Amidst the raging second wave of the COVID-19 pandemic and many fearing a third wave, the healthcare sector is in the limelight for the second consecutive year as several pharma and life sciences companies are lined up to tap the equity markets through IPOs over the next few months, according to investment bankers.
Five such companies which have firmed up their initial public offering (IPO) plans are Glenmark Lifesciences, a fully-owned arm of Glenmark Pharmaceuticals, the city-based bulk drugs firm Supriya Lifesciences, drug formulations firm Windlass Biotech, Bain Capital-backed Emcure Pharma and CX Partners-funded Veeda Clinical Research.
According to investment-bankers, they are planning to mop up over Rs 7,000 crore in primary share sales.
While the IPO street was the busiest in FY'21 with the best-ever performance after the pandemic scare had ebbed, pharma stocks have been one of the best performers throughout the year when Sensex and Nifty scaled new highs.
For instance, Arti Pharma gave over 501 percent in returns in FY21, Granules rallied 201 percent, J&B Chem gained 145 percent, Aurobindo Pharma just doubled the returns, Divi's rose 104 percent, Ipca Labs returned 97 percent and Ajanta Pharma gave 72 percent in FY21, pushing BSE healthcare index to all-time highs.
The huge IPO line-up from healthcare players comes in the back of stellar performance of Gland Pharma stock that debuted in 2020 with the biggest sectoral issue in decades mopping up around Rs 6,500 crore. Since listing, it has gained over 110 percent.
The domestic pharma sector accounts for over 50 per cent of global vaccine supplies, 40 percent of generic drug supplies to the US, and 25 percent of all medicines to Britain.
In FY20, the domestic pharma market stood at Rs 1.4 lakh crore, a growth of close 10 percent from the previous fiscal and is forecast to touch the USD 100-billion mark by 2025.
Glenmark Lifesciences, Windlass Biotech and Supriya Lifesciences have already filed the DRHPs with the Sebi and are likely to hit the market over the next few months.
"Outlook for the API (active pharmaceutical ingredient) is positive as companies are looking to source APIs from India, moving away from China," Vinod Nair, head of research at brokerage Geojit Financial Services, told PTI from Kochi explaining the rationale for the rush to the primary market.
An analyst with a leading brokerage, requesting not to be quoted as his firm is working in a few issues, opined that pharma firms are gaining from the tailwinds to the API market where India used to be the leader but has lost out to China of late and is trying to regain the lost glory now.
The China Plus One strategy under which many Western countries are keen to lower their China dependency, and tax incentives for local manufacturing are also helping the sentiment.
"New product launches, large aging population, spike in chronic diseases due to the lockdowns, and new methods for drug discovery among others are key growth drivers for the pharma industry," he added.
The recent outperformance of the pharma sector, ebullient secondary market conditions and keenness of investors to subscribe worthy IPOs have encouraged many pharma players to tap the IPO route now, Deepak Jasani, head of retail research at HDFC Securities, told PTI.
Another analyst said companies like Glenmark Lifesciences and Windlas are likely to benefit thanks to their proven capabilities in contract development and manufacturing.
Last month, Glenmark Lifesciences, which is into APIs, filed a draft red herring prospectus for a Rs 1,500-crore IPO. The offer will consist of a fresh issue of Rs 1,160 crore and an offer for sale of up to 7.31 million shares by parent Glenmark. Glenmark Lifesciences supplies over 130 APIs to over 700 customers across 65 countries. Its five plants have an annual production capacity of over 450 metric tonnes.
Private equity major Bain Capital-backed Emcure Pharmaceuticals is into generics and is planning a Rs 3,500-Rs 4,000 crore issue, consisting new shares and an OFS by promoter Satish Mehta and Bain Capital.
The CX Partners funded Veeda Clinical Research is planning a Rs 500 crore IPO and JM Financial and SBI Caps are said to be the advisors. It is yet to file the papers with Sebi.
The Mumbai-based bulk drugs firm Supriya has also filed for a Rs 1,200 crore issue. It will use the proceeds for expansion and to trim debt and intends to raise Rs 200 crore through a fresh issue, and a Rs 1,000-crore from an offer for sale by promoter Satish Waman Wagh.
Supriya, according to the DRHP, intends to expand its existing plants at Lote in Maharashtra, and to build new API capacity. It sells 39 APIs focused on diverse therapeutic segments like antihistamine, analgesic, anaesthetic, vitamin, anti-asthmatic and anti-allergic.
Supriya is the largest exporter of chlorpheniramine maleate and ketamine hydrochloride, contributing around 55 per cent and 70 per cent, respectively, of API exports from the country.
Windlas Biotech has filed preliminary IPO papers for offer of fresh issue of Rs 165 crore and an offer for sale later. Windlas is into formulations, and contract development and manufacturing business. It will use the money to add capacity at its Dehradun plant IV and also to add injectables dosage capability at the Dehradun Plant-II.