Mumbai-based pharmaceutical player Alkem Laboratories has become the latest company to file prospectus for the initial public offering (IPO) with market regulator Securities and Exchange Board of India (SEBI). According to reports, the issue will result in mobilization of funds in the range of INR1,500-3,500 crore. The IPO will consist of 1.28 crore shares or 10.75% of the total post-issue shares in the company. This means the company will attract a valuation of at least INR13,953 crore.
All these shares will be sold by existing investors and as a result, Alkem Laboratories will not receive any funds from the IPO. The 550-page draft red herring prospectus (DRHP) filed by the company can be accessed here. Nomura Financial Advisory and Securities (India) Private Limited, Axis Capital Limited, J.P. Morgan India Private Limited, and Edelweiss Financial Services Limited are the merchant bankers handling the issue while Link Intime India Private Limited is the registrar to the IPO.
No new shares, totally OFS
As with most other issues these days, this IPO is also aimed at facilitating exit to existing investors. As a result, there is no fresh issue of shares by the company and all the 1.28 crore shares will be sold through an offer for sale (OFS). The list of selling shareholders includes Nawal Kishore Singh, Jayanti Sinha, Rajesh Kumar, Rekha Singh, Anju Singh, Anita Singh, Rajeev Ranjan, Prerana Kumar, Prabhat N Singh, Deepak Kumar Singh, Kishore Kumar Singh, Lalan Kumar Singh, Tushar Kumar, Krishna Singh, Alok Kumar, Ashok Kumar, Madan Kumar Singh, and Raj Kumar Singh. Out of these, Nawal Kishore Singh, Jayanti Sinha, Rekha Singh, Lalan Kumar Singh, Madan Kumar Singh, and Raj Kumar Singh are among the promoter or promoter group of the company.
Founded in 1973, Alkem started operations as a healthcare marketing company but expanded later into the pharmaceutical business and currently offers services in Active Pharmaceutical Ingredient (API), branded and generic drugs. It has grown steadily and has maintained a compounded average of 16% over the last five years to achieve annual revenues in excess of INR3,200 crore (USD500 million).
Alkem’s prospectus follows the massively successful IPO of Biocon-subsidiary Syngene International. The IPO witnessed a total subscription of 32 times while retail investors bid for more than 3.34 crore shares against 70 lakh on offer. Shares of Syngene will list next week.
With an exception to Syngene International, stock market has not been kind to pharma companies. Most recently, Pune-based Emcure Pharmaceuticals withdrew its IPO application in June 2014. Prior to this, Intas Pharmaceuticals received an expedited clearance from SEBI for an IPO in September 2013 but did not launch the public offer. Similarly, Calyx Chemicals & Pharmaceuticals’ IPO plans received SEBI approval in January 2013 but the public offering did not materialize.