Windlas Biotech Limited - IPO Note

Pharmaceuticals & Drugs

Windlas Biotech Limited - IPO Note

Pharmaceuticals & Drugs

Price range
Rs. 448 – 460
Issue Period:
Aug 04, 2021
Aug 06, 2021
August 04, 2021

Stock Info

CNX Nifty
Face value (Rs.)
Market lot
Issue size
Rs. 401.54 cr.
Public Issue
0.87 cr. shares
Market cap post IPO
Rs. 981 – 1,003 cr.
Equity Pre - IPO
1.82 cr.
Equity Post - IPO
2.12 cr.
Issue type
Fresh Issue and Offer for Sale

Shareholding (Pre IPO)

Source: Ace equity, StockAxis Research

Shareholding (Post IPO)

Source: Ace equity, StockAxis Research

Key Strengths and Strategies

Chronic Therapeutic Focused CDMO Player
In terms of revenue, the company is one of the top five domestic pharma formulations CDMOs. With large pharma companies increasingly focusing on cost-cutting and operational optimization, CDMO has gained significant traction in the international pharma industry. Pharma companies are outsourcing the development and manufacturing of new products, which has resulted in a 13 percent increase in the domestic formulations CDMO market over the last five years, compared to an 8.6% increase in the domestic formulations market. According to the company, the increased use of outsourcing for the launch of new products is leading to increased growth in the CDMO industry and, as a result, opportunities for it. In FY20, the company’s market share was ~1.5% in terms of revenue in domestic formulations CDMO industry.

Chronic therapeutics is the key focus area of the company and revenue contribution from the sale of products in the segment (including sub-chronic) is 59.55% in FY21. The number of products in the segment have increased from 554 in FY19 to 920 in FY21.

Complex Generic Product Portfolio backed by R&D Capabilities
The company is focused on developing and launching new complex generic products, particularly those related to the formulation manufacturing process and drug delivery. It manufactures solid and liquid pharma dosage forms and provides capabilities including high potency, controlled substances, and low-solubility products. Its complex generic product portfolio comprises fixed dosage combinations, fixed dosage plus modified release combinations, customized generics and chewable, which was 68.5% in FY21 of total product portfolio.

It uses owned R&D resources to develop, optimise, and standardise formulation and manufacturing process, and conduct the required stability testing as well as conduct clinical studies through qualified third party CRO to obtain the regulatory licenses. As of March, 2021, the company had a team of 45 experts in medical affairs, regulatory affairs, pharmacology, and chemical research that works to identify ideas of complex generic products that create value at the end users’ level by improving the efficacy, safety, and cost of existing generics. Additionally, as of March, 2021, the company had obtained the license to manufacture 3,279 products from the State Drug Licensing Authority, Drug Controlling and Licensing Authority (Manufacturing), Garhwal Mandal, Uttarakhand.

Long-Term Relationships with Indian Pharmaceutical Companies
The company has developed relationships with leading Indian pharma companies which includes Pfizer, Sanofi India, Cadila Healthcare / Zydus Healthcare, Emcure Pharmaceuticals, Eris Lifesciences, Intas Pharmaceuticals, and Systopic Laboratories. The number of domestic CDMO customers that the company has catered to have increased from 97 in FY19 to 204 in FY21. In FY20, it provided CDMO services to 7 of the top 10 Indian formulations pharma companies. It has a history of high customer retention and as of December, 2020, it has been associated with:

  • Systopic Laboratories for ~19 years.
  • Win-Medicare for ~19 years.
  • Eris Lifesciences for ~12 years.
  • Intas Pharmaceuticals for ~11.8 years.
  • Lincoln Pharmaceuticals for 11 years, and
  • Cadila Healthcare / Zydus Healthcare for 9.5 years.

Its CDMO agreements are typically long-term in nature where the validity of the contract ranges between 2-5 years, with the option of renewal on mutually agreed terms. It derives a significant proportion of revenue from such long-term agreements with customers. Revenue generated from sales from top 10 customers represented 57.9% of revenue in FY21.

Foray into Injectables Segment
The domestic injectables CDMO industry is expected to grow at a CAGR of 11.5% - 12.5% between FY20 and FY25. The injectables segment is expected to account for 12% to 13% of all the dosage forms in the domestic formulations market and 13% to 14% of the domestic formulations CDMO market in FY25. The margin for contract manufacturers in the injectables segment is robust as there are fixed contracts for the development and manufacturing of the drugs and there are no selling and general costs for the contract manufacturers.

Accordingly, the company will use Rs. 50 crores of net proceeds towards capex for capacity expansion of existing manufacturing facility at Dehradun Plant – IV and setting up of an injectables dosage capability at existing facility at Dehradun Plant-II. The management believes that the proposed injectables business will complement existing CDMO offerings and enable the company to achieve higher margins. Further, the B2B model also allows opportunity for scaling up operations as the players can specialize molecule and have supply contracts with multiple injectables marketing players. The company intends to focus on specialising in developing liquid vials and lyophilized vials.

Expanding Product Portfolio and Delivery Systems by Enhancing R&D and Manufacturing Capabilities
Pharma companies are outsourcing R&D activities to academic and private CROs to reduce drug development timelines and costs. The company’ R&D efforts are primarily focused on expanding and diversifying its product and delivery system to cater to different therapeutic segments. The company continues to focus on expanding product development and manufacturing capabilities in complex generic products by developing products, including, (i) alternate dosages, such as medicated mouth sprays; (ii) coating technologies, including pellet coating using bottom spray, API coating, pH dependent coating and nanonized crystals; (iii) nutraceuticals dosages, including, biscuits, protein powder, supplements, chocolate bars and malt based foods; and (iv) ayurvedic products, such as, wellness products, hair oils and cough syrups.

It has also entered into grant-in-aid letter agreements with Biotechnology Industry Research Assistance Council and National Institute of Pharmaceutical Education and Research for funding of projects titled (i) Clinical evaluation of formulations based on NanoCrySP technology; and (ii) ‘Enhancement of oral bioavailability of poorly water-soluble drugs using NanoCrySP technology. Windlas will continue to identify, develop, and launch new products and delivery systems to meet market needs and capture growth opportunities to sustain the company’s revenue growth and profitability.


  • Customer Concentration – Revenue from CDMO has historically been derived from a small customer base. In FY21, top 10 customers represented 57.9% of total revenues. Largest customer represented ~11% of revenues.
  • High Competition – The company operates in a highly competitive market. Domestic formulations industry is highly fragmented in terms number of manufacturers and products, with 300-400 organised and ~15,000 unorganised players. Contract manufacturing is also high fragmented. Further, there are existing players in injectables business having more established products, experience and deeper relationships with customers and distribution channels.
  • Working Capital Intensive – The business is working capital intensive. It needs to maintain sufficient stock all the time to meet manufacturing requirements. Working capital as a percentage of total assets was 32.15% in FY21. The part of the net proceeds (Rs. 47.56 crores) will be used towards funding incremental working capital requirements in FY22 and FY23.

Company Description

Incorporated in 2001, Windlas Biotech Limited (Windlas) is amongst the top five players in domestic pharmaceutical formulations contract development and manufacturing (CDMO) industry in term of revenue. It has two decades of experience in manufacturing solid as well as liquid pharma dosage forms and provides comprehensive range of CDMO services ranging from product discovery, development, licensing, and commercial manufacturing of generic products, including complex generics. The company operates through three business verticals: a) CDMO services and products, b) domestic trade generics and over-the-counter (OTC) brands, and c) Exports.

Under CDMO, the company provides products and services across range of pharmaceutical and nutraceutical generic products for domestic and multinational pharma companies. The segment contributes majority of the revenues (FY21 - 84.7%). It partners with clients early in the drug development process, which provides the company an opportunity to continue to expand relationship as molecules progress through the clinical phase and into commercial manufacturing. In FY20, it provided services to 7 of the top 10 domestic formulation pharma companies.

Its domestic trade generics and OTC segment includes trade generic products and OTC brands, which include nutraceutical and health supplement products that are marketed and distributed in India under its own brand names through online and offline channels. The segment contributed 10.2% of total revenue in FY21.

Exports segment is engaged in identifying high growth markets and opportunities in semi-regulated markets as well as selected regulated markets, for developing and registering product applications to obtain marketing authorizations for generic medicines and health supplements and subsequently, sell such products to pharma companies and pharmacies. In FY21, the segment accounted 4.5% of total revenue.

Currently, it operates four manufacturing facilities located at Dehradun, Uttarakhand. As of March, 2021, these facilities had an aggregate installed capacity of 7,063.83 million tablets/ capsules, 54.46 million pouch/ sachet and 61.08 million liquid bottles. Additionally, it has recently received a license to manufacture certain APIs at Dehradun Plant – I, which will help the company with backward integration.


Windlas is a CDMO player and focuses on chronic therapeutic category and has a product portfolio comprising complex generics. It also enjoys long-term relationships with some of the leading domestic pharma companies. The company intends to capitalise on the growth of domestic formulation CDMO industry, which is looking promising as per data which suggests domestic formulations CDMO to grow at a CAGR of 14% between FY20 – FY25. Further, Windlas intends to foray into injectables by capacity expansion and setting up of an injectables dosage capability. Given the intensely competitive nature of the industry and intense working capital requirements by the business along with higher valuation of the issue at 52.3x of FY21 earnings, we recommend to subscribe to this issue for listing gains.

Key Information

Use of Proceeds:
The company will utilise the net proceeds from the fresh issue towards:

  1. Purchase of equipment required for (i) capacity expansion of their existing facility at the Dehradun Plant – IV; and (ii) addition of injectables dosage capability at their existing facility at Dehradun Plant – II
  2. Funding incremental working capital requirements
  3. Repayment/pre-payment of certain borrowings, and
  4. General Corporate Purposes.

Book running lead managers:
SBI Capital Markets Limited, DAM Capital Advisors Limited, and IIFL Securities Limited.

Vivek Dhariwal (Chairman and Non-Executive Independent Director), Ashok Kumar Windlass (Whole-time Director), Hitesh Windlass (Promoter and Managing Director), Manoj Kumar Windlass (Promoter and Joint Managing Director), Pawan Kumar Sharma (Executive Director), and Komal Gupta (CFO)

Financial Statement

Profit & Loss Statement:- (Consolidated)

Particulars (Rs. in Crores) FY19 FY20 FY21
Revenue from Operations 307.27 328.85 427.60
COGS 191.92 211.60 274.41
Gross Profit 115.34 117.26 153.20
Gross margin (%) 37.54% 35.66% 35.83%
Employee Benefit Expenses 42.96 43.57 58.32
Other Expenses 33.88 32.22 40.18
EBITDA 38.51 41.47 54.69
EBITDA Margin (%) 12.53% 12.61% 12.79%
Depreciation & Amortisation 10.59 9.29 12.97
EBIT 27.92 32.17 41.73
EBIT Margin (%) 9.09% 9.78% 9.76%
Finance Costs 4.84 2.53 1.29
Other Income 4.26 2.49 3.09
Profit Before Share of gain/(loss) in JV and Associates, Exceptional Items & Tax 27.34 32.13 43.53
Share of gain/(loss) in JV and Associates -0.77 -7.47 -0.17
Profit Before Exceptional Items & Tax 26.57 24.67 43.36
Exceptional Items 49.55 - -21.62
Profit Before Tax 76.12 24.67 21.74
Tax 12.29 8.46 6.17
Profit After Tax 63.82 16.21 15.57
PAT Margin (%) 20.77% 4.93% 3.64%
Earnings Per Share (Rs.) 38.61 8.90 8.70