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Windlas Biotech IPO: A Pure Play CDMO Bet

by Tavaga Invest

Dehradun-based, Windlas Biotech, a pharmaceutical formulation major and are amongst the top five players in domestic pharma formulations, is all set to take off its IPO. After the successful subscription of Glenmark Life Sciences and listing of Tatva Chintan with almost 95% premium, this will be the third pharma company to raise funds through an IPO in 2020-2021.

IPO Snapshot

Shareholding Pattern 

The Promoters include Ashok Kumar, Manoj, Hitesh Windlass, and AKW WBL Family Private Trust. They hold almost 70.2% of the stake and are offloading 11.5% of their stake in the IPO. Tano India is selling 100% of its stake. 

The objective of the Issue

The proceeds from the Offer for Sale will be deposited directly into the selling shareholders’ bank accounts.

Rs. 500 million raised from the fresh issue will be used for capacity expansion of Dehradun Plant.

Rs. 475.62 million raised from the fresh issue will be used for working capital requirements.

Rs. 200 million raised from the fresh issue will be used for repayment of the borrowings or debt.

The amount left over from the fresh issue proceeds will be used to meet general corporate purposes.

Industry Overview

The Indian API market has risen at a constant rate of 9.2% since FY 2018, and it is likely to continue to expand as the global pharmaceutical industry focuses more on emerging markets. 

The pharmaceutical sector’s reliance on China for API raw materials has been a source of concern, and the breakout of COVID-19 in China might disrupt the supply chain for crucial APIs, wreaking havoc on India’s pharmaceutical industry.

The government, on the other hand, has been seeking to revitalize the API business by providing faster clearances and increasing financial aid, which will help Windlas build more new APIs. The expanding trend among pharmaceutical and biotechnology businesses to produce various therapeutic medications has a promising market outlook.

Company Overview

In terms of revenue, Windlas Biotech is among the top five players in India’s domestic contract development and manufacturing organisation (CDMO) and pharmaceutical formulations business. 

They have more than two decades of experience manufacturing both solid and liquid pharmaceutical dosage forms, as well as extensive expertise in offering specialized capabilities. 

In terms of revenue, its market share in the domestic formulations CDMO business was around 1.5% in FY20.

Its manufacturing facilities are located at Dehradun. The company’s current focus is on the launch of sophisticated generic drugs in the chronic therapeutic category for lifestyle-related illnesses.

Their business has three divisions:-

1-CDMO Services and Product 

2-Domestic Trade Generics and Over-the-counter (OTC) Brand 


Customer Overview

It is important to have diversification of customers and not stick to the top 10 customers. Windlas has been very good at maintaining these numbers. It has continuously added more customers year on year. 

At the same time reduced the exposure to top customers so they are not highly dependent on these customers for their business. They also maintained the same amount of exposure to the top 10 customers which shows their strong and long-term relationship with their top 10 customers.

Windla Biotech has high focus on Research and Development

Research and Development play a very important role in Pharma. It is important to keep developing new molecules and complex products. Windla Biotech spends Rs. 3-4Crs which is approx. 1% of their sales every year. It has continuously increased its complex portfolio of products. 


Despite growing top lines, Windlas Biotech’s bottom lines have been deteriorating. The company’s subsidiary, Windlas Healthcare, has been divested and reacquired resulting in certain financial modifications.

Revenue from Operations as a percentage of total revenue looks good but the revenues are not constant and have to keep a check on them in upcoming years. It seems like a low-margin business, most of its competitors also have low margins. 

The Cash Flow conversion is bad due to huge Working capital. The Cash flow from Operations has also been reduced.

Peer Comparison

According to the RHP, there are no listed companies in India that act as peers to Windlas Biotech.

However, according to a Crisil report, the following can be considered as key players in the domestic formulations CDMO segment. Akums Drugs, Synokem Pharmaceuticals, Innova Captab, and Tirupati Medicare.

Abbott Healthcare, Cipla, and Alkem Laboratories are some of the listed players in the Indian Generics market.

CompanyOperating Profit MarginNet Profit MarginEPS (Earnings per share)Return on Net Worth (RoNW)P/E (Price Earnings)Industry P/E
Windlas Biotech12.4%6.8%5.4618.19%65NA
Alkem Laboratories Ltd18.92%18.23%13322.09%2730.7
Abbott Healthcare Ltd20.03%16.03%32526.54%59.330.7
Akums Drugs and Pharma7.2%1.8%NANANANA
Synokem Pharma13.4%9.1%NANANANA
Innova Captab 13.2%7%NANANANA
Tirupathi Medicare7.0%8.1%NANANANA
Source: RHP, Tavaga Research


Grey Market Premium 

The grey market premium for the IPO stood a premium of Rs 130. The shares were trading at a range of Rs 578 to Rs 590 per share on the grey market.

Anchor Investors

Anchor investors invested at Rs 460 per equity share.

Major Anchor Investors included Macquarie, Invesco Trustee, Kuber India Fund, ICICI Prudential, Nippon India, UTI MF, and many others

What can investors expect?

The API sector in India has grown rapidly over the last few decades. India boasts the most USFDA-approved plants, outside the United States. 

However, over the last decade, India has become increasingly reliant on Chinese imports for numerous APIs and raw materials for APIs. 

The Indian government launched an Rs. 9,940 crore plan for the bulk medicines business in March 2020, to increase local production and exports. And we can see the benefits of the same as more Indian companies who are into the manufacturing of APIs are getting listed.

Since last year, pharmaceutical companies have been a part of the Nifty 50’s bull run, with Divis Laboratories leading the field.

One has to look into the 3-4 years of underperformance by major pharma stocks. Sun Pharma and Lupin have not performed extremely well and have not generated double-digit returns. 

Windlas Biotech’s financials look average and are slightly overvalued than most branded formulations. But the management has great experience in the industry and has great long-term relationships with many of its top customers. The management can turn around the business if it works towards growth. 

Consult a SEBI Registered Investment Adviser before investing. Do not rely on nonqualified stock tips for investing your hard-earned money.

Disclaimer: This write up is solely for educational purposes. This in no way should be construed as a buy/sell recommendation. Please consult your investment advisor before investing.

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