Incorporated in 1981, Emcure is an Indian
pharmaceutical company developing, manufacturing, and marketing worldwide a diverse
range of pharmaceutical products across several therapeutic areas.
Emcure has established presence in major
therapeutic areas including gynecology, cardiovascular, vitamins, minerals and
nutrients, HIV antivirals, blood-related and oncology and anti-neoplastics.
Gynecology contributed 24.09%, cardiovascular 15.7%, anti-infectives 10.97%, vitamins,
minerals and nutrients 8.97%, HIV antivirals 6.85%, respiratory 6.35%, gastrointestinal
6.35%, pain and analgesics 5.48%, blood-related 3.84%, oncology and anti-neoplastics
4.46%, anti-diabetic 2.58%, hormones 1.77%, neurology/CNS 1.27%, and others
1.5% to domestic sales in FY 2024.
Two types of products are offered: formulations
and APIs. A substantial portion of its revenue was attributable to sales of
formulations in FY 2024, FY 2023, and FY 2022. The differentiated product
portfolio includes orals, injectables and biotherapeutics, enabling reaching a
range of target markets across over 70 countries.
Emcure intends to expand its robust international
presence by either developing its own front-end distribution capabilities or
focusing on alliances with local and multinational companies. India sales
contributed 48.28% and sales outside India 51.72% to total sales in FY 2024. Europe
represented 21.38% and North America 13.94%.
Sales of iron, chiral, biotherapeutics,
injectables and photo-chemistry products, most of which are developed and
manufactured in-house, contributed 52.97% to revenue from India and 29.70% to
revenue outside India in FY2024.
Emcure had a team of 548 qualified scientists and
five dedicated R&D facilities in India end March 2024. The company had filed
over 1,800 dossiers globally including 209 in the European Union and 142 in
Canada. As many as 220 patents have been granted and 30 were pending approval
in several countries. It had submitted 102 drug master files (DMFs) for active
pharmaceutical ingredients (APIs) with the US Food and Drug Administration
(FDA) by end March 2024.
There are 13 manufacturing facilities across
India. Its facilities produce pharmaceutical and biopharmaceutical products
across a wide range of dosage forms, including oral solids, oral liquids,
injectables, including liposomal and lyophilized injectables, biotherapeutics
and complex APIs, including chiral molecules, iron molecules and cytotoxic
products. Further, there are in-house manufacturing capabilities for most of
its specialty products, including complex injectables, iron products,
photo-chemistry products, chiral molecules and biotherapeutics.
Emcure had a marketing and distribution network
in India, supported by a field force of over 5,000 personnel interacting
regularly with doctors and other healthcare providers to promote pharmaceutical
products end March 2024. Moreover, the company has entered agreements with
Sanofi India and Sanofi Healthcare India to exclusively distribute and promote
their products, which include brands such as Cardace, Clexane, Targocid, Lasix,
Lasilactone, Cordarone, Plavix and Synvisc, in India.
Emcure was ranked 13th in domestic sales among
pharmaceutical companies in India and fourth in market share in its covered
markets for Mat FY2024. Additionally, it was the largest pharmaceutical company
in the gynecology and human immunodeficiency virus (HIV) antivirals therapeutic
areas in India in terms of domestic sales for Mat FY2024.
Across the gynecology, vitamins, minerals and
nutrients, HIV antivirals, blood-related and oncology and antineoplastics
therapeutic areas, Emcure is ranked among the 10 largest pharmaceutical
companies in India in terms of domestic sales for MAT FY2024.
Emcure is focused on pharmaceutical products used
in chronic (including sub-chronic) therapeutic areas. Moreover, its efforts are
maximized towards complex molecules, including highly complex APIs requiring
multi-step transformation, differentiated pharmaceutical formulations, in
multiple dosage forms, and novel drug delivery systems capable of greater
efficacy and better patient compliance.
Emcure intends to increase its domestic market
share and expand its international presence. The company has a market presence
of 52.66% of the Indian pharmaceutical market (IPM) in terms of domestic sales
for Mat FY2024.
Emcure incurred total capital expenditure of Rs
1148.73 crore in the past three financial years.
Offer and its objects
The IPO comprises fresh issue of equity shares
worth up to Rs 800 crore and an offer for sale (OFS) of 1,14,28,839 equity
shares, aggregating up to Rs 1152.03 crore by the existing shareholders.
The price band for the
IPO is Rs 960 to Rs 1008 per equity share of face value Rs 10 each.
The objectives of the
fresh issue include Rs 600 crore for repayment and prepayment of certain
outstanding borrowings. The remaining amount is to be used for general
corporate purposes.
The promoters are Satish
Ramanlal Mehta, Sunil Rajanikant Mehta, Namita Vikas Thapar, and Samit Satish
Mehta. The promoters and promoter group hold an aggregate of 15,07,30,468 equity
shares, aggregating 83% of the pre-offer issued and paid-up equity share
capital. The post-IPO shareholding is expected to be around 78%.
The issue, through the book-building process,
will open on 3 July 2024 and will close on 5 July 2024.
Strengths
A track record of surpassing IPM market growth.
Between Mat FY2020 and MAT FY2024, domestic sales registered a CAGR of 9.73%,
outperforming the IPM’s CAGR of 8.19%. Similarly, its exports recorded a CAGR
of 19.51%, outperforming the overall IPM, with a CAGR of 12.21%.
Stands to gain from the increased emphasis on
chronic (including sub-chronic) therapeutic fields. Chronic therapeutic areas
within the IPM are projected to experience greater growth compared to acute
therapeutic areas over the next five FYs. The chronic therapeutic areas
contributed 46.22% to total domestic sales for Mat FY2024.
Strong capabilities and a successful record of
building brands. Six brands were ranked among the 300 highest selling brands in
the IPM for Mat FY 2024. Moreover, there were 26 brands, with domestic sales of
over Rs 50 crore for Mat FY2024.
A wide array of products and global reach create
a business model minimizing risk and enhancing resilience by diversifying
revenue streams.
The capacity to produce own APIs and formulations
has facilitated a substantial vertical integration, enabling of cost-effective
sourcing of products, and ensuring the quality and security of essential raw
materials.
Ranked 1st, with a market share of
over 50% for several molecules across therapeutic areas. The leading position
allows launch of related products and penetration of adjacent therapeutic
areas. For example, the brand strength of Orofer-XT and leadership positions in
the treatment of anemia with gynecologists was leveraged to launch related
products such as Dydrofem.
Produces specialized pharmaceutical products to target
high-growth therapeutic areas characterized by limited competition and
significant barriers to entry.
A reliable record of successfully entering and
growing presence in new markets through inorganic expansion. For instance, in
the past, made strategic acquisitions of Marcan Pharmaceuticals in Canada in 2015
and Tillomed Laboratories in the United Kingdom in 2014. This allowed leveraging
the R&D and manufacturing capabilities in India and, at the same time,
quickly and cost-efficiently establish distribution channels for its products
in Canada and Europe, respectively.
Led by strong promoters alongside a qualified and
experienced management team. Satish Ramanlal Mehta, the Promoter, Managing
Director and Chief Executive Officer, has been associated since incorporation
and has significant experience in the pharmaceutical industry.
Weaknesses
Operates in a highly regulated industry. Any
failure to obtain, maintain or renew statutory and regulatory licenses permits
and approvals could adversely affect business.
The operating profit margin shows a continuous decline,
decreasing from 22.71% in FY2022 to 18.47% in FY2024.
A significant portion of revenue comes from
exports. Fluctuations in exchange rates, geopolitical tensions, or non-compliance
with export regulations could affect financials. Sales outside India
contributed 51.72% to revenue in FY2024.
There are outstanding legal proceedings
(including criminal) involving the company, its directors, promoters, and subsidiaries.
Any adverse outcome may subject it to significant losses and liabilities.
Currently entitled to certain grants, tax
incentives and export promotion schemes. Any decrease or discontinuation of
policies relating to grants, tax, duties or other such levies applicable may
affect results.
Along with two subsidiaries Zuventus and Gennova,
have been subjected to search and seizure operations conducted by the Income
Tax Department. Any such actions by authorities could have an adverse impact on
reputation and business.
Developing new drugs involves significant investment in research
and clinical trials, with no guarantee of success.
Depends on third-party suppliers of raw materials as well as
for the manufacturing of certain finished products. Raw material shortages,
manufacturing delays, or distribution challenges can disrupt product
availability. As much as 26.3% of the raw materials and finished goods were
imported in FY2024.
Valuation
Consolidated sales were up by 11.23% to Rs
6658.25 crore in FY 2024 as compared to FY2023. The OPM decreased 123 bps to
18.47%, leading to a 4.11% increase in OP to Rs 1229.72 crore. OI rose 24.15%
to Rs 56.99 crore. Interest cost increased 11.02% to Rs 237.15 crore. Depreciation
was up 20.1% to Rs 312.41 crore. PBT before EO fell 2.15% to Rs 737.16 crore.
Tax expenses were Rs 199.65 crore as compared to tax expense of Rs 185.37 crore
in FY2023. Minority interest was Rs 29.39 crore as compared to 29.83 crore. Net
profit fell 6.36% to Rs 498.18 crore.
The FY2024 EPS excluding extraordinary items and
relevant tax on post-issue equity works out to Rs 26.73. At the upper price
band of Rs 1008, the P/E works out to 38.
Emcure will be repaying 29%
of its debt from the issue proceeds. This will bring down its interest costs
substantially and boost profits. The FY2024 EPS works out to Rs 30.34 if 29% of
its interest cost is removed, keeping all other items, including tax rate same.
Re-worked P/E, at the upper price band, moderates to 33.
The focus on chronic therapies aligns with a growing global trend of
rapid increase in chronic diseases. Higher rates of conditions like cancer,
cardiovascular diseases, obesity, and diabetes are expected to boost demand for
pharmaceuticals and chronic treatments.
As of 1 July 2024, listed peers such as Dr. Reddy‘s Laboratories traded
at TTM P/E of 19, Cipla at TTM P/E of 28, Alkem Laboratories at TTM P/E of 33,
and Abbott India at TTM P/E of 49. For FY2024, Emcure OPM and ROE stood at
18.47% and 16.9%, respectively, compared to 28.32% and 19.74% for Dr. Reddy‘s
Laboratories, 24.41% and 15.43% for Cipla, 17.73% and 17.41% for Alkem
Laboratories, and 24.84% and 32.47% for Abbott India, respectively.
Emcure
Pharmaceuticals: Issue highlights
|
For Fresh Issue Offer size (in no of shares )
|
|
- On lower price band
|
83,33,333
|
- On upper price band
|
79,36,508
|
Offer size (in Rs crore)
|
800
|
For Offer for Sale Offer size (in Rs crore)
|
|
- On lower price band
|
1097.17
|
- On upper price band
|
1152.03
|
Offer size (in no of shares )
|
1,14,28,839
|
Price band (Rs)
|
960-1008
|
Minimum Bid Lot (in no. of shares )
|
14
|
Post issue capital (Rs crore)
|
|
- On lower price band
|
189.48
|
- On upper price band
|
189.09
|
Post-issue promoter & Group shareholding (%)
|
78.00
|
Issue open date
|
03-07-2024
|
Issue closed date
|
05-07-2024
|
Listing
|
BSE, NSE
|
Rating
|
45/100
|
Emcure Pharmaceuticals:
Consolidated Financials
|
|
2203 (12)
|
2303 (12)
|
2403 (12)
|
Sales
|
5,855.39
|
5,985.81
|
6,658.25
|
OPM (%)
|
22.71%
|
19.73%
|
18.47%
|
OP
|
1,329.91
|
1,181.18
|
1,229.72
|
Other inc.
|
63.47
|
45.91
|
56.99
|
PBIDT
|
1,393.38
|
1,227.09
|
1,286.71
|
Interest
|
175.98
|
213.61
|
237.15
|
PBDT
|
1,217.40
|
1,013.48
|
1,049.56
|
Dep.
|
244.86
|
260.12
|
312.41
|
PBT
|
972.55
|
753.36
|
737.16
|
Share of Profit/(Loss) from Associates/JV
|
-
|
-
|
-
|
PBT before EO
|
972.55
|
753.36
|
737.16
|
Exceptional items
|
-
|
6.15
|
9.93
|
PBT after EO
|
972.55
|
747.21
|
727.23
|
Taxation
|
269.99
|
185.37
|
199.65
|
PAT
|
702.56
|
561.84
|
527.57
|
Minority Interest
|
40.36
|
29.83
|
29.39
|
Net Profit
|
662.20
|
532.02
|
498.18
|
EPS (Rs)*
|
35.02
|
28.38
|
26.73
|
* EPS is annualized on post issue equity capital of Rs 189.09 crore of
face value of Rs 10 each
|
# EPS is not annualised due to seasonality of business
|
|
|
EO: Extraordinary items. EPS is calculated after excluding EO and
relevant tax
|
|
Figures in Rs crore
|
|
|
|
Source: Capitaline Corporate Database
|
|
|
|
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