Mankind Pharma Ltd. is India’s fourth largest pharmaceutical company in terms of domestic sales and third largest in terms of sales volume for Moving Annual Total (MAT) as of December 2022. The company is engaged in developing, manufacturing, and marketing a diverse range of pharmaceutical formulations across various acute and chronic therapeutic areas in India, including anti-infective, gastro, cardiovascular, anti- diabetic, CNS, VMN, and respiratory. Mankind also entered the consumer healthcare industry in 2007 and has since established several differentiated brands in the condoms, pregnancy detection, emergency contraceptives, antacid powders, vitamin and mineral supplements, and anti-acne preparations categories. Further, the company operates 25 manufacturing facilities across India in the states of Himachal Pradesh, Sikkim, Rajasthan, Andhra Pradesh, Maharashtra, and Uttarakhand, and had 4,121 manufacturing personnel as of December 31, 2022. The company also has a pan-India marketing presence, with a field force of 11,691 medical representatives and 3,561 field managers, as of December 31, 2022. The company is purely a domestic focus play, with revenue from domestic busi- ness contributing 97.6% of total sales for FY22. The company’s products are sold in 21 countries, including regulated and semi-regulated emerging markets such as the United States, Latin America, Southeast Asia, Africa, the Middle East, and the Commonwealth of Independent States.
Objects of the issue:
The net proceeds from the fresh issue will be used towards the following purposes:
- To carry out the offer for sale.
Investment Rationale:
Focus on domestic business for long-term growth visibility.
Mankind Pharma Ltd. is India’s fourth largest pharmaceutical company in terms of domestic sales and third largest in terms of sales volume for Moving Annual Total (MAT) as of December 2022. The market share of the company in terms of Domestic Sales in the IPM increased from 4.1% to 4.3% between FY20 and MAT December 2022, which represents the fastest growth among the 10 largest corporates in the IPM. The revenue from operations in India contributed to 97.6% of the total sales for FY22, which was one of the highest among peers. In India, Mankind has historically been present through its product portfolio in acute therapeutic areas and has slowly shifted focus to chronic thera- peutic areas. Their Domestic Sales in acute therapeutic areas grew at a CAGR of 11% from FY20 to MAT December 2022, which has outpaced IPM’s growth rate for acute therapeutic areas by 1.2 times. Further, with the increased focus on chronic therapeutic areas, the Domestic Sales in chronic therapeutic areas grew at a CAGR of 14% from FY20 to MAT December 2022, which has outpaced the IPM’s growth rate for chronic therapeutic areas by 1.4 times. The growth has been driven by vol- umes and had the third largest volume share among the Top-10 largest corporates in the IPM for MAT December 2022. Further, the company strategically acquires brands and companies across key markets as well as explores in-licensing and co-development opportunities with other companies to diversify its therapeutic portfolio.
Pan-India presence with a strong distribution network to cater future demand.
Mankind has a pan-India marketing and distribution presence, and had one of the largest distribution networks in the IPM with 11,691 medical representatives and 3,561 field managers, as of December 31, 2022, and over 80% of doctors in India prescribed their formulations during MAT December 2022. They have also established a significant distribution network and sold their products to over 12,000 stockists and engaged with 75 C&F agents. They have an established presence and a large share of Domestic Sales in Class II-IV cities and rural markets. The Domestic Sales from Class II-IV cities and rural markets contributed 47% of their total Domestic Sales for MAT December 2022, higher than 37% recorded for the IPM, indicating their established presence across high-growth markets in India.
Valuation and Outlook:
Mankind Pharma is engaged in developing, manufacturing, and marketing a diverse range of phar- maceutical formulations across various acute and chronic therapeutic areas, as well as several con- sumer healthcare products. The company has operated with a combination of the Indian pharmaceu- tical formulations and consumer healthcare sectors to provide quality products at affordable prices and has an established track record of building and scaling brands in-house. They are present in several acute and chronic therapeutic areas in India, including anti-infective, cardiovascular, gastrointestinal, anti-diabetic, CNS, VMN, and respiratory. Further, the company entered the consumer healthcare industry in 2007 and established several differentiated brands in the condoms, pregnancy detection, emergency contraceptives, antacid powders, vitamin, and mineral supplements, and anti- acne preparations categories. They are the category leaders in (I) the male condom category, (ii) the pregnancy detection kit category, and (iii) the emergency contraceptives category. Further, the com- pany has a track record of sustained growth in revenues and profitability. The company grew its revenue at a CAGR of 14.2% during the FY20-22 period. On the upper price band, the issue is valued at a P/E of 30.2x based on FY2022 earnings which we feel is richly valued, as it is higher than the industry’s major players such as Sun Pharma, Cipla and Dr. Reddy’s. We, therefore, recommend an “Avoid” rating for the issue.
