Akum Drugs and Pharma files DHRP: A deep dive into India’s leading CDMO

Amidst the dynamic landscape of India’s pharmaceutical industry, Akum Drugs and Pharma Ltd (Akum) stands poised to embark on a new chapter with its upcoming Initial Public Offering (IPO). As a leading pharmaceutical contract development and manufacturing organization (CDMO), Akum has carved a niche for itself by offering end-to-end product development and manufacturing solutions. This article explores Akum’s journey, its position in the market, and the factors driving its growth as it ventures into the realm of public trading.

India Healthcare Expenditure and Growth Drivers

India’s healthcare sector is witnessing a transformative shift, fueled by increasing disposable incomes and heightened awareness post-pandemic. Despite historical under-penetration, rising discretionary spending on healthcare is evident, driven by factors such as increasing insurance penetration and efforts to reduce out-of-pocket expenditure. With India’s healthcare expenditure at a mere 3.0% of GDP, there exists significant potential for growth, particularly in the realm of affordable healthcare products.

Pharmaceutical Industry Overview

The pharmaceutical sector, a crucial component of India’s healthcare ecosystem, has witnessed substantial growth, propelled by factors like the rise in chronic disease cases and the affordability of drugs. With a global pharmaceutical market projected to reach USD 1,967.0 billion by 2027, opportunities abound for companies like Akum to capitalize on emerging therapeutic areas such as Oncology, Alimentary Tract and Metabolism, and cardiovascular diseases.

Akum Drugs and Pharma Ltd Business Overview

Akum Drugs and Pharma Ltd, a frontrunner in the pharmaceutical CDMO space, boasts a diverse range of services encompassing formulation R&D, regulatory filings, and manufacturing of branded pharmaceutical formulations and APIs. As the largest India-focused CDMO in terms of revenue and production capacity, Akum has fostered longstanding relationships with key industry players, positioning itself as a trusted partner in the pharmaceutical value chain.

Financial Statements

Akum’s financial performance underscores its growth trajectory. With revenue from operations reaching Rs 3,654.82 million in the financial year 2023 and an EBITDA margin of 10.51%, the company has demonstrated robust operational efficiency and profitability. However, challenges such as a negative return on equity (-27.23%) highlight areas for improvement, which the IPO aims to address by unlocking fresh capital for expansion and investment in R&D.

Strengths

Akum’s strengths lie in its strategic presence across the pharmaceutical value chain, diverse client base, and rapidly growing R&D capabilities. With a market share of 29.4% in the Indian domestic CDMO market, the company is well-positioned to capitalize on the forecasted CAGR of 14.0% between the financial year 2023 and the financial year 2028. Additionally, its focus on scaling the API business and expanding domestic formulations augurs well for future growth.

Risk Factors

Despite its promising prospects, Akum faces several risks, including the concentration of manufacturing units in a single region, regulatory scrutiny, and dependence on third-party suppliers for raw materials. These risks underscore the importance of prudent risk management strategies as the company navigates its IPO and subsequent expansion plans.

Conclusion

In conclusion, Akum Drugs and Pharma Ltd’s IPO marks a significant milestone in its journey towards unlocking new growth opportunities. With a strong foundation, diverse service offerings, and robust financial performance, Akum is well-poised to capitalise on the evolving dynamics of India’s pharmaceutical landscape. However, navigating challenges and mitigating risks will be imperative as the company embarks on its public trading journey, with a steadfast commitment to delivering value to its stakeholders and contributing to the advancement of healthcare in India and beyond.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.