Mankind Pharma Ltd: Investors can tap it with medium to long-term outlook

Mankind Pharma Ltd is tapping the capital markets with its offer for sale of 4,00,58,544 shares in a price band of Rs1,026-1080. The issue would garner Rs4,326 crore at the top end of the price band. The issue opens on Tuesday (April 25) and closes on Thursday (April 27). It would be completing allocation to anchor investors on Monday (April 24).

Mankind Pharma is India’s fourth largest pharmaceutical company in terms of domestic sales, and third largest in terms of sales volume for the period ended December 2022. The company is engaged in developing, manufacturing and marketing a diverse range of pharmaceutical formulations across various acute and chronic therapeutic areas as well as several consumer healthcare products. The company is focused on selling in the domestic market with 97.60 per cent of its revenue of Rs7,781.55cr being sold domestically in the year ended March 2022.

The company is ranked number one in terms of number of prescriptions over the last five years (2018-22). Besides pharmaceuticals, the company is also into consumer healthcare products and three of their brands are ranked number one in their categories. The company has 19 brand families with sales of over Rs100 crore each annually. In terms of performance, the revenues of the company have grown at 15 per cent CAGR over the last three years, while net profits have grown at 17 per cent CAGR over the same period. It has a healthy 19 per cent PAT margin and has consistently returned a ROCE and RONW of over 25 per cent and 23 per cent respectively.

The company has made inroads into the length and breadth of the country and has believed in penetration from Tier-2 and Tier-3 towns to now Tier-1 and Metros. It has ensured a pan-India market and distribution coverage with focus on affordability and accessibility.

The company has been spending money on brand advertising and also its OTC products like condoms, pregnancy test pills and other such products. This basket of products contributes about nine per cent of the company’s top line and is growing rapidly.

The company operates 25 manufacturing facilities across India and has over 4,100 people involved in the manufacturing process. In terms of field force, it has close to 11,700 people across India. The reach in terms of stockists is over 12,000 and engaged with over 75 C&F agents. In terms of R&D, the company has a team of over 600 scientists and has developed a portfolio of differentiated products across several therapeutic areas.

The company is present across acute and chronic therapeutic areas and has recently acquired the formulations business of the company Panacea Biotec Limited which is strong in oncology. It acquired the formulations business of Panacea Biotech Pharma, a subsidiary of the company. This is the company which was manufacturing Sputnik-V, the Russian vaccine for Covid.

The company reported revenues of Rs7,781.55cr in the year ended March 2022. It reported a profit after tax of Rs 1,434.12cr and the EPS was Rs35.78. In the nine months ended December 2022, revenues have increased to Rs6,696.76cr and the profit after tax was at Rs990.66cr. The PE at the offer price is 28.68-30.18. During the course of the current year 2022-23, the company undertook the creation of a new speciality division for marketing its products. This one-time cost of approximately around Rs150 cr, has impacted the profits proportionately for the year ending March 23.

They would be commercializing a product within the next couple of quarters which would be sold globally and would make them only the second manufacturer of the same globally. Looking at the prospects of the company, its strong focus on domestic sales, affordability and pan-India reach, and strong investments in R&D, make investment in the company warranted. Investors with a medium to long-term outlook would be well rewarded.

(The author is the founder of Kejriwal Research and Investment Services, an advisory firm)