Fosun-controlled Gland Pharma’s IPO gets off to slow start

By Ankit Doshi

  • 09 Nov 2020
Credit: VCCircle

The initial public offering of drugmaker Gland Pharma Ltd got off to a slow start on the first day on Monday, with only retail investors applying to invest in the firm.

The public offering of nearly 30.24 million shares, excluding the anchor portion, received bids for about 1.27 million shares. The book was subscribed 4.1% at the end of day one, stock exchange data showed.

Retail investors bid for nearly 8% of their quota, while the portion set aside for non-institutional investors -- corporate houses and high-net-worth individuals (HNIs) -- was covered 1%.

Institutional investors did not bid for a single share, data showed.

The IPO will close on Wednesday.

Ahead of the IPO, the company raised Rs 1,943.86 crore ($262.68 million) from anchor investors led by Singapore sovereign wealth fund GIC.

Hyderabad-based Gland Pharma, which is majority owned by China’s Shanghai Fosun Pharmaceutical Group and is the first Indian company controlled by a Chinese firm to float an IPO, is seeking Rs 24,492 crore ($3.3 billion) in equity valuation through the share sale.

The total size of the IPO is about Rs 6,480 crore. This includes a fresh share sale worth Rs 1,250 crore. 

In addition, promoter entity Fosun Singapore, along with Gland Celsus and other shareholders, will sell 34.86 million shares worth Rs 5,229 crore at the upper end of the price band.

The IPO will result in 26.45% stake dilution after accounting for the fresh issue of shares. Fosun’s stake will dilute to about 58.4% after the IPO from 74% currently, VCCircle estimates show.

The company, which makes liquid parenterals and injectable drugs, will use Rs 769.5 crore out of the fresh net proceeds to fund its incremental working capital requirements and Rs 168 crore for capital expenditure. The proceeds from the secondary sale will go to the selling shareholders.

Fosun Singapore will fetch Rs 2,905 crore from the share sale, thereby recovering 40% of its investment cost a little over three years ago. In September 2017, Fosun agreed to acquire a 74% stake in Gland Pharma for $1.09 billion (Rs 6,980 crore). The deal had previously run into regulatory hurdles after border tensions between India and China.

Gland Pharma was incorporated in March 1978. It mainly made liquid parenterals before expanding into other areas of the injectable value chain, including contract development, technology transfer and manufacturing across a range of drug delivery systems.

It primarily sells its products under business-to-business models with clients based in 60 countries as of March 2020.

The company has seven manufacturing facilities in India, comprising four finished formulation facilities with a total of 22 production lines and three bulk-drug facilities as of March 2020. Its facilities have the capacity to manufacture approximately 755 million units per annum of finished formulations.

Kotak Mahindra Capital Co., Citigroup Global Markets (India), Haitong Securities India and Nomura Financial Advisory and Securities (India) are merchant bankers managing the share sale.

To discuss the business opportunity and the challenges in the healthcare sector, VCCircle is organising the Healthcare Investment Summit 2020—a virtual event—on December 11. Check out the details and register click here https://healthcare.vccevents.com/