Planning to invest in Mankind Pharma IPO? Take a look at key risks

Mankind Pharma IPO: Drug maker Mankind Pharma on Wednesday, April 19 informed that the company will raise Rs 4,326 crore through its initial public offering (IPO). The drug maker has fixed the price band of the IPO at Rs 1,026 to 1,080 per share. The IPO will open for subscription from April 25 to April 27.

Mankind Pharma’s IPO is entirely an offer for sale (OFS) of 40,058,844 equity shares by promoters and other existing shareholders. Hence, the company will not receive any net proceeds from the issue and the entire fund will go to the selling shareholders.

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Below are some of the key risks listed by the company in its DRHP that one should be aware of before subscribing to the IPO:

Mankind Pharma IPO: Internal risk factors

-As a pharmaceutical company, Mankind Pharma is highly regulated by the government and if the company fails to comply with the regulations, then its business, financial condition, cash flows and results of operations will be adversely affected.

-Mankind Pharma operates 23 manufacturing facilities across India and any disruption, slow down, or shutdown in the manufacturing or Research and development (R&D) operations could affect the business.

-The company in its Draft Red Herring Prospectus (DRHP) has mentioned that a decline in its product quality can affect its brand image and reputation and it cannot assure that it will be able to maintain its existing brand recognition.

-During the past three financial years, the company has incurred Rs 10.5 crore in expenditure for the development of certain products that Mankind Pharma was unable to successfully market primarily due to lack of commercial feasibility.

-The company’s ongoing investments in new product launches and R&D for future products could result in higher costs without a proportionate increase in revenues.

-The company, as per the DRHP, heavily focuses on the domestic Indian market and derives a significant portion of its revenue from operations from a limited number of markets. The company’s performance depends largely on the efforts and abilities of individual Promoters, senior management, and other key personnel. A significant proportion of the company’s domestic sales in certain therapeutic areas is generated only in India. Hence, this could affect its growth prospects negatively.

-Pharmaceutical and consumer healthcare industries are highly competitive with several major pharmaceutical companies as key players. The COVID-19 pandemic, or any future pandemic or widespread public health emergency, could impact our business

-The company’s Promoters, Subsidiaries, and Directors are currently involved in certain legal proceedings. These legal proceedings are pending at different levels of adjudication before various courts.

Mankind Pharma IPO: External risk factors

-Competition Act, 2002 after it comes into effect will result in additional costs for compliance, which in turn may adversely affect our business.

-If the authorities in India or in other jurisdictions grant compulsory licensing for any of the pharmaceutical products the company sells, this may result in an increase in generic competition and, in turn, a significant and rapid reduction in net sales for such products as generic versions are generally offered at sharply lower prices.

-The company’s borrowing costs and access to the debt capital markets depend significantly on the sovereign credit ratings of India. Any adverse revisions to India’s credit ratings for domestic and overseas debt by international rating agencies may adversely impact its ability to raise additional external financing, and the interest rates and other commercial terms at which such additional financing is available.

-Global economy uncertainties may adversely affect the business as the company is exposed to many different industries and companies. That apart, inflation could affect pricing.

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