Mankind Pharma Limited IPO

About the company:

About the company

Mankind Pharma is India’s fourth-largest pharmaceutical company in domestic sales and third-largest in sales volume for MAT December 2022. They are engaged in developing, manufacturing and marketing a diverse range of pharmaceutical formulations across various acute and chronic therapeutic areas and several consumer healthcare products.

The company’s growth has been organic with a focus on the domestic market, as a result of which their revenue from operations in India contributed to 97.60% of total revenue from operations for FY22, which was one of the highest among peers identified by IQVIA.

Issue Details

Strengths

Growth Prospects – Aim to increase their market share by expanding our product portfolio to increase sales, with a focus on chronic therapeutic areas. In addition to consolidating its presence in its existing brands and therapeutic areas, they also intend to pursue opportunities in therapeutic areas where they seek to grow its presence.

Focus on increasing penetration in metro and Class I cities - Mankind is increasing its penetration in metro and Class I cities while they already have a substantial share of Domestic Sales in Class II-IV cities and rural markets compared to the IPM. The company aims to explore the potential to further grow its presence in metro and Class I cities. The Domestic Sales from metro and Class I cities contributed to approximately 53% of total Domestic Sales for MAT December 2022, lower than the approximately 64% recorded for the IPM.

Established products and high market share in the Healthcare segment – The Company has established a number of consumer healthcare brands in the condoms, pregnancy detection, emergency contraceptives, antacid powders, vitamin and mineral supplements and anti-acne preparations categories, among others. Category leaders in the male condom category (a market share of ~29.6%), emergency contraceptives (a market share of ~61.7%) and pregnancy detection kit category (a market share of ~79.7%).

Pan-India market and distribution coverage – It 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 Mankind’s formulations during MAT December 2022. In line with this, they had 10 brand families, 19 brand families and 36 brand families with Domestic Sales of over Rs. 200 crores, Rs. 100 crores and Rs. 50 crores, respectively, for MAT December 2022.

Risks

· Any delay, interruption or reduction in the supply of raw materials or finished formulations from third-party suppliers and manufacturers, or an increase in the costs of such raw materials and finished formulations, may adversely impact the pricing and supply of our products and have an adverse effect on our business, financial condition, cash flows and results of operations.

· Revenues are mainly derived from India. Any increased competition from these markets may cause a decline as a result.

Financial Snapshot  

Outlook

Mankind is well-penetrated in the rural and Tier 3/Tier 4 markets, poised to take advantage of the growing pharmaceutical consumption. Furthermore, the company is now venturing into urban cities focusing more on the speciality therapeutic areas. However, the company has seen a sharp decline in the margins over the year. Resultantly, the return on equity has witnessed a steep decline. Moreover, even the net working capital days is in an increasing trend over the past few years. We would advise our investors to currently AVOID the IPO. Having said that, the company has headroom for growth and an investor must keep it on their watch list and invest once financials stabilise.