Lifesciences, and Intas Pharmaceuticals among others, and had last Thursday launched a Rs 400-crore issue that is opening on August 4.

It will be the first pharma formulations CDMO to go public. The IPO proceeds will be used to augment capacity of its Dehradun plants II& IV. It has two more plants the Uttarakhand city.

The most recent example of the boom in pharma and healthcare sector is the Glenmark Life Sciences issue which was subscribed 44.17 times with qualified institutional buyers bidding for 36.97 times, non-institutional investors 122.54 times and retail 14.63 times.

According to market sources, Krsnaa Diagnostics has advanced its IPO launch by a week due to the high demand from institutional investors and will be hitting the market in the next few days.

Supriya Lifescience has filed for a Rs 1,200 crore issue, and plans to use to fund for expansion and repayment of debt.

The Mumbai-based bulk drugs firm intends to raise Rs 200 crore through a fresh issue, and an offer for sale of Rs 1,000 crore by promoter Satish Waman Wagh.

Bain Capital-backed Emcure Pharmaceuticals, a generic drug maker, is launching a Rs 4,000-crore issue consisting of new issuance and an OFS from its promoter Satish Mehta and investor Bain Capital.