Windlas Biotech IPO opens today: Should you subscribe? Brokerages weigh in

11:49 PM Aug 04, 2021 | FPJ Web Desk

Pharmaceutical formulations contract developer and manufacturer Windlas Biotech Ltd. (WBL), is planning to raise up to Rs. 400 crore through an IPO, which opens today (August 4) and closes on August 6.

The price band is Rs. 448 - 460 per share.


The issue is a combination of fresh and OFS. The company will not receive any proceeds from the OFS portion. Of the net proceeds from the fresh issue, Rs 50 crore will be utilized for capacity expansion and addition of injectable dosage facility at its existing facilities, Rs. 47.5 crore will be used to fund the working capital requirement and another Rs 20 crore will be used to repay/prepay certain debt availed by the company. Through the OFS, Tano India Private Equity (investor selling shareholder) is fully offloading its 22 percent stake.


Top brokerage houses have given ‘subscribe’ rating for the IPO of Windlas Biotech Ltd, a leading Contract Development Manufacturing Organisation (CDMO) with a focus on the chronic therapeutic category.

With more than two decades of experience in manufacturing both solid and liquid pharmaceutical dosage forms, WBL provides a comprehensive range of CDMO services including product discovery, product development, licensing and commercial manufacturing of generic products.

“Its innovative portfolio of complex generic products supported by robust R&D capabilities, efficient and quality compliant manufacturing facilities with significant entry barriers, long-term relationships with Indian pharmaceutical companies and a consistent track record of financial performance provide for further growth visibility,” said BP Equities in a report.

“On the valuation front, at the upper price band, the issue is aggressively priced at 64.4x P/E considering the diluted equity shares and FY21 annualized earnings. However, considering all the positive factors mentioned above, we give a “SUBSCRIBE” rating on this issue for the long term,” it further said.

In FY2020, Windlas provided CDMO services to 7 of the top 10 Indian formulations pharmaceutical companies. The domestic formulations CDMO is projected to grow at a CAGR of approximately 14%. Further, the Government of India has approved the Production Linked Incentive (“PLI”) scheme for pharmaceuticals for FY2021 to FY2029, which is expected to promote innovation for development of complex and high-tech products.

With its superior product mix, established brand name, strong Relationships with Leading Pharma Companies, and adding capacities, we believe the company is well placed to capitalize on domestic opportunities. At the upper price band of Rs.460/-, stock is valued at 26.8x of FY21 Earnings of Rs.17.1(based on fully diluted post issue equity and adjustment of exceptional item of 22Cr),” said Asit C Mehta Securities.

“We recommend to subscribe the issue from a long-term prospective,” it further said.

With increasing globalization and focus of large pharmaceutical players on cutting costs and optimizing operations, CDMOs have seen significant acceptance in the pharmaceutical industry internationally over the last few years.

Windlas has developed relationships with leading Indian pharmaceutical companies. Their operational track record in successful delivery of products, responsiveness, dosage innovation, complex generic product development, quality and technical standards, turnaround times, and productivity has facilitated the strengthening of their customer base and helped them in expanding their product and service offerings as well as geographic reach.

In FY2020, they provided CDMO services to 7 of the top 10 Indian formulations pharmaceutical companies.

Pharmaceutical companies are increasingly outsourcing development and manufacturing of new products, and as a result the domestic formulations CDMO (contract development and manufacturing organization) market has grown at a higher rate of approximately 13 percentCAGR compared to the growth rate of approximately 8.6 percent of the domestic formulations market in the past five years. It is expected to continue this trend over the next five years. Domestic formulations CDMO is projected to grow at approximately 14 percent CAGR (to a market size of Rs. 370-410bn), while domestic formulation segment is expected to grow at approximately 11 percent during FY20-25.

In FY20, 31-33 percent of the total domestic formulations market was catered by CDMO players. Anti-diabetic and cardiac therapies account for a major share and constituted approximately 25 percent and 15 percent share in the domestic formulations CDMO market.

The company is also entering into injectables CDMO industry.

The domestic injectables CDMO industry is expected to reach Rs.49 billion to Rs.53 billion by FY2025. Moreover, the injectables segment is expected to account for 12% to 13% of all the dosage forms in the domestic formulations market and 13.2% to 14.2% of the domestic formulations CDMO market in FY2025. Further, the margins for contract manufacturers in the injectables segment are more robust as there are fixed contracts for the development and manufacturing of the drugs and there are no selling and general costs for the contract manufacturers. Accordingly, Windlas proposes to utilize Rs.50 crore of their Net Proceeds towards capital expenditure for capacity expansion. Further, the business to business model also allows opportunity for scaling up operations as the players can specialize in particular molecule and have supply contracts with multiple injectables marketing players.

It has consistent track record of financial performance. In the last three years (FY19-21), the company’s revenue and operating profit has grown at a CAGR of 18% and 19% respectively. They have received ICRA A (Stable) and ICRA A1 rating from ICRA. As of March 31, 2021, the Total Debt/ Equity ratio was 0.16, and ROCE was 20.23 percent. They have consistently experienced an improvement in their PAT margin from 4.65 percent in Fiscal 2019 to 8.70% in Fiscal 2021, on account of cost rationalization strategies, increased focus on complex generic products in the chronic therapeutic category.

According to GEPL Capital, WBL has strong R&D and manufacturing capabilities with long term client relationships with marquee pharma companies and it has recommend a subscribe rating to the issue.

“WBL has reported a steady increase in business with improving profitability. On the back of increased sales from the existing customers, addition of new CDMO products & customers and improved business from the domestic trade generics and OTC brands, the company has reported a 6.7% CAGR rise in consolidated business over FY18-21 to Rs. 427.6cr in FY21,” Choice Broking said.

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