The Indian IPO market is abuzz with activity once again, and investors are eyeing the upcoming Concord Biotech IPO, which aims to raise INR 1,551 crore. In Concord Biotech IPO Review, we try to understand its business model and see if investors should invest or not in the upcoming IPO.
Concord Biotech IPO Review – Business Background and Market Outlook
Concord Biotech is a prominent global player in the development and manufacturing of fermentation-based APIs (Active Pharmaceutical Ingredients) across immunosuppressants and oncology. The company supplies its products to over 200 customers in more than 70 countries, including regulated markets like the United States, Europe, Japan, and India.
As of March 2023, Concord Biotech boasts six fermentation-based immunosuppressant APIs in its portfolio, serving a wide range of markets. The global small-molecule fermentation-based API market, valued at USD 11 billion in 2022, is projected to reach USD 14 billion in 2026, indicating a Compounded Annual Growth Rate (CAGR) of 3.6%.
The Indian healthcare market is also witnessing significant growth, with a projected CAGR of 8% to 10% from 2023 to 2026. India holds a crucial position as a supplier of generic drugs, catering to nearly 40% of the total U.S. generic drug demand and about 25% of the United Kingdom’s drug demand. The country also leads in global vaccine production, fulfilling 60% of the global demand and 70% of the WHO’s demand.
India’s API Market and Concord Biotech’s Competitive Standing
India’s API market is on a steady growth trajectory, with both domestic consumption and exports contributing to its expansion. The Indian API market was valued at USD 17 billion in 2022, with API exports accounting for USD 5 billion and APIs required for formulation manufacturing amounting to USD 12 billion in the same year. The domestic API market is expected to grow at a CAGR of 11.1% between 2022 and 2026, aligned with the overall growth of pharmaceutical drug consumption in India.
Concord Biotech IPO Review – Offer Details
The Concord Biotech IPO is scheduled for 4th to 8th August 2023, with a price range of INR 705 to 741 per share. The IPO consists of an Offer For Sale (OFS) of 20,925,652 shares, valuing the offering between INR 1,475.26 to 1,550.59 crore. It is worth highlighting that the company will not get any funds from IPO proceeds as it is totally an OFS. The minimum bid size is 20 shares, priced at INR 14,820, and retail investors are allotted 35% of the shares. The IPO will be listed on both BSE and NSE.
Concord Biotech IPO Analysis – Manufacturing Facilities and R&D
Concord Biotech operates three manufacturing facilities in Gujarat, India, including two API manufacturing facilities and one formulation manufacturing facility. The company’s R&D capabilities have been crucial in advancing products from research to commercialization. It has developed and commercialized 23 fermentation-based APIs with the support of its 148-member R&D team. Additionally, Concord Biotech offers contract research and manufacturing services to third-party pharmaceutical companies.
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Concord Biotech IPO Analysis – Product Portfolio and Financial Performance
As of June 2023, Concord Biotech’s product portfolio comprises 57 brands and 77 products, including 23 APIs and 53 formulations. Revenue from new product launches in the FY 2021, 2022, and 2023 accounted for 0.37%, 0.25%, and 0.42% of the total revenue, respectively.
In terms of financial performance, the company’s total revenue from operations showed a robust CAGR of 17.60% from FY 2021 to 2023. The EBITDA margin, a measure of profitability, declined from 53.02% in FY 2021 to 40.47% in FY 2023. However, the cash conversion ratio remained strong, indicating efficient management of cash flow. Return on equity (ROE) also showed a favorable trend, standing at 26.55% in FY 2021 and improving to 20.06% in FY 2023.
| FY 2021 | FY 2022 | FY 2023 | |
| Revenue | 616.94 | 712.93 | 853.17 |
| Expenses | 317.58 | 495.19 | 568.42 |
| Net income | 234.89 | 174.93 | 240.08 |
| Margin (%) | 38.07 | 24.54 | 28.14 |
Concord Biotech IPO Review – Customer Base and Peer Comparison
As mentioned above, Concord Biotech serves more than 200 customers across the globe, including key players in the pharmaceutical industry such as Intas Pharmaceuticals Limited and Glenmark Pharmaceuticals Limited. The revenue from the top 10 customers accounted for approximately 44% of its total revenue in FY 2023.
In comparison to its peers, Concord Biotech’s financials demonstrate strong growth potential, with a positive and growing EPS and a reasonable PE ratio, indicating attractive valuation. It also shows a relatively healthy Return on Capital Employed (ROCE) and Return on Equity (ROE), demonstrating effective utilization of capital and shareholder funds.
| FY 2021 | FY 2022 | FY 2023 | |
| EPS | 22.45 | 16.72 | 22.95 |
| PE ratio | – | – | 30.72 – 32.29 |
| RONW (%) | 26.55 | 16.64 | 20.06 |
| NAV | 95.53 | 105.45 | 123.31 |
| ROCE (%) | 28.54 | 20.55 | 24.27 |
| EBITDA (%) | 53.02 | 37.82 | 40.47 |
| Debt/Equity | 0.09 | 0.05 | 0.02 |
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Concord Biotech IPO Review – Should You Invest?
Considering the positive market outlook for the global small-molecule fermentation-based API market and India’s API market, Concord Biotech is well-positioned to benefit from the industry’s growth. The company’s diverse product portfolio, strong customer base, and strategic expansion into emerging markets add to its competitive advantage.
Based on the provided information and considering the company’s financial performance and competitive standing, it is recommended that investors consider investing in the Concord Biotech IPO. However, as with any investment decision, it is essential for investors to conduct their due diligence and carefully evaluate their risk tolerance before making any investment choices.
All in all, Concord Biotech IPO review indicates that the company has a strong business model in place and the offer is attractively priced, considering the positives and negatives. According to grey market, the IPO is commanding a premium of INR 170 per share (nearly 23%) which is another comforting factor, although it shouldn’t be used in isolation.
