Windlas Biotech IPO: All You Need To Know
The contract manufacturer of pharmaceutical formulations will launch its three-day initial public offering starting Aug. 4.
Windlas Biotech Ltd. will launch its three-day initial public offering starting Aug. 4 as the contract manufacturer of pharmaceutical formulations looks to pare debt and expand capacity in a record year for Indian companies turning public.
The company will sell shares at Rs 448-460 apiece seeking a market value of Rs 1,002.5 crore at its upper end of the price band. The Rs 401.5-crore initial share sale comprises a fresh issue of Rs 165 crore and sale of shares worth Rs 236.5 crore by the promoter group and Tano India Private Equity Fund-II. After the IPO, promoters will own close to 60% in the company while providing an exit to the private equity firm. The IPO accounts for 40.1% of the post-issue equity capital.
Issue Details
Face value: Rs 5 per share.
Bid lot: 30 equity shares.
Listing: BSE and NSE.
Book running lead managers: SBI Capital Markets, DAM Capital, IIFL Securities and Link Intime.
Watch the interview with Windlas Biotech's Managing Director Hitesh Windlass:
Objective
The company plans to use Rs 50 crore from the issue's proceeds to expand capacity of its existing facility at Dehradun (Plant 4) and its injectables dosage capability at Dehradun (Plant 2).
Retiring long-term debt worth Rs 20 crore.
Fund incremental working capital requirements for about Rs 48 crore.
The rest will be used for general corporate purposes.
Business
Windlas Biotech is among India's top five contract development and manufacturing firms in the pharmaceutical formulations space in terms of revenue. It makes solid and liquid pharmaceutical dosage forms providing services like product discovery and development, licensing and commercial manufacturing of generic products, including complex generics.
It also sells its own branded products in the trade generics and OTC markets as well as exports generic products to several countries.
The firm's contract development segment makes pharmaceutical and nutraceutical generic products for Indian and multinational drugmakers who market them under their own brand names.
The company had 204 domestic contract development and manufacturing organisation customers in FY21. It provided CDMO services to seven of the top 10 Indian formulations pharmaceutical companies in 2020, according to a Crisil report.
Windlas' primary export markets include Vietnam, Myanmar, Sri Lanka, Thailand, Philippines, Cambodia, Fiji, Trinidad & Tobago and South Africa. In FY21, the company exported over 56 products and obtained 59 product marketing authorisations across various export markets.
The company had 185 domestic trade generics and over-the-counter brands as of March 31, 2021, which are distributed through a network of over 703 stockists and distributors in 15 Indian states.
It operates four manufacturing facilities at Dehradun in Uttarakhand that develop formulations, and can be deployed for full-scale commercial manufacturing.
Its research and development laboratories are located at its plant 1 in Dehradun.
While plants 1 and 2 at Dehradun can make tablets or capsules, pouches or sachets and liquid bottles, plant 3 can make tablets or capsules and plant 4 has capacity for tablets or capsules and pouches or sachets.
Financials
Other Highlights (FY21)
Revenue from domestic market stood at Rs 4,07.72 crore—or 95.5% of total—while the rest came from overseas markets.
Total expenditure on research and developement at Rs 3.61 crore was 0.93% of total expenses.
Top five customers accounted for 57.9% of total revenue, with the biggest client accounting for nearly 11%.
Peer Comparison
There are no listed companies in India that engage in business similar to that of Windlas Biotech.
However, according to a Crisil report:
Key players in domestic formulations CDMO segment include Akums Drugs and Pharmaceuticals Ltd., Synokem Pharmaceuticals Ltd., Theon Pharmaceuticals Ltd., Innova Captab Ltd. and Tirupati Medicare Ltd.
Abbott Healthcare Ltd., Cipla Ltd. and Alkem Laboratories Ltd. are some of the listed players in the Indian generics market.
Risks
Potential loss of significant number of customers or decrease in business from any key customer.
Manufacturing facilities are provided the right to be audited by CDMO customers and must comply with WHO GMP regulations and Schedule M of the Drugs and Cosmetic Act, 1940. Guidelines may be subject to warning or deficiency letters from U.S. Food and Drug Administration.
A warning letter was issued by U.S. FDA to Dehradun Plant 4 on March 10, 2020, for violations of good manufacturing practices.
Research and development efforts may not succeed and failure to innovate new products to meet customers’ demands and delays may adversely affect business.
Entry into injectables manufacturing, if not successful, can have adverse impact.
Intense competition from organised and unorganised players in the company's business segments.
Intense working capital requirements.
All manufacturing and R&D facilities located in Dehradun—any social, political, economic disruption or natural calamities or civil disruptions can impact operations.
No long-term contracts with third-party suppliers for raw materials.
Dehradun Plant 1 and 3 are on leased premises and at risk of renewal upon termination.
Subject to risk of rejection of supplied products and consequential claims and associated product liability costs due to defects in products.