IPO Alert: What to expect when Emcure Pharma hits public markets

India’s domestic pharmaceutical market is estimated at $42 billion in 2021. It is likely to reach $65 billion by 2024 and further expand to $120-130 billion by 2030. Meanwhile, the Indian domestic formulations market grew at a healthy combined annual rate of 7% from 2018 to 2021.

The domestic formulations segment is expected to grow at an annual rate of approximately 9-11% from 2020 to 2026 and demand is expected to reach ₹2.6-2.7 trillion by fiscal 2026.

Emcure Pharmaceuticals Limited recently filed its Draft Red Herring Prospectus with market regulator Securities and Exchange Board of India to raise funds via an initial public offering.

The offer size is expected to be in the range of ₹45 billion to ₹50 billion. The IPO comprises fresh issuance of shares worth ₹11 billion and an offer for sale of 18,168,356 shares by promoters and existing shareholders. The company is considering a pre-IPO placement aggregating up to ₹2 billion. If that is successful, the fresh issue size will be reduced.

Emcure plans to utilize ₹9.47 billion from the net proceeds towards repayment or prepayment of all or a portion of certain outstanding borrowings availed by it. The remaining proceeds will be used for general corporate purposes.

Company Profile

Emcure is engaged in the development, manufacturing, and marketing of a broad range of pharmaceutical products across several major therapeutic areas. It is the 12th largest pharmaceutical company in India and has a sizeable market share in gynecology and blood-related & HIV antivirals therapeutic areas.

The Pune-based company has a differentiated product portfolio that includes orals, injectables, and biologics, as well as an mRNA platform through which its subsidiary Gennova Biopharmaceuticals is currently developing a COVID-19 vaccine. The initiative is expected to enable the company to reach a range of target markets across over 70 countries, with a strong presence in Europe and Canada.

Key numbers

In fiscal 2021, Emcure had total revenue of ₹60.91 billion, compared to ₹51.30 billion in the previous year. The company’s profit was at ₹4.18 billion, against ₹1.01 billion in 2020.

While a significant portion of the company’s business transactions is done in foreign currency, primarily US dollar and Euro, it reports financial results in Indian currency. Emcure also procures a noteworthy portion of raw materials from outside India and incurs costs in foreign currencies.

External commercial borrowings and other foreign currency-denominated borrowings create foreign currency exposure in respect of cash flows and the ability to service such debt.