Alkem laboratoies is coming up with an IPO. Pharmaceuticals being the largest industry of all and having everlasting demand, every investor wishes to invest in pharma stocks. Last couple of years, we have seen a dream run in Pharma stocks. But, when it comes to selecting the company, it becomes difficult to understand the business operation,the medicinal formulations and all. Above all, the Indian pharma industry stands on its foreign business rather than domestic. Plus, the regulations and restrictions… every single little tablet has to pass strict tests, at development stage and even after launch.
US is a big market and with the US FDA tightening its standards, Indian pharma companies are not on a good stage at present. Contained in this environment, Alkem Laboratories is entering the market next week. Along with it, Dr. Lal Path Labs is also offering its shares for sale.
To provide liquidity to existing shareholders, Alkem Laboratories Ltd. is coming in for an Intial Public Offer, where the proceeds of this offer (i.e. all the money that will be raised) will be transferred to these share sellers. Also, to enjoy listing benefits, 12,853,442 equity shares of the selling shareholders are on offer for sale. The offer opens on December 8, 2015, with a price band of Rs. 1,020 to Rs. 1,050.
Alkem Laboratories Ltd. is a leading Indian pharmaceutical company, not because of its global presence but its business model that concentrates more in India. This makes it unique in the industry.The prime business operations include development of pharmaceutical and neutraceutical (health products made from food sources), then manufacturing and selling them. In 2015, the domestic operations contributed 75% of the net revenues from operations and the rest 25% was from international sales.
The company was founded by Mr. Samprada Singh and Mr. Basudeo N. Singh, in 1973 in Patna. It has now relocated the business to Mumbai. The sub-categories or the pharma-segments the company is into are acute and chronic therapy. Alkem has generic and branded products for/of:
- Central nervous system
- Pain management
A few strong points this company has are its domestic presence, growth in the US market and robust sales and distribution capability.
Below are the financial for the last 5 years for Alkem laboratories for the last 5 Financial years.
As far as the ratios are concerned, P/E ratio for Alkem at a higher price band of Rs 1050 comes at around 28.5 based on the EPS of last year which was 36.5. Compared it to other competitors like Torrent pharma and Stride Shasun, which trade at P/E of higher that 50, the issue seems to be priced aggressively. A run up can be expected one the issue hits the market.
Once the allotment are done which is expected to happen by Dec 21st, you can find your allotment status for ALKEM laboratories IPO here.
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