Mankind Pharma IPO opens today: Here's what 12 brokerages recommend

The Rs 4,326 crore initial public offering (IPO) of Mankind Pharma kicks off for subscription on Tuesday, April 25, 2023. The issue, which can be subscribed till Thursday, April 27, 2023, can be bid in the range of Rs 1,026-1,080 per share. The company has fixed its lot size at 13 equity shares.

The issue of Mankind Pharma is entirely an offer for sale (OFS) of up to 4,00,58,844 equity shares with a face value of Re 1 each, by its existing shareholders and promoters. Promoters Ramesh Juneja, Rajeev Juneja and Sheetal Arora along with shareholders including Cairnhill CIPEF, Cairnhill CGPE, Beige and Link Investment Trust will participate in the OFS.

A day before its IPO, Mankind Pharma raised Rs 1297.90 crore by allotting 1,20,17,652 equity shares at a price of Rs 1.080 per share to 77 anchor investors, including 16 domestic mutual funds through a total of 41 schemes, a circular on BSE told.

Being entirely an OFS, the net proceeds from the issue will go to the selling shareholders and the company will not receive any proceeds from the issue. 50 per cent of equity shares are reserved for qualified institutional bidders (QIBs), while 15 per cent shares will go to non-institutional investors (NIIs) bidders. Retail investors will get remaining 35 per cent equity shares.

Incorporated in 1991, Mankind Pharma develops, manufactures, and markets pharmaceutical formulations across various acute and chronic therapeutic areas and several consumer healthcare products. It has over 36 brands across the segments Including anti-infectives, cardiovascular, gastrointestinal, anti-diabetic, well-being and respiratory.

It owns some of the popular brands like 'Manforce' condoms, pregnancy test kit Prega News, emergency contraceptive brand Unwanted-72 and antacid powders (Gas-O-Fast) among others.

Mankind Pharma has reported a profit after tax (PAT) at Rs 1,452.96 crore with revenue at Rs 7,977.58 crore for the fiscal year that ended on March 31, 2022. Its PAT stood at Rs 1,015.98 crore, with revenue at Rs 6,777.82 crore during the period that ended on December 31, 2022.

Kotak Mahindra Capital Company, Axis Capital, IIFL Securities, Jefferies India and JP Morgan India are the book-running lead managers to the issue, while KFin Technologies has been appointed as the registrar to the issue. Shares of the company will be listed as both BSE and NSE.

A majority of the brokerage firms are positive on the issue and suggest investors subscribe to the issue on a long-term basis, citing the dominant market position, strong financials, defensive sector and robust growth outlook. However, some analysts have raised red flags over rich valuations and the complete OFS nature of the issue, capping room for any stellar upside.

Here is what a dozen of brokerage firms suggest about the initial public offering of Mankind Pharma:

Aditya Birla Capital
Rating: Subscribe
At the upper price band, the issue is available at PE of 33 times its expected FY23 EPS. As of FY22, the D/E stands at 0.09 times while its net working capital cycle was at 49 days, said Aditya Birla Capital in its IPO note.

We believe that Mankind's market leadership and brand recognition coupled with management’s bet on the recent acquisition of Panacea biotech’s formulations may provide a huge growth opportunity for the company. We have a 'subscribe' recommendation to this issue, said AB Capital.

Ashika Stock Broking
Rating: Positive
"We believe that most of the negative impact on margins and sales has already been experienced, and we anticipate a significant improvement in key financial metrics in FY24. The suppression in margins was due to an increase in input prices, hiring costs and one-off costs due to Panacea’s products acquisition, which is mostly behind us," said Ashika Stock Broking.

Post-IPO, the promoter will continue to hold 78 per cent of the company, with 12 per cent held by existing PE investors. This strong promoter holding makes the stock well positioned from a floating perspective, it said. "Overall, we believe that the Mankind Pharma IPO presents a compelling investment opportunity with a favorable risk-reward outlook," it added.

Asit C Mehta Investment Intermediates
Rating: Subscribe for Long Term
Mankind benefits from the industry experience and business acumen of their individual promoters and is driven by the 3 core values of quality, affordability and accessibility.  The company strives to maintain corporate governance standards, said the IPO note from Asit C Mehta Investment Intermediates.

"The company is focused on sustainability in their operations as well as on the health and safety of their workforce and have undertaken initiatives relating to optimizing energy usage and minimizing dependence on conventional sources of energy to reduce carbon footprint," it said with a recommendation of subscribing to the issue from a long-term perspective.

Canara Bank Securities
Rating: Subscribed for long term
Mankind Pharma is India’s fourth largest pharmaceutical company in terms of domestic sales and third largest in terms of sales volume for MAT (Moving Annual Total) December 2022 engaged in a diverse range of pharmaceutical formulations across acute and chronic therapeutic areas. The company has 98 per cent of its revenues coming from India, said Canara Bank Securities.

"The company is gradually increasing its R&D expenditure. The company also has strong market share in the brands of consumer healthcare segment and is looking to further expand the segment.  The company is net debt free with working capital of 45-50 days. The company seems fairly valued in comparison to its peers. We recommend 'subscribe' for the long term," it said.

BP Equities/Stoxbox
Rating: Avoid
The issue is valued at a P/E of 30.2x based on FY2022 earnings which we feel is richly valued, as it is higher than the industry's major players such as Sun Pharma, Cipla and Dr Reddy’s. We, therefore, recommend an 'avoid' rating for the issue, said BP Equities, which is now known as Stoxbox.

They are the category leaders in the male condom category, the pregnancy detection kit category, and the emergency contraceptives category. Further, the company has a track record of sustained growth in revenues and profitability. The company grew its revenue at a CAGR of 14.2 per cent during the FY20-22 period, read the brokerage firm's IPO note.

Centrum Wealth Management
Rating: Subscribe
About 36 brands in the Pharma business, which have sales over Rs 50 crore, with strong brand positioning. In the consumer segment, it has leading brands including Manforce,  Prega  News,  Unwanted‐72,  which are having a significant market share in their respective categories, said Centrum Wealth Management in its note.

"The limited 3 years financials has been impressive, in terms of sales growth, margin and return  ratios given the typical advantages of branded formulations business such as limited working capital, low R&D investments (around 2.5 per cent of sales), we recommend subscribe to Mankind," Centrum said.

Choice Broking
Rating: Subscribe
Till FY22, Mankind has grown organically and evolved as the third-largest pharmaceutical company. Its domestic-focused operations bring stability in the performance, compared to players having exposure to the developed markets. The company is positioned as the manufacturer of quality medicines at affordable prices, said Choice Broking.

"Going forward, it intends to remain an affordable medicine manufacturer, while expanding its chronic product portfolio. Over the period following a bottom-up approach, Mankind has established a vast marketing & distribution reach in the high-growth markets. We assign a 'subscribe' rating for the issue," it added.

Geojit Financial Services
Rating: Subscribe for long term
Considering under-penetration of healthcare services and lower consumer expenditure in healthcare in India, Mankind's focus on chronic therapeutic areas, emphasis on increasing penetration in metro and Class-I cities, growth in consumer healthcare business, good financial performance and strong distribution network, we assign a 'subscribe' rating for a long term, said Geojit.

ICICIDirect Research
Rating: Subscribe
Mankind Pharma benefits from its strong foothold in domestic branded formulations with an emphasis on affordable product offerings, said ICICIDirect. It highlighted competition from well-established players in newer therapies, concentration towards top revenue-generating brands, volatility in API prices and dependence on key personnel as the key risk for the company.

At the upper price band, it is valued at 32.5x P/E on annualized FY23E EPS of Rs 33.2. ICICIDirect has assigned a 'subscribe' rating on the back of opportunities from its newer acquired products and its plan to backward integrate in its power brands, Structural preference for domestic branded formulations among broader healthcare themes.

Marwadi Shares and Finance
Rating: Subscribe
Considering the FY23 Annualized EPS of Rs 33.16 on a post-issue basis, the company is going to list at a P/E of 32.57 times with a market cap of Rs 43,263.6 crore whereas its peers namely Sun Pharmaceuticals, Cipla, Alkem Lab and Torrent Pharmaceutical are trading at a P/E of 29.43 times, 27.45 times, 39.24 times and 43.65 times, respectively, said Marwadi Shares and Finance.

"We assign a 'subscribe' rating to this IPO as the company has a diversified portfolio with market-leading rankings across key therapeutic areas and wide market and distribution coverage with a focus on affordability and accessibility. Also, it is available at a reasonable valuation as compared to its peers," it added.

SBI Capital Securities
Rating: Subscribe for long term
The IPO looks fairly valued across various valuation parameters when compared with its close peers. The investors can 'subscribe' to the IPO for a long-term investment perspective, SBI Capital Securities said. Mankind Pharma is the second company to launch Dydrogesterone in India.

Swastika Investmart
Rating: Subscribe for long term
Mankind Pharma is a well-known and established pharmaceutical company that offers pharmaceuticals as well as several consumer healthcare products. The company has pan-India distribution with a focus on affordability, accessibility, and strong brand recall.

In the past three years, the company has demonstrated robust growth in its financial performance. However, the pharmaceutical industry is fiercely competitive, and secondly, regulatory risk and stricter norms pose a potential challenge, suggesting only high-risk investors should consider a long-term investment in the issue.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Business Today)