Akums Drugs & Pharmaceuticals Ltd is gearing up for its ₹2,036 crore ($243 million) IPO, valuing the company at a notable $1.27 billion.
Source: Piyush S.
Key Highlights of Akums Drugs
Akums is a Contract Development and Manufacturing Organization (CDMO) specializing in R&D, Branded Drugs, and APIs.
Founded in 2004, the company has expanded to 16 plants.
Akums produces over 12% of the drugs consumed in India.
In 2019, Akums raised ₹500 Crore ($60 million) from Quadria Capital by diluting a mere 15% of equity, with the promoters, Sanjeev and Sandeep Jain, retaining 85%. The upcoming IPO offers Quadria an exit at 3.21x through an Offer for Sale.
Valuation Insights
At ₹10,665 crore ($1.27 billion), some might question why Akums isn’t aiming higher. With a PAT of ₹98 crore ($11.7 million), a valuation of 2.5x seems reasonable, especially when considering a PE ratio of 109, which, though double that of JB Pharma, isn't far off from Torrent Pharmaceuticals' PE of over 71. However, the critics argue Akums could have pushed for a ₹15,000 crore ($1.79 billion) valuation.
Growth Potential
However, Akums’ real growth potential lies ahead. With India’s burgeoning pharma export market, Akums could easily scale to a ₹30,000 crore+ ($3.57 billion) valuation within 3 years, especially with projected revenues of ₹5,000-₹6,000 crore ($595Mn-715Mn). At this future valuation, Akums could smartly dilute another 10% equity, raising ₹3,000 crore ($357 million) from a large PE firm for the next growth phase. This strategy allows the promoters to scale the business while retaining majority control—a savvy move indeed.
JB Pharma Comparison
Akums’ strategy contrasts sharply with JB Pharma, a veteran in the industry since 1976. Already listed, JB Pharma has a market cap of ₹29,872 crore ($3.56 billion) with similar revenue but a lower PE of 54. JB Pharma’s journey included a ₹3,100 crore ($369 million) capital raise from KKR, but at the cost of diluting 54% equity, leading to the promoters losing their majority stake.
4 years later, KKR is reportedly selling its majority stake to Torrent Pharmaceuticals for ₹18,000 crore ($2.14 billion), marking a significant 6x exit. While this is a massive win for KKR, it wasn’t as favorable for JB Pharma's promoters.
Conclusion
Akums’ upcoming IPO and its strategic growth trajectory present a different path from its competitors. With careful valuation management and strategic equity dilution, Akums is positioning itself for significant growth while maintaining control—an approach that could pay off handsomely in the years to come.
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