Wockhardt Ltd. RI review (May apply)

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•    Despite losses, the company is enjoying its brand image.
•    It has skipped dividends since FY17.
•    The company is incurring losses since FY19.
•    Due to fancy, the counter is well quoted on the bourses. 
•    Investment may be considered with a long term perspective. 

Wockhardt Ltd. was originally incorporated as Wockhardt Pharmaceuticals Ltd. and later on, it changed its name to the current one. The company is among the key research-based global pharmaceutical companies based in India (CRISIL Report). It is engaged in the research and development, manufacture and distribution of pure and branded generics, vaccines, biosimilars, active pharmaceutical ingredients ("APIs"), as well as new chemical entity ("NCE") antibiotics targeting antimicrobial resistance ("AMR"). 

The company has four key revenue streams, namely generics, biotech, vaccines and NCEs, that accounted for 67.2%, 12.5%, 19.3% and 0.9%, respectively of its total income for the nine-month period ended December 31, 2021. For the nine-month period ended December 31, 2021, its operations in the United Kingdom, India, the Rest of the World ("RoW") markets, the United States and Europe accounted for 44%, 19%, 16%, 11% and 10%, respectively, of total income.

It manufactures and distributes pharmaceutical products across acute therapeutic areas, such as pain management, cough, nutrition, steroids, anti-infective and acute dermatology, and chronic therapeutic areas, such as diabetes, nephrology, neuropsychiatry, chronic pain and chronic dermatology, as well as different drug delivery forms, including solids, injectables, biotechnology, liquids, nasal sprays and complex technologies. One of its business strategies is to deepen market share in chronic therapeutic areas, which accounted for 41% and 46% of total income in Financial Year 2020 and 2021, respectively, as compared to acute therapeutic areas, which accounted for 53% and 49%, respectively, of total income during the same periods. 

The revenue generated from chronic therapeutic areas and acute therapeutic areas stood at 38% and 53%, respectively, of consolidated revenue for the nine-month period ended December 31, 2021, with the increase in revenue generated from acute therapeutic areas being primarily due to significant revenue amounting to Rs. 496 crores generated from the supply of COVID-19 vaccines in the United Kingdom.

The company has leveraged its established capabilities in the manufacturing and distribution of pharmaceutical and biotechnology products to build innovative and multi-disciplinary research and development capabilities. Its research and development efforts have resulted in 3,214 patents filed and 793 patents held worldwide as of December 31, 2021. It has over 520 scientists including over 80 PhDs and more than 150 in the drug discovery team across three research and development centres and other locations as of January 31, 2022.

As of December 31, 2021, the company has 12 manufacturing facilities, eight of which are located in India and one each in the United Kingdom, the United States, Ireland and the United Arab Emirates.

To part finance its need for repayment of certain subordinated/outstanding debts with interest (Rs.590.00 cr.) general corporate purpose (Rs. 152.00 cr.), the company is coming out with a rights issue (RI) to mobilize Rs. 748.00 cr. The company will be issuing 33244650 equity shares of Rs. 5 each at a fixed price of Rs. 225 per share in the ratio of 3 rights shares for every 10 shares held as on the record date of March 09, 2022. The issue opens for subscription on March 15, 2022, and will close on March 22, 2022. Post allotment, shares will be listed on BSE and NSE. The company will be spending Rs. 6.00 cr. for this RI process. 

The issue is solely lead managed by Ambit Pvt. Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. 

Post RI, the company's current paid-up equity capital of Rs. 55.41 cr. will stand enhanced to Rs. 72.03 cr. Based on the RI pricing, Wockhardt is looking for a market cap of Rs. 3241.35 cr. 

The company has posted declining trends for top-line from 2017 to 2020 and has marked turnaround for 2021. However, it has been posting losses since 2019 and skipping the dividends.  The company posted turnover/net profits of Rs. 2534.14 cr. / Rs.68.66 cr. (FY18), Rs. 2180.95 cr. / Rs. - (81.89) cr. (FY19), Rs. 933.08 cr. / Rs. - (231.12) cr. (FY20) and Rs. 1027.99 cr. / Rs. 593.29 cr.  (FY21). Profits for FY21 includes onetime income on the sale of discontinued operations. For the nine months of FY22 ended on December 31, 2021, it has posted a loss of Rs. - (179.51) cr. on a turnover of Rs. 908.35 cr. Thus its loss-making trends raise concern for a while. 

The company has not declared any dividend since 2017. 

The scrip last closed on cum-right basis at Rs. 340.95 on March 07, 2022, and opened on the ex-rights basis at Rs. 315.90 on March 08, 2022. Since then, it has posted the high/low of Rs. 326.45 / Rs. 304.95. It last closed at Rs. 310.15 on March 11, 2022, and based on this quote, its market cap comes to Rs. 4467.76 cr. 

For the last 52 weeks, it has posted the high/low of Rs. 741.75 / Rs. 300.80. Its promoter's holding has come down from 69.68% as of June 30, 2021, to 67.13% as of December 31, 2021.

Conclusion / Investment Strategy

The company has worldwide operations, but of late it has been posting losses and has skipped dividends from FY17. The counters have seen price movements well above the RI pricing and makes this offer a worthy bet. Investors may consider investing in this fully priced offer with a long term perspective.

Review By Dilip Davda on Mar 11, 2022

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).

About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

More Wockhardt Ltd RI Views / Analysis / Recommendations ...

The Wockhardt Rights Issue Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered Rights Issue Analysts tells you if Wockhardt Rights Issue worth investing. The Wockhardt Rights Issue Note sets the Rights Issue expectations in systematic way which tells you if Wockhardt Rights Issue good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Wockhardt Rights Issue by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.


2. વિરૂબેન ચૌધરી     Link|Mar 14, 2022 6:12:54 PM
મને vokhart ના ૭૫ શેર રાઈટ માં મળવાપાત્ર છે, પણ મને હજુ સુધી તેનું ફોર્મ મળ્યું નથી, તો મારે કેવી રીતે ઇસ્યુ ભરવો?
1. DPKN     Link|Mar 13, 2022 5:11:17 AM
Thank you so much Dilip sir, you have been doing a tremendous job in helping the retail investors with your views and all the details in this website are amazing!

Appreciate your enthusism is sharing the knowledge and helping the newer generations of investors with you valuable insights!