Rumors about Glenmark selling the business are from March-April, so nothing new unseen has mentioned, it was always going to be a good for GLS due to conflict of interest going away. Please share your views than views of people from X (formerly Twitter)
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Another important question would be the funding option that Nirma would take to buy 75% of GLS + any amount of shares being tendered via open offer. Both put together amounts to almost 7000 crores (assuming entire 17.1% of public shares being tendered)
Nirma had already taken on debt for their earlier cement company acquisition. If they take additional debt now, they would definitely depend on dividend payment from GLS
Just a thought.
If Nirma takes debt to fund this acquisition, can they immediately de-list the share after 1 year?
Means how such financial transactions work?
@Rocky_Chow that was not my view. It was the management who mentioned that. There is a link in that post of the CFO interview. My Point is majority stake sell was never a surprise given that it was there in news since more than 6 months. Any management will never acknowledge on record any ongoing stake sale discussions till the transaction is complete. Hope this helps.
Hi Suhag
Please re-read your own words on the August 16 post. I will put out the quote that spells out your confusion as well on the August 16 post. "As per the media interaction of Glenmark’s management, they are looking to sell only 7-8% in GLS as of now. I know there are media reports doing the rounds since last 2-3 months about the parent putting their entire stake in GLS on block, however that may not be the case as of today."
Hope this helps you understand the dichotomy in your reply to me “that there was never a confusion on that.”
Hi is there any clarity on whether minority shareholders who do not tender back there shares, assuming it ll still be listed. Also is not tendering an option here since the offer practically includes all public shares.
Nirmal has to make a mandatory offer. But it is not mandatory for shareholders to tender the shares.
There is an old news where Nirma tried to indirectly force shareholders to sell shares, but not much details are available
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GLS board has declared a dividend of Rs. 22.50 per share with record date as Oct 17
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Any views on the Open Offer. Personally, I am a long term investor and not interested in tendering my shares.
Views invited on below:
- Nirma has mentioned that they don’t intend to delist, how they will manage stake reduction which will increase from 75% promoter holding post this open offer
- In case Nirma gets more than 90 per cent shares and plans for delisting, what will be my options( Post closure of Open offer in Nov 2023)
Thanks
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I don’t think Nirma will delist GLS. 2010 was a different period – valuations were low, regulations were different and promoters were not chasing market cap. Now the new generation has taken over and they would be more in tune with the current times. Regulations have changed, reverse book building is an expensive process. If Nirma had wanted to delist GLS, they would not have bought a listed company in the first place. Nirma listed their cement business with an IPO in 2021 (Nuvoco Vistas). My guess is, they will offload the excess stake and retain 75 %. Doing that in the current market will be easy since company fundamentals are strong.
(Disc: Tracking but no positions at the moment)
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Some highlights from the Q2 FY24 concall:
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CDMO business: Saw slower demand this quarter in one of the molecules. But there is a lot of traction from new customers and new projects. In a year’s time, another 2 – 3 projects will be added to the basket. We have supplied validation batches. Then there is an approval cycle etc. These have a total revenue potential of Rs.150 crore.
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Milestones achieved: Added 3 new products to our pipeline, with one high-potent API and 2 complex APIs. Working capital remained stable during H1 FY24 at 170 days. Better to stock up on inventory than run out of it, external environment is still volatile.
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Capex: Current year’s capex is Rs.200 crore. Expansion happening in All three – Dahej, Ankleshwar and Solapur. The engineering work has started for construction of phase 1 of 200 KL in Solapur. In Ankleshwar, out of 400 KL capacity, 192 KL was added in Q4 FY23. Another 208 KL will be completed in Q4 FY24 and will quickly be utilized. Most of the capacities are fungible across customers & businesses except for 1 where the capacity is dedicated capacity for a CDMO customer.
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Higher Employee Costs: Driven by regular increment cycles and certain talent management cost which will continue at similar levels in FY24.
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Agreement with Glenmark: Current business will continue for a period of 5 years. We supply more than 65 APIs to Glenmark Pharma. Over 95% of it is a regulated market business. With the number of approvals that we have over multiple markets, this is a sticky business. There is non-compete with both Glenmark as well as Nirma. Pharma will have to restrict from doing the APIs that Glenmark Life Sciences is doing. And so will Nirma have to avoid doing any formulations that Glenmark Pharma is doing using Glenmark Life Sciences APIs. Glenmark Pharma has already qualified quite a few GLS APIs. That will come under the agreement, but anything new that they want to develop, that they can go ahead and develop.
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PLI benefit: Will go away after the change in ownership. It will have 100 to 150 bps impact, which we will cover up elsewhere.
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Going ahead: Demand will pick up in H2 of the year, have good visibility on both generic API and CDMO. Current year’s guidance – 28 to 29 % EBIDTA margin. But thereafter, it will stay at 30 %. Long term revenue growth will be in mid-teens. Making new business forays into oncology and iron complex. In Oncology, we have 9 molecules in the pipeline. Three have been validated already.
(Disc: Have initiated a position last week)
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Is there a different chain where we can compare similar MCap pharma companies? How do these 4 companies stack up in terms of revenue growth, margin expansion in next few years? I have given some data below - no one stands out on all parameters
| Mcap | PE | Annual Sales 2022-23 | Net Profit 22-23 | OPM | |
|---|---|---|---|---|---|
| Caplin Point | 9036 | 21.67 | 467 | 377 | 30% |
| Marksans Pharma | 7261 | 24.5 | 1852 | 265 | 18% |
| Glenmark Life Sciences | 7791 | 15.4 | 2161 | 467 | 30% |
| Neuland Labs | 6580 | 24.7 | 1191 | 164 | 23% |
Regards,
Abhinav
Very difficult to predict the future.
But you need to categorize these businesses like pure play CDMO, branded / unbranded generics etc.
And the below approximate criteria (shared by Aditya Khemka sir on one of the Twitter spaces.) you can use to value them.
Hope this helps
dr.vikas
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Hi, about the stake reduction, is there a timeline by they need to do it from 82pc to 75pc?
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No updates on even open offer yet. Seems these open points are dragging any movement in stock price
CCI has given its approval just last week for the acquisition.
Not sure how many more approvals have to be obtained before open offer can start
As per the draft open offer document, it was supposed to be open from 16th Nov to 30th Nov. Not sure if there was any change in the dates later on.
Hi, I am new to this thread. can you help me understand about open offer. If I make some positions now can I get benefit once open offer start ?. Thanks in advance
MIT bought 1.43% stake in GLS in Q3FY24. That is an interesting development.
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Its quite interesting, MIT entry is very positive for the company.
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