Emcure IPO to Hit Market in 1st Week of Feb 2022

Emcure Pharma has got the SEBI approval for its proposed IPO. In SEBI parlance, it has given its observations on the draft red herring prospectus (DRHP) filed by the company, which is equivalent to SEBI approval. Now the company can go ahead and plan the IPO. As per market reports, Emcure Pharma is expected to hit the IPO market sometime in the first half of February 2022, and will be one of the largest IPOs in recent times since Gland Pharma.

Emcure Pharmaceuticals IPO consists of Rs.5,000 crore & will comprise of a fresh issue of shares to the tune of Rs.1,100 crore with the balance Rs.3,900 crore being accounted for by the offer for sale (OFS). The promoter family of Satish Mehta and Sunil Mehta jointly holds 48.05% in the company and they will be monetizing part of their stake in the IPO. Other promoters who own 33.5% collectively will also partially monetize their stake in the IPO.

With Rs.3,900 crore as the size of the OFS component, there is going to be substantial dilution of stake by the promoters who currently own more than 80% in the company. Global Private Equity giant, Bain Capital, owns 13.09% in Emcure Pharma and they will look at partial exit in the OFS. The exact mix of the OFS is expected to be announced shortly.

The fresh issue component of Rs.1,100 crore will be predominantly used to reduce debt of the company. Emcure Pharma currently has total debt of Rs.1,253 crore and out of the new issue component, Rs.947 crore will be utilized to repay chunk of this debt. This is likely to help the company substantially deleverage its balance sheet. Currently, the trend is towards a lighter balance sheet, which is normally favourable for valuations.

Emcure Pharma, based out of Pune, is a market leader in several products in India including HIV Antivirals, Gynaecology and blood related therapeutic products. In the HIV Antivirals, Emcure Pharma has an imposing market share of 51.53% in the domestic market. Its market share in the other products is about 11%, although it has leadership in a highly fragmented Indian pharma market.

Emcure has a strong presence in Europe and Canada and currently services more than 70 countries across the world, apart from a very strong India franchise. For FY21, Emcure ha reported revenues of Rs.6,092 crore, while the net profits stood at Rs.419 crore. The profits and sales have growth steadily on a YoY basis.

Seven out of the brands of Emcure feature in the top-300 brands in India. The company also runs 5 R&D facilities in India and it currently has 161 patents and 98 patent applications pending in various countries. The issue will be lead managed by Axis, BOFA Securities and JM Financials.

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