What you must know about the Mankind Pharma IPO

Mankind Pharma Ltd is a 33 year old pharmaceutical company incorporated in the year 1991. The company develops and manufactures a complete of range of pharmaceutical formulations to treat acute and chronic therapeutic areas. In addition, it is also extremely popular in India for its consumer healthcare products, especially those sold under the Manforce brand and the Prega News brand. Its formulations brand include anti-infectives, cardiovascular, gastrointestinal, anti-diabetic and respiratory issues; among others.

Mankind Pharma is predominantly an India driven business with 97% of its revenues coming from the domestic market. The company has annual revenues in excess of Rs. 7,700 crore and employs more than 22,000 workers on its rolls. Mankind Pharma has over 600 scientists manning its R&D centre, and has already applied 54 ANDAs. The company also has one of the largest distribution networks of medical representatives in the Indian pharmaceutical market. It has been the recipient of several awards in the last few years.

Highlights of the IPO issue of Mankind Pharma Ltd

The size of the issue is not yet known, as that would be contingent on the price band that is decided upon. However, what is known is that the IPO is entirely an offer for sale. According to the Draft Red Herring Prospectus (DRHP) filed with SEBI, the IPO will entail the issue of 4,00,58, 844 shares (400.59 lakh shares) entirely by way of an offer for sale (OFS) by the existing shareholders of the company. The IPO would be through the book built route and the stock will be listed on the BSE and the NSE. The company has put together a formidable team of BRLMs (book running lead managers) to manage the IPO. The issue will be managed by Kotak Mahindra Capital Company, Axis Capital, IIFL Securities, Jefferies India, and JP Morgan India. KFIN Technologies will be the registrar to the issue.

The selling shareholders in the OFS would be the promoter group as well as some of the early private equity and other institutional investors. Here is a list of shareholders taking partial exit from the company via the OFS.

As per the terms of the offer, 50% of the net offer is reserved for the qualified institutional buyers (QIBs), while 35% of the total issue size is reserved for the retail investors. The residual 15% is kept aside for the HNI / NII investors . The company has a par value of Rs1 per share and post the IPO, the stock of Mankind Pharma Ltd will be listed on the NSE and on the BSE. Being an offer for sale (OFS) of equity, the IPO will not result in any dilution of equity or EPS, as it just entails a transfer of shares from promoters and early investors to the public. However, promoter stake would come down post the dilution.

Key dates for Mankind Pharmaceuticals Ltd IPO and how to apply?

The issue opens for subscription on 21st April 2023 and closes for subscription on 25th April 2023 (both days inclusive). The basis of allotment will be finalized on 28th April 2023 and the refunds will be initiated on 02nd May 2023. In addition, the demat credits are expected to happen on 03rd May 2023 and the stock will list on 04th May 2023 on the NSE and the BSE. Mankind Pharma will be the second mainboard IPO of FY24 after Avalon Technologies and would be crucial to big ticket IPO appetite measurement. It will also be setting the tone for the IPO story in FY24. It is hoped that for the IPO market, the FY24 is able to recreate the IPO magic of FY22. Let us now turn to the more practical issue of how to apply for the IPO of Mankind Pharma Ltd.

Investors can apply either through their existing trading account or the ASBA application can be directly logged through the internet banking account. This can only be done through the authorized list of self-certified syndicate banks (SCSB). In an ASBA application, the requisite amount is only blocked at the time of application and the necessary amount is debited only on allotment. Investors can apply in the retail quota (up to Rs2 lakh per application) or in the HNI / NII quota (above Rs2 lakh). Minimum lot sizes will be known after pricing.

Financial highlights of Mankind Pharma Ltd

The table below captures the key financials of Mankind Pharma Ltd for the last 3 completed financial years.

Data Source: Company RHP filed with SEBI

There are few key takeaways from the financials of Mankind Pharma Ltd which can be enumerated as under

1. The company is in a very niche segment with strong visibility in the API, formulations, and the consumer health segment. Its Manforce and Prega News brands are extremely popular in India and that is likely to act as a moat. That is evident in the healthy ratio of net margins and the return on assets.
    

2. The robust profit margins for the company comes from its near dominance of the niche segments in the domestic market place. The gradual fall in the asset turnover can be attributed to the higher capital investment in the last couple of years.

While pricing of the IPO will matter here, what is more critical is the eventual PAT margins that will sustain. The India focus of Mankind has helped it maintain robust net margins and that is likely to be value accretive for the company. Eventually, a lot will depend on the pricing and how much is left on the table for the investors. It could be a safe bet, but pricing would hold the key.