Windlas Biotech Limited incorporated in 2001 is amongst the top five players in the domestic pharmaceutical formulations contract development and manufacturing organization (“CDMO”) industry in India in terms of revenue. It has three distinct strategic business verticals (“SBVs”): (i) CDMO Services and Products; (ii) Domestic Trade Generics and over-the-counter (“OTC”) Brands; and (iii) Exports.
It further sells its own branded products in the trade generics and OTC markets. Currently, the focus of the company is to launch complex generic products in the chronic therapeutic category related to lifestyle-related disorders. Its manufacturing facilities are located at Dehradun with an installed operating capacity of 7,063.83 million tablets/ capsules, 54.46 million pouch/ sachet, and 61.08 million liquid bottles.
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Promoters & Shareholding:
Ashok Kumar Windlass, Hitesh Windlass, Manoj Kumar Windlass, and AKW WBL Family Pvt Trust are the company promoter with pre issue holding of 78%.
Public Issue Details:
Offer for sale: Fresh issue of approx. 8,962,946 equity shares of Rs. 5 aggregating up to Rs. 165 Cr and OFS of approx. 5,142,067 equity shares aggregating up to Rs. 236.54 Cr.
Total IPO Size: Rs. 401.54 Cr.
Price band: Rs. 448 – Rs. 460.
Objective: To purchase equipment required for capacity expansion of existing facility at Dehradun Plant, repaying of certain borrowings and for working capital requirements.
Bid qty: minimum of 30 shares (1 lot) for Rs. 13,800 and maximum of 14 lots.
Offer period: 4th Aug 2021 – 6th Aug 2021.
Date of listing: 17th Aug 2021.
Pros:
- One of top five players in the domestic pharmaceutical formulations CDMOs in terms of revenue.
- Innovative portfolio of complex generic products supported by robust R&D capabilities.
- Professional and experienced management team.
- Long-term relationships with some key Indian pharmaceutical companies.
- Strong financial performance in the last 3 years.
Cons:
- Its manufacturing facilities are concentrated in a single region hence any disruptions will have adverse effect on their business.
- The pharmaceutical market is subject to extensive regulation and failures to comply with the existing and future regulatory requirements will impact the company’s business.
- The company is subjected to strict technical specifications, quality requirements and regular inspections by its CDMO customers.
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Subscribe or avoid?
Contract Development and Manufacturing Organisation (“CDMO”) has emerged as a viable model for the global pharmaceutical industry. With increasing globalisation and focus of large players on cutting costs and optimizing operations, CDMOs have seen significant acceptance in the industry worldwide over the last few years; global formulations outsourcing market is estimated at approximately US$ 20 billion in 2020 and it is expected to grow at approximately 8.5% CAGR over the next five year which is expected have positive impact on the company and its business.
On the financial side, the company has had strong financial performance for the past 3 year; they have reported revenue of Rs. 430.69 Cr, Rs. 331.34 Cr and Rs. 311.52 Cr in the FY21, FY20 and FY19 respectively and net profit of Rs. 15.57 Cr, Rs. 16.21 Cr and Rs. 63.82 Cr in the FY21, FY20 and FY19 respectively. The average annual revenue growth from the last 3 years has been around 18.17%.
Looking from the valuation perspective, for the last 3 years average EPS of Rs 13.59, the P/E ratio is 34x. On the upper price band of Rs 460 and EPS of Rs 8.7 for FY21, the P/E ratio works out to be 53x. Hence, the pricing seems a bit expensive. However due to the current Bull Run, high demand and considering all the above factors, we recommend “SUBSCRIBE” to this IPO for the possibility of listing gains and good returns from medium to long term perspective.
Disclaimer:
This article should not be construed as an investment advise, please consult your Investment Adviser before making any investment decision.
