Laurus Labs

Promoted by Dr Satyanarayana Chava and Dr Raju Kalidindi in 2005, Laurus Labs (Laurus) is the leading research and development (R&D)-driven pharmaceutical company in India, with a leadership position in generic active pharmaceutical ingredients (APIs) for select, high- growth therapeutic areas of anti-retrovirals (ARVs) and Hepatitis C. The strategic and early investments in R&D and Manufacturing infrastructure have enabled them to become one of the leading suppliers of APIs in the ARV therapeutic area to multi-national pharmaceutical formulation companies catering to the large and fast-growing donor-funded access-to-medicines market sof Sub-Saharan Africa, South-East Asia and Latin America.

Laurus has launched 59 products since their inception in 2005. In FY 2016, Laurus sold their APIs in 32 countries. The company also manufacture APIs in oncology and other therapeutic areas. The company also has growing synthesis and nutraceutical and cosmeceutical ingredients businesses. Further, it is increasingly focusing on growing the integrated generics finished dosage forms (FDFs) business.

Key customers include Aspen Pharmacare, Aurobindo Pharma, Cipla, Mylan Laboratories, Natco Pharma and Strides Shasun. In FY 2016, nine out of the 10 largest generic pharmaceutical companies in the world by revenues were its customers.

As of September 30, 2016, Laurus had employed 605 scientists at the R&D center in Hyderabad and 12 scientists at the R&D centre in Greater Boston, which constituted 24.4% of the total employee strength. It is currently in the process of expanding the R&D center in Hyderabad and setting up another R&D center in Visakhapatnam. The company currently has three manufacturing facilities in Visakhapatnam and in the process of setting up two additional manufacturing facilities in Visakhapatnam, one of which is expected to be operational by end of FY 2017. Post this planned expansion, the aggregate reactor volumes of the company will increase from 1833.6 kilo liters (kl) to 2,095.6 kl by end of FY 2017.

The company has entered into a long-term license agreement with Gilead Sciences Ireland UC to manufacture and sell sofosbuvir, ledipasvir and velpatasvir within specified jurisdictions. The company has also entered into a tripartite sublicense and technology transfer agreement with Bristol-Myers Squibb Company and the Medicines Patent Pool Foundation to manufacture and sell daclatasvir for ultimate use in specified jurisdictions. The company has entered into an arrangement with Natco to manufacture and sell Hepatitis C APIs. In the oncology therapeutic area, the company is focused on increasing sales of their existing products and commercializing new products.

The Offer and the Objects

The issue comprises fresh offer of Rs 300 crore, which at lower price band of Rs 426 per share works out to an issue size of 70.42 lakh shares and at the higher price band of Rs 428 per share works out to 70.09 lakh shares.

The issue also comprises an offer for sale of 2.41 crore shares by the selling shareholders, which at the lower price band of Rs 426 per share works out to an issue size of Rs 1026.66 crore and at the higher price band of Rs 428 per share to an issue size of Rs 1031.48 crore. The selling shareholders comprise institutions such as Aptuit (90.40 lakh shares), Blue water (90 lakh shares), FIL Capital Management (60.28 lakh shares) and FIL Capital Advisors (0.39 lakh shares). The minimum bid lot is 35 equity shares and in multiples of 35 equity shares. The issue is made through the book-building process and will open on 6 December and will close on 8 December, with anchor investor bidding date of 7 December 2016.

Apart from achieving the listing benefits of equity shares on the BSE and the NSE and enhancing the visibility and brand image among the existing and potential customers and provide liquidity to the existing shareholders, the objects of the offer is to pre pay the term loans and general corporate purposes.


The company is a leading producer of generic API in the high growth therapeutic areas of ARV and Hepatitis C. The manufacturing facilities are capable of large-scale commercial production of APIs enabling the company to position itself as a supplier of choice for major pharmaceutical companies. The regulatory compliant manufacturing facilities are attracting global generic pharmaceutical companies for contract manufacturing of generic APIs. It currently has four customer contracts for manufacturing of generic APIs.

The company is further building on the API strengths to forward integrate into FDF. As of September 30, 2016, the company had invested Rs.209.79 crore to set up an FDF manufacturing facility, which has a current capacity of one billion tablets per year and has civil infrastructure in place that can increase their manufacturing capacity at this facility to five billion tablets per year, after incurring additional investments. The API production presence at the same location will be the key to growth of the FDF business and allow the company to capture significant operating efficiencies.

Good R&D and process chemistry skills. As of September 30, 2016, the company owned 34 patents and had 152 pending patent applications in several countries and had commercialized 59 products since their inception. The company had commercialized 30 out of 37 drug master files (DMFs) filed as on September 2016.

The company is positioned to capitalize on the ARV API opportunity as a result of its portfolio and scale of operations. As of September 30, 2016, the companys ARV API portfolio comprised 11 commercialized products. It supplies ARV APIs to all major global producers of FDFs including those having their own API manufacturing capabilities.

The company has a portfolio of products in the oncology therapeutic area, a market that is expected to grow steadily at 7% to 8% between 2015 and 2020 to reach a value of US$152 billion in 2020. As of June 30, 2016, the oncology portfolio consists of 15 active DMFs and it supplies oncology APIs to global generic multinational pharmaceutical companies.


The company is over dependent on therapeutic segment of ARV, which contributed over 70% of the revenues in FY 2016.

In the event of a breakthrough in the development or invention of alternate drugs or formulations by competitors, the companys product can become obsolete.

A significant portion of companys revenues (around 68% in FY 2017) come from a few customers, most of with whom the company does not have long-term contractual arrangements. The loss of one or more such customers can affect the business operations.

Current and upcoming manufacturing locations are located in the same region: Vishakhapatnam.

Significant raw material requirement is sourced from China.

Exposed to forex fluctuations in rates between US $ and the Indian rupee.


For the half year ended September 2016, the company reported consolidated net sales of Rs 929.60 crore, with the OPM of 21.1%, resulting in OP of Rs 196.60 crore. Interest costs stood at Rs 52.90 crore and depreciation at Rs 53.60 crore. After providing total tax of Rs 25.80 crore, consolidated PAT stood at Rs 75 crore. Net profit cannot be annualised to calculate EPS due to seasonality in business.

For FY 2016, consolidated net sales were up 34% to Rs 1783.80 crore. The OPM stood at 20.9% compared with 15.1% for FY 2015, thus leading to an 86% increase in OP to Rs 372.20 crore. Interest costs increased by 13% to Rs 120 crore and depreciation was up by 50% to Rs 92.20 crore, leading to a 152% increase in PBT. After providing total tax of Rs 34.50 crore, and MI of Rs 0.40 crore, consolidated PAT increased 94% to Rs 132.70 crore. On a higher price band of Rs 428, the diluted equity share capital of the company stands at Rs 105.71 crore of face value of Rs 10 each. EPS for FY 2016 works out to Rs 12.6. At higher price band the scrip is offered at P/E multiple of around 34. Much larger companies like Divis Lab and Aurobindo Pharma are trading at P/E of 20-25 times their FY 2016 EPS.

Laurus Labs: Issue highlights

For Fresh Issue Offer size (in number of shares )
- On lower price band70.42 lakh
- On upper price band70.09 lakh
Total Fresh Issue of shares (Rs crore)300 crore
Offer for sale size (in Rs crore )
- On lower price band1026.66
- On upper price band1031.48
Total Offer for sale (number of shares)2.41 crore
Price band (Rs)426-428
Post issue share capital (Rs crore) 105.71
Post-issue Promoter & Group shareholding (%)30.7%
Issue open date06-12-2016
Issue closed date08-12-2016
Rating 40/100

Laurus Labs: Consolidated Financials

Net Sales450.70718.501159.701326.601783.80929.60
OPM (%)17.3%20.2%18.0%15.1%20.9%21.1%
Other in. 1.605.108.8034.107.6012.20
PBT 21.5086.10120.9066.60167.60102.30
PBT after EO21.5086.10120.9066.60167.60102.30
Tax (including Deferred Tax)0.00-2.1023.60-1.6034.5025.80
MI and share of assiciates0.
Total PAT21.5088.2097.3068.40132.7075.00
EPS (Rs)*
*EPS is on diluted equity share capital of Rs 105.71 crore of face value of Rs 10 each
#EPS not annualised due to seasonality of business
Figures in crore
Source: Capitaline Database

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