Emcure Pharmaceuticals IPO: 10 Key Risks Investors Should Consider Before Subscribing To The Rs 1,952 Crore Issue

Emcure Pharmaceuticals’ IPO goes smoothly on first day of auction, led by non-institutional and retail investors. The Pune-based company’s issue was fully subscribed on day one.

The IPO consists of a new issue of capital shares valued at ₹800 crore and an offer for sale (OFS) by the promoters and existing shareholders for 1.14 crore ordinary shares, valued at ₹1,152 crores, at the upper end of the price range. The overall public size results ₹1,952 crores.

Among the investors selling OFS shares are investor BC Investments IV Ltd., a division of US private equity giant Bain Capital, and promoter Satish Mehta. BC Investments currently holds 13.07 per cent stake in the company, while Satish Mehta holds 41.85 per cent.

The proceeds of the new issue will be used for general corporate operations and debt repayment.

Brokerage firms estimated that the company’s market capitalization after issuance would exceed ₹19,000 crore, according to press reports.

A wide range of pharmaceutical treatments covering many important therapeutic areas are developed, manufactured and marketed internationally by Emcure Pharmaceuticals, a Pune based company.

Here are some of the main risks listed by the company in its Red-Herring Prospectus (RHP):

• The company’s reputation, business, financial condition and operating results may all be harmed by manufacturing or quality control issues. The company may also be subject to regulatory action, legal proceedings and other sanctions.
• Product liability claims may result from the Company’s failure to meet appropriate quality standards, which may adversely impact its operations, cash flows, business and financial condition.
• The organization’s manufacturing and research and development activities are vulnerable to operational hazards. Their business, financial condition and operating results could be adversely affected by any disruption or delay in their manufacturing or R&D activities.
• The supply and price of their products may be adversely affected by any disruption in the availability of these resources or by price increases for the finished products they outsource. This may have an impact on their cash flows, business, financial condition and results of operations.
• The Company’s business, financial condition, operating performance and cash flows could all be harmed if it is unable to meet its commitments, including financial and other covenants, in its debt financing agreements.

Also read: Emcure Pharma IPO: here is what GMP reports before the opening of subscriptions

• The Company’s business, financial condition, results of operations and cash flows could all suffer from its inability to effectively manage its inventories and estimate demand for its products.
• The Company’s earnings and profitability could suffer if it is unable to increase production and the current capacity utilization rate of its manufacturing plants.
• Despite the spin-off of its US operations, the company still faces huge losses and liabilities from ongoing civil proceedings in the US, including class-action antitrust litigation and complaints filed by US state attorneys general.
• Their goodwill and operational results may suffer from the availability of counterfeit pharmaceutical products, such as drugs sold as their products by third parties.
• Due to its global operations, the Company is subject to a variety of complex managerial, legal, tax and economic risks that could adversely impact its operations, finances and overall business performance.

Also read: Emcure Pharmaceuticals IPO sets price range at ₹960-1,008 each; Namita Thapar to partially sell stake

Disclaimer: The opinions and recommendations expressed above are those of individual analysts or brokerage firms, and not those of Mint. We advise investors to consult certified experts before making any investment decisions.