Mankind Pharma develops, manufactures and markets a diverse range of
pharmaceutical formulations across various acute and chronic therapeutic areas,
as well as several consumer healthcare products. It is India’s fourth largest
pharmaceutical company in terms of domestic Sales and third largest in terms of
sales volume, according to MAT December 2022.
The company has presence in several acute and chronic therapeutic areas
in India, including anti-infectives, cardiovascular, gastrointestinal,
anti-diabetic, neuro/CNS, vitamins/minerals/nutrients and respiratory. Its covered
market presence in the IPM increased from approximately 62% to approximately
69% between FY 2020 and MAT December 2022.
The company entered the consumer healthcare industry in 2007 and has
since established several differentiated brands in the condoms, pregnancy
detection, emergency contraceptives, antacid powders, vitamin and mineral
supplements and anti-acne preparations categories. For MAT Dec 2022, VMS
contributed 74.53% to total sales in consumer healthcare category, antacids
13.39%, condoms 7.54%, emergency contraceptives 0.85%, acne preparations 2.57%,
and pregnancy tests 1.12%.
The company is leader in (1) the male condom category, where its Manforce
brand had market share of approximately 29.6%, (2) pregnancy detection kit
category, where its Prega News brand had market share of approximately 79.7%,
and (3) the emergency contraceptives category, where its Unwanted-72 brand had
market share of approximately 61.7%, according to MAT December 2022.
As part of its strategies to grow its healthcare business, Mankind is
planning to launch a new preconception and pre-natal care range of products as
brand extensions under its Prega News brand.
In Nov 2022, company completed a cash acquisition for a majority stake in
Upakarma Ayurveda, which is expected to provide Mankind with a
direct-to-customer channel in the Ayurvedic medicine category.
Company acquired one dermatology brand (Daffy) and one respiratory brand
(Combihale) from Dr. Reddy’s Laboratories in February 2022. Company also
acquired several pharmaceutical formulations brands from Panacea Biotec Pharma
and Panacea Biotec in India and Nepal. This will enable it to explore new
super-specialty therapeutic areas, such as transplant and oncology, and further
drive growth. Company plans to continue to pursue strategic acquisitions of
brands and companies across key markets as well as explore in-licensing and
co-development opportunities.
Key therapeutic areas such as Anti-infectives contributed 14% to total
domestic sales for MAT December 2022, Cardiovascular 13%, Gastrointestinal 11%,
Vitamins/minerals/nutrients 9%, Respiratory 9%, Anti-diabetic 8%, Dermatology
6%, Gynaecology 8%, Pain/analgesics 5% and Neuro/CNS 3%.
The company operate 25 manufacturing facilities across India and had
4,121 manufacturing personnel as of December 31, 2022. Its formulations
manufacturing facilities have a total installed capacity of 42.05 billion units
per annum across a wide range of dosage forms including tablets, capsules,
syrups, vials, ampoules, blow fill seal, soft and hard gels, eye drops, creams,
contraceptives and other over-the-counter products, as of December 31, 2022.
The company has a pan-India marketing presence, with a field force of
11,691 medical representatives and 3,561 field managers, as of December 31,
2022. The company has established a significant distribution network in India.
During the nine months ended December 31, 2022, the company sold its products
to over 12,000 stockists and engaged with 75 clearing and forwarding (C&F)
agents.
As of December 31, 2022, the company had a team of over 600 scientists
and a dedicated in-house R&D center with four units located in IMT Manesar,
Gurugram, Haryana and Thane, Maharashtra.
During MAT December 2022, its domestic sales in the North India, South
India, East India and West India regions amounted to approximately Rs 2967.3
crore, Rs 1917.8 crore, Rs 1599.1 crore and Rs 1906.1 crore, respectively,
contributing to approximately 35%, 23%, 19% and 23%, respectively, of total domestic
sales.
The company derives most of its revenue from the domestic market. Operations
in India contributed to 97.60% of total revenue for FY 2022.
The company’s domestic sales from Class II-IV cities and rural markets
contributed to approximately 47% of total domestic sales, according to MAT
December 2022, higher than the approximately 36% recorded for IPM. The company
plans to increase its penetration in metro and Class I cities.
The company has created 36 brands in pharmaceutical business that have
each achieved over Rs 50 crore in domestic sales, according to MAT December
2022.
The company aims to increase its market share by expanding the product portfolio,
with a focus on chronic therapeutic areas. In particular, the company plans to
grow its market share in the following therapeutic areas: (1) anti-diabetic,
(2) cardiovascular, (3) neuro/CNS (4) respiratory, (5) critical care, (6)
ophthalmology, and (7) gynaecology.
The company has developed digital platforms to improve doctor engagement.
Its in-house developed DrOnA Health service is a dedicated virtual-consultation
platform that enables doctors to easily consult and interact with their
patients across various channels, including in-clinic and virtually.
Offer
and its objects
The IPO will be complete offer for sale of Rs 4326.35 crore by existing
shareholders Ramesh Juneja, Rajeev Juneja, Sheetal Arora, Cairnhill CIPEF,
Cairnhill CGPE, Beige and Link Investment Trust.
Price band for the IPO is Rs 1026 to Rs 1080 per equity share of face
value of Re 1 each.
The company will not directly receive any proceeds from the offer. All
the offer proceeds will be received by the selling shareholders, in proportion
to the offered shares sold by them.
Promoters of the company are Ramesh Juneja, Rajeev Juneja, Sheetal Arora,
Ramesh Juneja Family Trust, Rajeev Juneja Family Trust and Prem Sheetal Family
Trust. The promoters and promoter group hold an aggregate of 316,464,857 equity
shares, aggregating to 79% of the pre-offer issued and paid-up equity share
capital. The post-IPO shareholding is expected to be around 76.5%.
The issue, through
the book-building process, will open on 25 April 2023 and close on 27 April
2023.
Strengths
Mankind Pharma
is an established and growing consumer healthcare franchise. The company‘s
reputed brands like Manforce and Prega News are extremely popular in India and are
likely to act as a moat. Manforce condoms had domestic sales of approximately
Rs 461.6 crore, as per MAT December 2022, ranking 1st in the male condom
category, with approximately 29.6% market share. Prega News products had domestic
sales of approximately Rs 184.4 crore, as per MAT December 2022, ranking 1st in
the pregnancy test kit category, with approximately 79.7% market share.
The company has consistently
outperformed the growth of IPM. Between FY2020 and MAT December 2022, the company’s
domestic sales grew at a compounded annual growth rate (CAGR) of approximately
12% from approximately Rs 6094.2 crore to approximately Rs 8390.2 crore, which
is approximately 1.3 times that of IPM.
The company has
demonstrated track record of creating brands with domestic sales of over Rs 100
crore. In MAT December 2022, 21 of its brands had annual domestic sales of more
than Rs 100 crore, compared to approximately 16 brands on average among the 10
largest corporates in IPM.
The supply and
demand for healthcare goods and services is expected to increase as the urban
population is projected to grow to 37% of the total population in India by 2027.
India’s healthcare expenditure is among the lowest compared to other countries,
primarily because of under-penetration of healthcare services and lower consumer
expenditure in healthcare, this indicates a growth opportunity for companies
like mankind pharma.
The company has a
diversified portfolio of products across leading therapeutic areas. In terms of
domestic sales (in FY2022), it is among the 10 largest companies in 10 of the
leading therapeutic areas.
The company has one of the largest distribution networks of medical
representatives in the Indian pharmaceutical market. Over 80% of doctors in
India prescribed its formulations, as per MAT December 2022.
The production-linked
incentive (PLI) scheme is expected to promote domestic manufacturing of
critical key starting materials, drug intermediates, and APIs, which will boost
the company‘s growth.
The company
benefits from its brand and leadership positions in key therapeutic areas,
which can be used to launch related products, thereby capturing a wider
molecule coverage.
The company has a
dedicated in-house R&D center, with four units located in IMT Manesar,
Gurugram, Haryana and Thane, Maharashtra. Its R&D capabilities enable it to
ensure supply of quality products to the domestic market.
In addition to a professional
and experienced management team, the company benefits from the support and
experience of private equity investors, which include affiliates of Capital
International Group and ChrysCapital.
Weaknesses
The pharmaceutical
and consumer healthcare industries are highly competitive with several major
pharmaceutical companies as key players.
Company derives
significant portion of revenue from operations in India. For the Financial
Years 2020, 2021 and 2022, and the nine months ended December 31, 2021 and
December 31, 2022, its revenue from India was 98.70%, 97.01% and 97.60%, 97.73%
and 96.79%, respectively, of its total revenue. Domestic pharma industry can at
best grow at a steady rate. Most Indian pharma companies are focusing on
exports to grow at a faster rate. The company’s track record in terms of
exports, which is the key growth driver in this industry is limited.
Company acquired dermatology brand (Daffy) and respiratory brand
(Combihale) from Dr. Reddy’s Laboratories in February 2022. Company also
acquired several pharmaceutical formulations brands from Panacea Biotec Pharma
and Panacea Biotech. If company fails to properly integrate and capitalise on
these acquired product lines, its financial performance will be impacted.
During 9M FY23, the company had around 13.44% of total domestic portfolio
under price control. It is likely that the Indian government may bring more
such drugs and formulations under price control, which in turn will have an
adverse impact on the company’s domestic value growth.
The company has entered
certain transactions with related parties, including Group Companies, Promoters,
and certain members of its Promoter Group and Key Managerial Personnel, and is
likely to continue to do so in the future. The arithmetic aggregated absolute
total of related-party transactions (post inter-company eliminations) was Rs 909.50
crore, Rs 749.73 crore, Rs 770.07 crore, Rs 495.07 crore and Rs 473.97 crore
for FYs 2020, 2021 and 2022, and the nine months ended December 31, 2021 and
December 31, 2022, respectively. Such related-party transactions in the future
may potentially involve conflicts of interest, which may be detrimental to the
interest of the company.
The company’s business
prospects depend on its ability to build, maintain and enhance its brands image
and reputation. Any negative publicity in relation to company’s products would
damage its brands image and reputation.
Valuation
During 9M FY2023, consolidated sales were up by 10.58% to Rs
6696.77 crore compared to 9M FY2022. OPM decreased by 599 bps to 22.16% due to
the costs of acquisitions during the period, which led to 12.94% decrease in
operating profit to Rs 1483.96 crore. Other income decreased 50.12% to Rs 23.09
crore, while interest cost fell 13.75% to Rs 39.31 crore and depreciation
increased 102.41% to Rs 241.4 crore. PBT decreased 24.40% to Rs 1293.95 crore.
Tax expenses for 9M FY23 was of Rs 277.98 crore compared to tax expense of Rs
451.31 crore in 9M FY22. Minority interest for 9M FY23 was Rs 19.56 crore
compared to Rs 16.85 crore in 9M FY21. Net profit fell 19.86% to Rs 996.42
crore, however company’s acquisition of dermatology brand (Daffy), respiratory
brand (Combihale) and several pharmaceutical formulations brands from Panacea
Biotec Pharma and Panacea Biotec will enable it to explore new super-specialty
therapeutic areas, such as transplant and oncology, and drive company’s future
growth ahead of IPM.
In FY2022, consolidated sales were up by 25.22% to Rs 7781.56
crore compared to FY2021. OPM decreased by 95 bps to 25.57%, which led to 20.71%
increase in operating profit to Rs 1989.36 crore. Other income increased 14.67%
to Rs 196.03 crore, while interest cost increased 190.91% to Rs 58.61 crore and
depreciation increased 40.05% to Rs 166.62 crore. PBT increased 16.73% to Rs
1974.60 crore. Tax expenses for FY2022 were Rs 521.64 crore compared to tax
expense of Rs 398.58 crore in FY2021. Minority interest for FY2022 was Rs 19.48
crore compared to Rs 27.61 crore in FY2021, Net profit rose 13.28% to Rs
1265.43 crore.
The TTM EPS on
post-issue equity works out to Rs 29.62. At the upper price band of Rs 1080,
P/E works out to 36.46.
As of 23 April 2023, its listed peers such as Pfizer India traded
at TTM P/E of 29.91, and Eris Lifesciences traded at TTM P/E of 21.02. For FY2022,
Mankind Pharma OPM and ROE stood at 25.57% and 23.29%, respectively, compared
to 32.01% and 21.38% for Pfizer India, 36% and 21.28% for Eris Lifesciences, respectively.
Mankind Pharma: Issue highlights
|
For Offer for Sale Offer size (in Rs crore)
|
|
- On lower price band
|
4110.04
|
- On upper price band
|
4326.35
|
Offer size (in no of shares )
|
4,00,58,844
|
Price band (Rs)
|
1026-1080
|
Minimum Bid Lot (in no. of shares )
|
13
|
Post issue capital (Rs crore)
|
|
- On lower price band
|
40.06
|
- On upper price band
|
40.06
|
Post-issue promoter & Group shareholding (%)
|
76.50
|
Issue open date
|
25-04-2023
|
Issue closed date
|
27-04-2023
|
Listing
|
BSE, NSE
|
Rating
|
44/100
|
Mankind Pharma: Consolidated Financials
|
|
2003 (12)
|
2103 (12)
|
2203 (12)
|
2112 (9)
|
2212 (9)
|
Sales
|
5,865.23
|
6,214.43
|
7,781.56
|
6,055.79
|
6,696.77
|
OPM (%)
|
24.50%
|
26.52%
|
25.57%
|
28.15%
|
22.16%
|
OP
|
1,436.81
|
1,648.10
|
1,989.36
|
1,704.52
|
1,483.96
|
Other inc.
|
110.42
|
170.95
|
196.03
|
162.50
|
81.06
|
PBIDT
|
1,547.23
|
1,819.05
|
2,185.38
|
1,867.02
|
1,565.01
|
Interest
|
21.97
|
20.15
|
58.61
|
45.58
|
39.31
|
PBDT
|
1,525.26
|
1,798.90
|
2,126.77
|
1,821.44
|
1,525.70
|
Dep.
|
99.06
|
118.97
|
166.62
|
119.26
|
241.40
|
PBT
|
1,426.20
|
1,679.93
|
1,960.15
|
1,702.18
|
1,284.30
|
Share of Profit/(Loss) from Associates/JV
|
11.54
|
11.68
|
14.45
|
9.37
|
9.65
|
PBT before EO
|
1,437.74
|
1,691.61
|
1,974.60
|
1,711.55
|
1,293.95
|
Exceptional items
|
-
|
-
|
-
|
-
|
-
|
PBT after EO
|
1,437.74
|
1,691.61
|
1,974.60
|
1,711.55
|
1,293.95
|
Taxation
|
381.59
|
398.58
|
521.64
|
451.31
|
277.98
|
PAT
|
1,056.15
|
1,293.03
|
1,452.96
|
1,260.24
|
1,015.98
|
Minority Interest
|
25.72
|
27.61
|
19.48
|
16.85
|
19.56
|
Net Profit
|
1,030.43
|
1,265.43
|
1,433.48
|
1,243.40
|
996.42
|
EPS (Rs)*
|
25.72
|
31.59
|
35.78
|
#
|
#
|
* EPS is annualized on post issue equity capital of Rs 40.06 crore of
face value of Re 1 each
|
|
|
# EPS is not annualised due to seasonality of business
|
|
|
|
|
EO: Extraordinary items. EPS is calculated after excluding EO and
relevant tax
|
|
|
|
Figures in Rs crore
|
|
|
|
|
|
Source: Capitaline Corporate Database
|
|
|
|
|
|
|