Mankind Pharma Ltd. was incorporated in 1991 & is engaged in developing, manufacturing, and marketing a diverse range of pharmaceutical formulations across various acute and chronic therapeutic areas & several consumer healthcare products.

The Company is India’s fourth largest pharmaceutical company in terms of Domestic Sales and third largest in terms of sales volume for MAT (Moving annual total) December 2022. The company has one of the largest distribution networks of medical representatives in the Indian pharmaceutical market and over 80% of doctors in India prescribed Company’s formulations for MAT December 2022.

As of 31^st December 2022, Mankind has a pan-India marketing presence, with a field force of 11,691 medical representatives, 3,561 field managers & 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. Also as of 31^st December 2022, it had 25 manufacturing facilities across India and 4,121 manufacturing personnel. The network is really strong and is not easily replaceable.

Services provided by the company:

As mentioned earlier, company develops, manufactures, and markets pharmaceutical formulations across various acute and chronic therapeutic areas and several consumer healthcare products.

In the therapeutic area, the company operates in various fields including anti-infectives, cardiovascular, gastrointestinal, vitamins/minerals/nutrients, respiratory, anti-diabetic, dermatology, gynecology, pain/analgesics & neuro/CNS.

In Consumer healthcare segment, it operates in fields including condoms, Acne Preparations, Emergency Contraceptives, Antacids, Vitamins and Dietary Supplements & Pregnancy Tests.

It has over 36 brands, including Manforce (Rx), Moxikind-CV, Amlokind-AT, Unwanted-Kit, Candiforce, Gudcef, Glimestar-M, Prega News, Dydroboon, Codistar, Nurokind-Gold, Nurokind Plus-RF, Nurokind-LC, Asthakind-DX, Cefakind, Monticope, Telmikind-H, Telmikind, Gudcef-CV and Unwanted-72, among them.

We can see that the company ranks in top 3 in most of its highest selling brands, which indicates market dominance of the company.

Industry Outlook

At approximately 2.1% in FY23, the proportion of GDP allocated to spending on healthcare in India is significantly less than the OECD (Organization for Economic Co-operation and Development) average. India’s healthcare spend is also amongst the lowest when compared to other BRICS (Brazil, Russia, China, and South Africa) economies. This low healthcare expenditure in India is primarily on account of under-penetration of healthcare services and lower consumer spending on healthcare. This healthcare expenditure is expected to increase on account of below factors:

Demographic factors: The population of India is expected to increase, with the average age expected to be approximately 35 years in CY36 as compared to approximately 28 years in CY21. Also, urbanisation in India has been growing consistently. An ageing population in addition to urbanisation will increase demand for healthcare services.

Epidemiologic factors: With rising life expectancy, urbanisation and affluence levels, lifestyle changes associated with sedentary behaviour, stress and poor diet are responsible for a growth in prevalence of Non-Communicable Diseases (“NCDs”).

Policy factors: The Indian government has announced several programs such as Ayushman Bharat, Production-Linked Incentive (PLI) schemes and subsidised medicines to address challenges in different areas of the healthcare sector.

With all the above drivers, India Pharma Market is expected to grow at 10-11% CAGR over FY22- 27.

Objective of the Issue

1. The Company will not receive any proceeds from the Offer & the Offer Proceeds will be received by the Selling Shareholders.

Financials

The Revenue, EBITDA and Net Profit have all grown in absolute terms, with a CAGR of 15.54%, 17.62%, and 17.29% respectively (from FY20 to FY22). However, the EBITDA margin & Net Profit margin has declined (from FY20 to FY23(9m)). Further, both ROE & ROCE are in decreasing trend.

Peer comparison and valuation

*The PE & Price to BV ratios for Mankind Pharma Ltd are calculated on the basis of upper price band of the IPO

As it can be seen in the above table, the RoNW of the Company is higher than the peer average. Whereas Price to BV ratio of the company is slightly higher than the peer average, the PE ratio is lower than peer average, indicating fair valuation.

Risk

1. Company derives a significant portion of its revenue from a limited number of markets. (ie. less diversification on global level). For FY20, FY21 & FY22, the Revenue from operations in India amounted to ₹5788.83Cr, ₹6028.53Cr & ₹7,594.75Cr respectively, representing 98.70%, 97.01%, 97.60% respectively, of our total revenue from operations. Any regulatory change in this market may hurt the company’s revenue generating capability.

2. Company’s success depends on highly on its ability to retain and attract Key Management Personnel, Senior Management and other key personnel, medical representatives and field managers, as well as distributors and retailers.

3. The pharmaceutical and consumer healthcare industries are intensely competitive.

4. Compulsory licensing - Compulsory licensing refers to when a government allows another manufacturing company to produce the patented product or process without the consent of the patent owner. If the authorities in India or in other jurisdictions grant compulsory licensing for any of the pharmaceutical products we sell, this may result in an increase in generic competition and in turn, a significant and rapid reduction in net sales for such products as generic versions are generally offered at sharply lower prices. As a result, the grant of a compulsory license may have an adverse effect on company’s business.

IPO details and subscription

The IPO started on 25th April 2023 and will end on 27th April 2023 with an issue size of Rs. 4,326.36 Cr (entirely Offer for Sale). The lot size will be 13 shares and a retail investor can apply for a maximum of 14 lots. The price band offered by the company is Rs. 1026 -1080 per share. As at the time of writing of this blog the Grey Market Price is Rs. 1145, making the GMP 6.02%.