KARACHI: Pakistan-based Citi Pharma Limited plans to raise up to Rs2.8 billion by offering a 35 per cent stake to institutional and ordinary investors in an initial public offering (IPO) on the Pakistan Stock Exchange (PSX), a statement said on Friday.
The book-building phase of the IPO will be held on June 15 and 16 where high net worth individuals and financial institutions will participate. The company will issue all new shares through book-building at the floor price of Rs. 28/share, which includes a premium of Rs. 18 apiece. Through the IPO, Citi Pharma is guaranteed to raise at least Rs 2 billion.
However, based on the interest from investors during the book-building process, the strike price can be raised by 40 per cent (Rs39.20/share); thus, helping the company collect Rs2.8 billion, it said. After the book-building process, successful bidders will be provisionally allotted 75 per cent of the issue size (54.5 million shares). The remaining 25 per cent (18.1 million shares) will then be offered to retail investors at the strike price, it said.
Although the company makes several drugs, its major source of revenue is the manufacturing and sale of active pharmaceutical ingredients (APIs) — key substances that make a finished pharmaceutical product. Major drugmakers such as GlaxoSmithKline, The Searle Company, Barret Hodgson, and Martin Dow purchase their APIs from Citi Pharma.
In particular, Citi Pharma sells paracetamol, an API used in painkillers, to GlaxoSmithKline that mixes it with other chemical salts and sells under the renowned brand of Panadol. Citi Pharma is raising new funds for expanding its existing capacity of 3,600 tonnes/annum of paracetamol to 6,000 tonnes/annum in the wake of a surge in its demand due to COVID-19.
In addition, the company also plans to add new APIs, as well as pharmaceutical formulations (final products) to its existing product line. The company wants to build three manufacturing facilities, taking its total capacity to 200,000 vials/injectables/day; dry powder/suspension 60,000 bottles/day; capsules 4.2 million/day; and tablets 4.5 million/day.
These include dedicated manufacturing lines for penicillin, cephalosporin, and psychotropic and narcotics drugs.
Citi Pharma also plans to create synergies and forward integration by building a 50-bed healthcare facility in Lahore. The hospital will cater to the outpatient department and consultancy clinics, general operations, and diagnostic services.
In March 2013, the sponsors of Citi Pharma had acquired the company, including its licences and manufacturing rights. Presently, 93 per cent of the company’s sales originate from the API segment, while the pharmaceutical formulation segment contributes 7 per cent to the topline. Further, over half of the total sales in the API segment come through a single client: GlaxoSmithKline.
The pharma industry in Pakistan is worth Rs. 501 billion. It grew at an annualised growth rate of 11.4 per cent between 2016 and 2020. Of the 650 pharma companies, only 31 are multinationals. Local firms have a collective share of 60 per cent, while multinationals control the rest of the market.
Citi Pharma’s revenue was a little more than Rs1 billion in 2015/16, which grew to Rs3.5 billion in 2019/20. This reflects an annualised growth rate of 36.5 per cent. Similarly, net profit for 2019/20 was Rs145.6 million after increasing at an annual average of 27.7 per cent. Net profit for the first half of 2020/21 amounted to Rs168.5 million.