Alkem Labs IPO – Health for Customers, Wealth for Investors
The company’s name may sound unknown, boring and most of us may not even recall using the company’s products. However, there is a high likelihood that your family doctor must have prescribed you medicines manufactured by this company. Alkem Laboratories is the 5th largest pharmaceutical company in India (in terms of domestic sales) and has a portfolio of 736 brands across therapeutic segment. The investment arguments have been enumerated below:
Investment Arguments
- Large Product Portfolio, Recurring Nature of Domestic Business:
Alkem has portfolio of 736 brands that are recommended by doctors to treat infection, stomach & digestion related problems, pain management, anti-diabetic treatment, skin care, etc. Five of its brands feature in India’s top 50 pharmaceutical brands. Domestic markets contribute to ~76% of company’s revenue which is recurring in nature.
- Strong Capabilities across R&D, Manufacturing and Distribution:
Alkem has four R&D facilities that employ 483 scientists who are involved in development of new drugs. For manufacturing of medicines, it has 14 manufacturing facilities across India. For selling its medicines, it has a field force of 5,856 medical representatives who frequently visit the doctors and pharmacy stores.
- Fast Growing International Operations, Clean Balance Sheet:
Revenues from international operations have grown at CAGR of 46% over FY11-15 and contribute to 24% of overall sales. In the United States, the company has filed 66 ANDAs, which indicates a healthy pipeline for the future. The company is virtually a debt-free company, indicating strong balance sheet management.
GreenEdge Wealth Services’ View
At the higher price band of Rs. 1050, the stock will trade at ~24 times FY16E earnings. Thus is surely not cheap when compared to peers like Torrent Pharma or CIPLA. However, given the fact that it has a formidable presence in Indian markets as well as potential upside from its US business, investors can expect 15% to 20% gains in the near term.
Issue Details
| Issue Open Date | 8th Dec, 2015 |
| Issue Close Date | 10th Dec, 2015 |
| Issue Price (Rs.) | 1,020 to 1,050 |
| Market Lot | 14 shares |