India’s biggest condom maker lifts dreary IPO market

India’s biggest condom maker has raised Rs43.3bn ($529mn) in the country’s largest listing this year, as sovereign wealth funds Abu Dhabi Investment Authority and Singapore’s GIC led a rush to buy one of the country’s most widely known pharmaceutical brands.

Mankind Pharma will float on the Mumbai stock exchange next month after its offer to investors received 15 times as many bids as there were shares available by the end of Thursday.

Canada Pension Plan Investment Board, the country’s largest pension plan, and the asset management arms of Goldman Sachs and Morgan Stanley joined the sovereign wealth funds as anchor investors paying Rs1,080 a share, at the top end of Mankind’s price range.

Mankind makes drugs for everything from heart conditions to indigestion but is best known for its Manforce brand of condoms, which commands a 30 per cent share of the Indian market.

The listing of Mankind is a rare bright spark in a slowdown in new listings in Mumbai, where just three companies floated in the first quarter. That is down more than 50 per cent year on year, according to data provider Tracxn.

Mankind’s flotation, which gives it a valuation of Rs432.6bn, will “bring some life to the IPO market which has been fairly dull for the last few months,” said Neha Singh, Tracxn co-founder and chief executive.

The global market for initial public offerings has frozen with inflation, rising interest rates and the war in Ukraine hitting valuations and sentiment.

Indian start-ups rushed to list as a wave of easy money swept through the country in 2021 and 2022. There were 65 listings in 2021 and 41 the following year, compared with an annual average of 19 from 2018 to 2020, Tracxn data shows.

But a series of disastrous tech listings in 2021 bruised investors and left lingering worries about high valuations. Shares of Zomato, a food delivery company that listed in 2021, are now trading at Rs59.95, almost half their listing price of Rs115.

Several high-profile tech start-ups, including SoftBank-backed hotel aggregator Oyo, were forced to abandon or downsize listing plans.

In 2021, “there was a lot of euphoria and the companies did the IPOs at very high valuations with absolutely no clarity on revenue generation or profitability,” said Hemang Jani, equity strategist at Mumbai-based broker Motilal Oswal.

But now “valuation is something investors will have on top of their mind, they will not be looking for exotic companies that are doing something very fancy”.

Mankind, a 32-year-old company based in New Delhi, is India’s fourth-biggest pharmaceutical company by domestic sales, and is majority owned by its founding family.

It posted Rs78bn in operational revenue for the year that ended March 31 2022, and profit after tax of Rs14.5bn.

Priyanka Kishore, economic director at Singapore-based executives forum IMA Asia, said investors prefered companies such as Mankind over high-growth tech start-ups.

“In these conditions, you probably are going to see IPOs from companies like this where the balance sheets are well grounded . . . rather than [companies operating in] the ‘virtual universe’,” she said.

While India’s pharmaceutical sector is best known for generic drug exports to other countries, analysts say that Mankind is interesting because of its significant domestic revenues. About 97 per cent of its operational revenue comes from India, where it has 25 factories.

“There is more interest in domestic businesses with large exposure to India rather than generic [that is, overseas] markets, where volatility tends to be higher,” said Saion Mukherjee, healthcare analyst at Japanese bank Nomura.