Macleods Pharmaceuticals Ltd IPO - 7 things to know

Macleods Pharmaceuticals Ltd, a company focussed on anti-infective and cardiovascular generics, had filed its draft red herring prospectus (DRHP) in mid-February 2022 and SEBI is yet to give its observations and approval for the IPO.

Normally, the IPOs are approved by SEBI within a period of 2 to 3 months unless there are other queries or clarifications that the regulator has. In this case, the approval is expected either by the end of April or in May 2022.

The IPO of Macleods Pharmaceuticals Ltd will be totally an offer for sale but the next step will be for the company to finalize on its issue date and issue price which will happen post the approval of the IPO.
 

7 important things to know about the Macleods Pharmaceuticals Ltd IPO

1) Macleods Pharmaceuticals Ltd has filed for an IPO with SEBI and is currently awaiting the SEBI approval to go ahead with the IPO.

The Macleods Pharmaceuticals IPO comprises of purely an offer for sale of 604.80 lakh shares with an issue size that is pegged to be approximately worth Rs.5,000 crore which will also be the total size of the issue.

However, since the price band and the other granular details like the number of shares offered are not yet finalized, we need to await final word from the company on such details. 

2) Let us talk about the offer for sale (OFS) portion of the IPO first. The entire issue would be an offer for sale as the company is not looking for fresh fund raising now.

A total of Rs.5,000 crore worth of shares will be sold by the promoters and the early investors as part of the offer for sale.

The OFS component will not result in any fresh fund infusion or dilution of the capital or the EPS. However, the selling of stake by the promoter will increase the free float of the company and facilitate listing of the stock.

The main sellers in the Rs.5,000 crore OFS include the promoter group comprising of Girdharilal Bawri, Banwarilal Bawri and Dr. Rajendra Agarwal. Since the company is entirely owned by the promoters, there are not private equity investors looking to take an exit.

3) Being a total offer for sale, there is no fresh issue portion in the Rs.5,000 crore IPO. In the absence of fresh issue of shares, there will be no fresh funds coming into the company and hence the question of utilization of proceeds does not arise.
 

The fresh issue component normally leads to reduction of stake of promoters due to a larger capital base. The company is cash rich and is not in need of funds now.

4) Currently, Macleods Pharma is wholly owned by promoter and promoter group. Since its inception more than 33 years ago, the company has managed to grow organically through internal accruals.

That is why even in the IPO, they were not raising fresh funds to bankroll your growth plans without external funding from private equity players. Macleods was set up in 1989 and has since emerged as the seventh-largest company in the Indian pharmaceutical market.

5) Macleods has solid top line and bottom line flows generating enough surplus cash to not require external funding. For FY21 full fiscal year, Macleods Pharma reported revenues of Rs.7,750 crore and a net profit of Rs.2,023 crore.

This translates into net profit margin of a peer group record at 26.1%. Revenue from operations outside India (export revenues) grew at a CAGR of 21.5% between FY19 and FY21. As of the revenues of FY21, the export revenues from abroad account for 48.3% of its total revenues, with domestic markets accounting for the balance. 

6) The company is largely based on specialized generics, which account for a bulk of its domestic sales comprising 51.7% of total operating revenues for FY21. Its domestic sales grew at a CAGR of 15.3% consistently between FY11 and FY21.

Macleods Pharma is well known for its specific drugs pertaining to anti-infectives, cardiovascular, anti-diabetic, dermatology and hormone treatment brand and has strong presence in the Northern and Eastern region of India.

7) The IPO of Macleods Pharmaceuticals Ltd will be lead managed by Kotak Mahindra Capital, Citigroup Global Markets, Edelweiss Financial Services, ICICI Securities and Nomura Financial Advisory. They will act as the book running lead managers or BRLMs to the issue.

KFINTECH Technologies Private Limited will be the registrar to the IPO. The stock will be listed on the NSE and the BSE.
 

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