Emcure Pharmaceuticals Limited IPO: Get Date, Price, Review and Details

Introduction:

This Indian pharmaceutical company is involved in developing, manufacturing, and marketing a wide range of pharmaceutical products across several major therapeutic areas.

As an R&D-driven company, it offers a differentiated product portfolio that includes orals, injectables, and biotherapeutics, enabling it to reach target markets in over 70 countries.

The company has a strong presence in India, Europe, and Canada, and is the 13th largest pharma company in India by domestic sales for FY24. Exports account for 51.72% of total revenues for FY24.

With 5 research centers and 13 manufacturing facilities across India, the company is well-equipped to serve its diverse customer base.

IPO Details:

Objects of Issue:

• Repayment/prepayment of the debt.
• Balance for General Corporate Purposes

Key Strengths:

• Revenue from operations is well diversified between domestic and international sales with 48.3: 51.7 as of FY24.
• With a team of 552 scientists as of 30^th Sep, 2023 and 201 patented products and 33 applications pending for patent approval signifies company’s strong R&D capabilities
• Large, diversified and fast-growing product portfolio in international markets.
• Barriers to entry in this industry are typically high.
• Extensive and diversified manufacturing capacity

Risks:

• Since there are 13 manufacturing facilities any quality control problems would damage the reputation, business and ultimately financials of the company.
• Although the US operations are de-merged, there are ongoing civil proceedings in the United States, including class-action antitrust cases and complaints filed by U.S. state attorneys general. If materialized would lead to significant losses and liabilities.
• The R&D spends are on a declining trend as a % of sales from 5.81% in FY2022 to 4.66% in FY2024.
• It operates in a regulated industry and our products and offerings are subject to changing laws, rules, regulations, and legal uncertainties.

Financial Snapshot:

Conclusion:

With Life expectancy improving and changing demographic profile, it is important to ensure availability of adequate healthcare services.

The listed peers namely Dr. Reddy’s, Cipla, and Alkem Laboratories are trading at 19x, 28x, and 31x earnings valuations and Emcure is expected to bring its IPO at 36 times valuations and the RoCE stands at 27%, 23% and 20% respectively while Emcure is at 19%. This comparison suggests that Emcure’s IPO might be slightly overvalued.

Additionally, the financials reveal some concerns, as there has been a trend of declining margins. The proceeds from this issue are expected to help the company reduce its debt, potentially improving both the bottom line and margins. However, topline growth remains a key concern.

Considering the company’s growth potential, financials, and valuations we would suggest our investors to subscribe to this IPO for listing gains.