Akums Drugs and Pharmaceuticals IPO: Key Insights for Investors

Introduction to the Indian Pharmaceutical Sector

The Indian pharmaceutical industry is positioned for substantial growth, with experts forecasting a robust compound annual growth rate (CAGR) of 10.7% through 2030. Valued at approximately US$ 50 billion (bn), the market is expected to reach US$ 65 bn by 2024 and an impressive US$ 130 bn by 2030. India, known as the second-largest contributor to the global biotech and pharmaceutical workforce, plays a pivotal role on the global stage. The sector spans across various segments, including generic drugs, over-the-counter (OTC) medicines, bulk drug manufacturing, vaccines, contract research, biosimilars, and biologics. Renowned for its leadership in global generic drug supply, India also stands out for its affordable vaccines and generic medications.

Focus on Akums Drugs and Pharmaceuticals

Amidst this thriving landscape, Akums Drugs and Pharmaceuticals emerges as a prominent player poised to capitalize on the ongoing growth of the Indian pharmaceutical market. Positioned as a pharmaceutical contract development and manufacturing organization (CDMO), Akums offers a diverse range of pharmaceutical products and services both domestically and internationally. The company specializes in end-to-end solutions for product development, manufacturing, research and development (R&D) of formulations, regulatory dossier preparation, and various testing services. Additionally, Akums engages in the manufacture and sale of branded drugs and active pharmaceutical ingredients (APIs).

Insight into Akums Drugs and Pharmaceuticals IPO

Akums Drugs and Pharmaceuticals is gearing up for its initial public offering (IPO) to further bolster its market position and expand operations. Here are the critical details prospective investors need to consider:

Issue Period: The IPO is scheduled from 30 July 2024 to 01 August 2024.

Type of Issue: Book Built Issue.

Price Band: The price band for shares is set at Rs 646 – 679 per share.

Face Value: Each equity share has a face value of Rs 2.

Lot Size: Investors can apply for a minimum of 14 shares, requiring a minimum investment of Rs 14,938 for retail investors.

Tentative Allotment and Listing Dates: The IPO allotment date is anticipated on August 2, 2024, with listing expected on August 6, 2024.

Financial Breakdown: The IPO is valued at Rs 18.5 bn, comprising a fresh issue of Rs 6.8 bn and an offer for sale (OFS) of 17.3 million shares by existing shareholders.

Utilization of IPO Funds

Proceeds from the IPO will be utilized strategically:

• Debt Repayment: To repay existing financial obligations of Akums and its subsidiaries, including Pure and Cure Healthcare, Maxcure Nutravedics, and Pure.

• Growth Initiatives: To fund inorganic growth projects and enhance working capital requirements, positioning Akums for future expansion.

Financial Performance Review

Akums Drugs and Pharmaceuticals has demonstrated significant financial resilience and growth:

• Revenue Trends: Revenues fluctuated from Rs 36.7 bn in March 2022 to Rs 36.5 bn in March 2023, then surged to Rs 41.8 bn by March 2024.

• Profitability: The company reported a notable turnaround in profitability, with profit after tax (PAT) improving from a loss of Rs 2.51 bn in March 2022 to a profit of Rs 7.9 m by March 2024.

• Return Metrics: Despite challenges, Akums showed improved return metrics, including a positive shift in return on net worth (RoNW) from negative figures to 0.11%.

Operational Excellence and Future Prospects

Akums has achieved significant operational milestones:

• Quality Standards: Several production facilities hold prestigious accreditations from global regulatory bodies such as EU-GMP, WHO-GMP, and US NSF, underscoring the company’s commitment to quality manufacturing practices.

• Expansion Plans: Future growth strategies include expanding production capacity with the commissioning of two additional units for its CDMO business in FY25.

Comparative Analysis with Peers

Akums Drugs and Pharmaceuticals operates in a competitive landscape alongside prominent peers in the pharmaceutical sector. Here’s a comparative overview of financials and valuation metrics, showcasing Akums’ positioning relative to its industry counterparts.

Here Is a summary of key financial metrics for Akums Drugs and Pharmaceuticals and its peers for FY 2024:

Akums Drugs and Pharmaceuticals has a face value of Rs 2 per share and reported an operating revenue of Rs 41,782 million. The EPS stands at 0, with a net asset value per equity share of Rs 50.

Divi’s Laboratories is valued at Rs 4,520 per share with an operating revenue of Rs 78,450 million. It has an EPS of Rs 60, a P/E ratio of 75, and a return on tangible net worth of 11.80%. The net asset value per share is Rs 511.

Suven Pharma has a closing price of Rs 821, operating revenue of Rs 10,514 million, and an EPS of Rs 12. Its P/E ratio is 70, with a return on tangible net worth of 14.60%, and a net asset value per share of Rs 81.

Gland Pharma trades at Rs 1,991 per share, generating an operating revenue of Rs 56,647 million. The EPS is Rs 47, P/E ratio is 42, return on tangible net worth is 8.90%, and the net asset value per share is Rs 530.

Torrent Pharma has a share price of Rs 2,946, operating revenue of Rs 107,280 million, and an EPS of Rs 49. Its P/E ratio is 60, return on tangible net worth is 24.20%, and net asset value per share is Rs 203.

Alkem Laboratories reports an operating revenue of Rs 126,676 million and an EPS of Rs 150, with a share price of Rs 5,134. The P/E ratio is 34, return on tangible net worth is 17.40%, and the net asset value per share is Rs 862.

Eris Lifesciences trades at Rs 1,006 per share with an operating revenue of Rs 20,091 million. The EPS is Rs 29, P/E ratio is 35, return on tangible net worth is 15.20%, and net asset value per share is Rs 190.

JB Chemicals has a closing price of Rs 1,791, operating revenue of Rs 34,842 million, and an EPS of Rs 36. Its P/E ratio is 51, return on tangible net worth is 18.90%, and the net asset value per share is Rs 188.

Mankind Pharma trades at Rs 2,129 per share with an operating revenue of Rs 103,348 million. The EPS is Rs 48, P/E ratio is 45, return on tangible net worth is 20.40%, and the net asset value per share is Rs 234.

Innova Captab has a face value of Rs 10, a share price of Rs 558, and an operating revenue of Rs 10,813 million. The EPS is Rs 19, P/E ratio is 30, and return on tangible net worth is 11.40%.

Key Operational Challenges

Despite its strong market position, Akums Drugs and Pharmaceuticals faces several operational challenges:

• Supply Chain Risks: The company is susceptible to supply chain disruptions and price volatility of raw materials sourced through purchase orders.

• Client Dependency: A significant portion of revenue is derived from a limited number of clients, posing risks of revenue concentration.

• Intellectual Property Concerns: The protection of intellectual property rights remains crucial amidst regulatory variations across jurisdictions.

In conclusion, The Indian pharmaceutical industry continues to thrive on its commitment to innovation and quality, presenting lucrative opportunities for growth. Akums Drugs and Pharmaceuticals, with its upcoming IPO, represents a compelling investment prospect. However, potential investors are advised to conduct thorough due diligence, considering the company’s financial performance, competitive positioning, and operational challenges. By assessing these factors diligently, investors can make informed decisions aligning with their investment objectives and risk tolerance levels.