Daybreak - Was Mankind Pharma's IPO a good idea?

Episode Date: April 28, 2023

The initial public offering ((IPO) of Mankind Pharma Ltd opened for subscription on 25th April and closed just yesterday. The pharma major is reportedly eyeing a valuation of over $6.7 billion.But in recent years, the Indian stock market has not been very kind to pharmas that have been listed. Since 2010, 17 of them have had IPOs, but four have delisted. Of the remaining, half are trading below their listing price.Amidst this and the current economic state that is making many postpone their IPOs, Mankind still went ahead with its plan. Why?Tune in to find out. 

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Ramon Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the same. secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they managed to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into.

to the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get an alert, as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcast. or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode.

Way back in 1991, Rajiv Juneja, a medical sales representative from Merit in Uttarpadesh, India, decided to start his own pharma company along with his brother. They started with an initial capital of 50 lakh rupees. Now, he is the CEO of the fourth largest farmer. company in India in terms of domestic sales. The farmer is reportedly eyeing a valuation of over $6 billion. And one thing that makes it stand out from the rest of its competitors

and also makes it the target of criticism is its sales first strategy. This approach, of course, came from Rajiv Junaja's experience as a sales representative. Junija had no training. He just learned along the way as he tagged along with his friends from Sipla and Glaxo-Smith Klein when they went from doctor to doctor. And here is what he told Sima Singh, the editor of the Ken, a few years ago, in a very telling interview when she asked him about his early days. He said, and I'm quoting,

I learned from my gurus, who were bosses, not leaders. On the 30th of the month, you need to deliver or else I'll take your bag. This was the industry culture, which is why many companies went to dogs. but Zipla and Glaxo-Smith Klein had a good culture. End quote. For the most part of its existence, the company which we know as mankind followed a philosophy of selling medicines

to smaller and more rural areas for a lower price. It sold drugs for acute therapies. But in the last couple of years, mankind has changed its strategy. In fact, in this interview with Sima, Junija had actually talked about it. To him, he did. said, mankind is aggressive, even impish. He spoke about how in the long term mankind sees itself

as a listed company. A little more than five years later, that is exactly what is happening. The initial public offering or IPO of Mankind Farmer Limited opened for subscription on the 25th of April and closed just yesterday. But in recent years, the Indian stock market it has not been very kind to pharma companies that have been listed. Since 2010, 17 of them have had IPOs, but four have been delisted. Of the rest, half of them are trading below their listing price. And not to forget, the current economic situation with the banks collapsing, most companies have decided to postpone their IPOs.

But mankind is going for it, with confidence. Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nickda Sharma, and I Don't Chase the News Cycle. Instead, thrice a week on Mondays, Wednesdays and Fridays, I will come to you with one business story that is worth understanding and worth your time. Today is Friday, the 28th of April. It's actually been a while since mankind was ready for an IPO. Clearly, the farmer's aggressive sales strategy has worked out for it so far. Its business in metros and cities grew by 22% in the last financial year. This is nearly two times the overall growth of the Indian farmer market.

But before we go any further, here is what you should know about the IPO. The company is looking to raise $670 million, but none of that money is actually going to mankind. It is the company's promoters and private equity investors who are selling their shares, which are about 400 million in number. But the question remains, is this a good time for an IPO considering the market situation? A farmer analyst who is privy to some valuation conversations told us that actually it is quite well-timed.

He explained his statements saying, and I'm quoting, the market may be jittery due to macroeconomic concerns such as high inflation and interest rates. But farmer stocks are considered defensive bets in such conditions and they are preferred. End quote. But Mankind has clearly been doing things that seem to be working out pretty well for it so far. Stay tuned to find out more.

For the longest time, Mankind has focused on a sales first approach. It has a field force of over 11,000 medical representatives and 3,000 sales managers. It is very unusual in the pharma sector. You won't believe that for the first 12 years since, it came to be, it did not even have its own manufacturing unit. It was only in 2007 when it set up its first plant in Himachal Pradesh and in the following 10 years, 18 more plants came up. Now, the company has grown manifold because it is focusing on diversifying. From its earlier focus on drugs for acute diseases, it began tapping into the chronic segment. The company acquired Panasier

biotech's formulation brands business for seven times at sales. Analysts thought that this was too expensive. But this let mankind get into new fields like oncology and transplants. It also in-licensed two more molecules from Pharma Majors Glenmark Pharmaceuticals Limited for anti-diabetes and from Novartis A.G. for heart failure therapy. It also acquired a Dr. Reddy's lab brand for asthma treatment. Now, it is also moving towards hospitals. This shift to the chronic segment has borne fruit for the company.

The segment grew 2% faster than the acute segment, which actually accounts for two-thirds of mankind's sales. But not everything is rainbows and sunshine for mankind. Coming up next, I tell you about some concerning matters regarding the farmer company. Analysts are not happy with mankind because it has not provided the breakup of its consumer health business. For example, each of its top 36 brands has sales for over $6 million. In the consumer health category, it is the three top brands in contraception that are leaders in their segment. But beyond that, there is little understanding of how mankind's

different brands are growing. But irrespective of whether consumer health is growing faster or not, mankind wants its business to grow faster for sure. But in order for that to happen, especially with its entry into new therapeutic areas, the investment in research and development is not enough. That is another matter of concern. It is spending less on research and development than what a company its size should be spending. All its competitors are spending more in this area. If mankind really wants to maintain this growth and push it further, it will require more than just the reach and frequency of its field force, which is already among the largest in the Indian pharma industry.

Goroa Kapoor, the co-founder and head of India operations at Life Sciences Commercialization Company called Indy Gene, summed it up pretty well when he spoke to the ken. He said, and I'm quoting, if mankind is able to provide what its core proposition has been, which is high quality at an affordable price, because of which in each of the therapies that they are present in, they have taken a 30% share in the new five therapeutic areas, they will do pretty well. End quote. Daybreak is produced from the newsroom of the Ken India's first subscriber-focused business news platform.

What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters, subscriber-only apps and podcast extras. Head to the Ken.com and click on the red subscribe button on the top of the website. I am Snigdal-Sharmai, your host, and today's episode was edited.

by my colleague, Jav C.N.