With investor sentiments favoring bulls at the moment, Indian benchmark indices are soaring high up in numbers, with Nifty, Bank Nifty and SENSEX reaching their all-time highs. This bullish sentiment is especially a welcoming gesture for many companies which are planning to go live with their IPOs. Among these, Emcure Pharmaceuticals is generating significant buzz. The pharmaceutical manufacturing company recently received SEBI approval for its proposed IPO, valued at Rs 800 crore. Having filed its Draft Red Herring Prospectus (DRHP) in December last year, Emcure Pharmaceuticals is poised to be the latest entrant in the IPO market, sparking excitement among investors. Let's delve into the details of this IPO to determine if it's worth bidding on or if waiting for another opportunity might be wiser.

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About Company

Emcure Pharmaceuticals, founded by Mr. Satish Mehta in 1981 and operational since 1983 in Pune, Maharashtra, operates 13 manufacturing facilities and 5 R&D centres across India. These facilities produce a wide range of pharmaceutical and biopharmaceutical products, including oral solids, liquids, injectable (such as liposomal and lyophilized varieties), bio-therapeutics, and complex APIs.
The company has a strong presence in domestic, regulated, and emerging markets, supported by subsidiaries in various countries like the UK, Canada, Dubai, Italy, Germany, and South Africa. Emcure markets formulations in therapeutic segments like anti-diabetic, cardiovascular, oncology, anti-infectives, gastro-intestinal, and pain management.
The promoters hold 82.98% of Emcure, with Bain Capital owning 13.09% and the remainder held by key employees and directors. Recently, Emcure's Canadian subsidiary, Marcan, acquired Mantra Pharmaceuticals Inc. in Quebec, financed through a CAD 57.64 million debt. The net adjusted debt to EBITDA ratio was 1.76 times in fiscal 2023 (1.42 times excluding guaranteed debt), with expectations of gradual improvement due to strong cash flow and prudent capex funding, despite a prolonged working capital cycle.

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Strengths

Emcure Group maintains a robust business risk profile bolstered by its diversified revenue streams across various geographic markets. In fiscal 2023, it derived 46% of its revenue from the domestic market, 16% from emerging markets, and 30% from regulated markets including Canada and Europe. The company holds a significant market share in the domestic formulations sector, particularly in therapeutic areas like gynaecology, blood-related disorders, and HIV antiretroviral therapies. Emcure has strategically expanded its presence in Europe and Canada through acquisitions, enhancing its market reach.
The company benefits from an experienced management team led by Mr. Satish Mehta, a veteran in the pharmaceutical industry with over four decades of experience. Its 13 manufacturing facilities across India are equipped to produce a wide array of pharmaceutical and biopharmaceutical products, approved by regulatory bodies such as USFDA, UK MHRA, Health Canada, and others.

Weaknesses

Emcure faces moderate financial risks, evidenced by its net adjusted debt to EBITDA ratio of 1.76 times in fiscal 2023. The company operates in multiple geographies and maintains a substantial inventory, contributing to a lengthy working capital cycle. It is exposed to competitive pressures in the generics market, particularly in regulated markets, which could impact profitability.
Despite these challenges, Emcure maintains adequate liquidity, supported by healthy cash accruals and manageable debt repayment obligations. As of September 30, 2023, the company held Rs. 558 crores in cash and equivalents, with its annual capex of Rs. 300 crore funded through a mix of cash accruals and debt.

Key Highlights and Utilization of Proceeds

Emcure Pharmaceuticals is gearing up for its Initial Public Offering (IPO), which includes a Fresh Issue of ₹800 crores, along with an Offer for Sale of up to 13,678,839 equity shares by the selling shareholders. A significant portion, amounting to ₹640 crores, will be utilized to repay or prepay certain outstanding borrowings availed by the company. The remaining net proceeds will be deployed for general corporate purposes such as growth opportunities, marketing & brand building, investment subsidiaries and many more
Satish Ramanlal Mehta, and Sunil Rajanikant Mehta are the promoters selling shareholders in the OFS. Namita Vikas Thapar, Pushpa Rajnikant Mehta, Bhavana Satish Mehta, Kamini Sunil Mehta, BC Investments IV, Arunkumar Purshotamlal KhannaI, Berjis Minoo Desai, and Sonali Sanjay Mehta will also be selling shares in the OFS.

As part of Emcure Pharmaceuticals' Offer for Sale (OFS) in the upcoming IPO, Shark - Namita Thapar from the promoter group and BC Investments IV Limited, an investor, are among the key selling shareholders. Namita Thapar is offering up to 1,408,600 equity shares, while BC Investments IV Limited is offering a larger tranche of up to 7,234,085 equity shares. This strategic sale by both prominent promoter and investor shareholders highlights the diverse participation in Emcure's IPO, aiming to broaden the company's equity base and attract new investors.

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