Are funds shifting from Glenmark Pharma to Glenmark Life?

When Glenmark Life’s IPO was open last week, parent Glenmark Pharma’s share price fell by almost 12% from 670 levels to nearly 590, although it rose 3% on Friday, after the IPO closed with bumper subscription of 44x. Post IPO, Glenmark Pharma’s stake in Glenmark Life has reduced to 83% from 100%.

Glenmark Life, developing complex pharma APIs, has the higher growth and higher margin vertical of Glenmark Pharma. It accounted for 17% of Glenmark Pharma’s revenue, but 36% of the net profit, as its net margin of 19% is more than double Glenmark Pharma’s 9% net margin in FY21. Revenue growth for Glenmark Life was also much higher, at 23% YoY in FY21 vis-à-vis 4% for Glenmark Pharma.

So, are large funds and institutional investors moving out of Glenmark Pharma to Glenmark Life? There are cues supporting it. HSBC Global Investment Funds, a FPI, holding 1.3% stake in Glenmark Pharma as of 30.6.21, was an anchor investor in Glenmark Life’s IPO for 3.6% stake.

So going forward, what’s in store for Glenmark Pharma?  

While rise in share price of Glenmark Life post listing may keep share price of Glenmark Pharma buoyant over the short term, the latter’s own growth being lower, with holding company discount may limit potential upside over the medium term.

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