Eugia Pharma’s IPO – Will it be a game changer for Aurobindo Pharma?

Aurobindo Pharma, a popular name in the pharmaceutical sector, is poised to take a significant step. In value-unlocking mode again, the company is now contemplating a big-bang IPO of its wholly-owned subsidiary Eugia Pharma Specialities. 

According to experts, the company aims to raise approximately ₹4,500 crore from the IPO in 2024. Aurobindo Pharma is considering the listing of Eugia, as the markets are in an uptrend and pharma valuations appear promising. 

This could possibly change the game for Aurobindo Pharma Limited. Let’s explore more about this strategic move. 

Also read: Here’s everything you need to know about MobiKwik’s upcoming IPO 

Overview – Aurobindo Pharma 

Aurobindo Pharma was founded in 1986 by Mr. PV Ramprasad Reddy with the help of K Nityananda Reddy and a group of professional individuals. The company started its venture in 1988-89 with just one unit, which manufactured SSP or Semi-Synthetic Penicillin located at Pondicherry.

Aurobindo Pharma converted into a public company in 1992. Then, in 1995, its shares were listed on the Indian stock exchanges. The company’s primary focus is on manufacturing and marketing active pharmaceutical ingredients, generic drugs and related services. 

Its product base covers the major therapeutic and whole classes of products, including antibiotics, systemic gastroenterological, anti-retroviral, central nervous system, anti-allergies, etc. 

Aurobindo Pharma is known to be one of the largest pharma companies in India and also one of the largest generics companies by Rx dispensed in America. The company boasts:

• 25 advanced manufacturing and packaging plants 
• Over 150 countries are reached through exports
• More than 1,500 scientists and analysts engaged in R&D work and  
• 9 dedicated R&D centres

About Eugia Pharma Specialities

Founded in 2013, Eugia Pharma is a subsidiary of Aurobindo Pharma. It is a speciality generic pharmaceutical company with 6 manufacturing facilities located across India and the US. 

The company is engaged in the process of synthesising a wide variety of distinctive products covering Hormonal, Oncology, Penicillin, Ophthalmic and General injectables.

The company has a global reach, operating in over 120 countries, whose offices are staffed by employees numbering more than 4000 and currently producing more than 250 approved generics.

At Eugia’s state-of-the-art R&D centre, over 200 dedicated scientists are diligently working towards developing differentiated products.

Revamping Eugia: A new approach by Aurobindo Pharma

In a bid to improve operational efficiency, Aurobindo Pharma took an essential strategic move in May 2021. They decided to pass their injectable assets to their subsidiary company, Eugia Pharma Specialities Limited. 

Their main aim was to foster more focus, specialisation and attention and to help future fund-raising.

The holding company, Aurobindo Pharma, had also considered the sale of Eugia and held talks with leading private equity firms in 2022. However, a final agreement was not reached due to valuation disagreements during these talks.

Aurobindo Pharma also informed the stock exchanges on 12th August 2023 that it was considering different options for restructuring Eugia’s business. 

With a positive foreseeable market situation and attractive pharma valuations, they are now contemplating an Initial Public Offering (IPO). This step could potentially redefine Aurobindo Pharma’s future growth path.

As a result of these initiatives, Aurobindo Pharma’s share price has seen remarkable growth, surging by 50% in the last six months as of Jan 11, 2024.

IPO – Eugia Pharma Specialities 

Pharmaceutical giant Aurobindo Pharma is in the news once again as it is contemplating a significant IPO for its wholly-owned subsidiary, Eugia Pharma Specialities – a speciality generic firm. 

The target is to secure around ₹4,500 crore in the year. However, the final IPO amount is still to be determined and depends on market circumstances.

Investment banks like Axis Capital, Kotak Mahindra Capital, Jefferies and JP Morgan have been chosen as advisors alongside three law firms for this IPO. 

The domestic pharma and life sciences sector witnessed a flurry of public issues in the past eight months. Just a month ago, Emcure Pharma, with Bain Capital’s backing, again filed its IPO papers to SEBI. However, this time, it was for a smaller size. 

Last year, Mankind Pharma made a remarkable entry into the country’s IPO market. This was followed by successful debuts from Blue Jet Healthcare, Concorde Biotech, and Innova Captab. These successful IPOs have set a positive tone for the upcoming IPO of Eugia Pharma.

Also read: The pharmaceutical industry in India and its contribution to the world

Financials  

Let’s see the financial performance of the company’s parent company – Aurobindo Pharma. 

Should you invest in Eugia Pharma Specialities? 

Strengths 

• Eugia Pharma Specialities is a pioneer in the speciality generic pharmaceutical world, encompassing an array of products from Hormonal to General injectables. 
• The company has obtained USFDA approval to develop and sell a generic version of one popular asthma medication with an estimated market value of $226 million in 2024.

Also read: Understanding IPO valuation through relative and absolute methods

Risks 

Some of the factors that may affect the performance of Eugia Pharma Specialities are:

• Competitive and regulated speciality generic market demand and supply dynamics.
• The regulatory approvals and quality standards of these products change from country to country or region by region.

Bottomline 

In conclusion, Aurobindo Pharma stands at the threshold of a transformative moment with the imminent Initial Public Offering (IPO) of its subsidiary, Eugia Pharma Specialities.

However, if you wish to invest in the IPO, you must navigate the landscape carefully. You must also weigh the potential rewards against the associated risks and keep a keen eye on the dynamic pharmaceutical market.