India’s leading generic and specialty pharmaceutical company, Alkem Laboratories is planning to bring its initial public offering (IPO) by December. Shares offered through the IPO will comprise 10.75% of Alkem’s share capital, said BN Singh, Executive Chairman of the pharma major in an interview with Business Today. However, Alkem will not receive any funds from the IPO as it will be totally an offer for sale (OFS) issue.
Alkem’s background: From healthcare marketing to pharmaceuticals
Hailing from a simple background from Bihar, Founder and Chairman Samprada Singh with his brother B N Singh founded Alkem Laboratories in 1973. Alkem started operations as a healthcare marketing company but expanded later into the pharmaceutical business and currently offers services in Active Pharmaceutical Ingredient (API), branded and generic drugs.
At present, Samprada Singh holds 31.75% stakein the company whereas collectively the promoter group owns 70 %. BN Singh is the current Managing Director and holds 31.75% stake.In 2013, Samprada Singh was ranked as the 48th richest man in India by Forbes Magazine.
Considering domestic market share, AlkemLaboratories is the fifth largest pharmaceutical company. It operations are in India, Europe, Africa, South America, and the United States. In 1989, Alkem Labs successfully manufactured and marketed Taxim, a generic version of the antibiotic cefotaxime. Innovators of the product were French company Hoechst Marion Roussel (now Sanofi Aventis) which dominated the market. With Alkem’s competitive pricing, Aventis had to finally halt its production.
At present, Alkem is a zero debt company, with over 736 branded generic drugs in its kitty. 13 of the company’s brands featured among the top 300 pharma brands in Indiaduring FY2015.Annual turnover of its Clavamdrug is around INR2.15 billion. Other major brands include anti-infectives like Taxim and Taxim-O, Pan 40 and Pan D.
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Alkem operates 16 manufacturing facilities out of which 14 are in India while the other two are in the US. Apart from India, Alkem’soperations are spread in 55 countries.
Solid financial performance
With INR39.6 billion turnover and 5,856 sales personnel, the company boasts of cash reserves and investments worth INR4.72 billion in FY2015. Its 5-year compounded annual growth rate (CAGR) at 22% is much higher than the industry average of 14-16%. Alkem generates most of its revenue (around 75%) from domestic sales and registered a net profit of INR4.6 billion in FY2015. This is worth highlighting that Alkem’s consolidated revenues and profits grew in each of the last four years.
With an exception to Syngene International, stock market has not been kind to pharma companies in recent years. Most recently, Pune-based Emcure Pharmaceuticals withdrew its IPO application in June 2014. Prior to this, Intas Pharmaceuticals received an expedited clearance from SEBI for an IPO in September 2013 but did not launch the public offer. Similarly, Calyx Chemicals & Pharmaceuticals’ IPO plans received SEBI approval in January 2013 but the public offering did not materialize.
However, solid and consistent financial performance of Alkem makes it a rare opportunity for small investors. Although pricing of the IPO will be crucial, it is likely to attract strong demand from investors the same way Syngene did.