Mankind Pharma shares nosedive 5% on report of I-T raid

After making a stellar debut on Tuesday, shares of Mankind Pharma continued their losing streak for the second consecutive session on Thursday amid a report that the Income Tax (I-T) department conducted searches at the pharma major’s New Delhi offices. The IT department is searching the company premises in Delhi and nearby locations over allegations of tax evasion, as per the report. However, the Delhi-based company is yet to issue an official statement on this development.

Extending losses for the second day, Mankind Pharma shares opened 0.7% lower at ₹1,371 against the previous closing price of ₹1,381.80 on the BSE. During the session so far, the pharma stock declined as much as 5.5% to hit an intraday low of ₹1,306, while the market capitalisation dipped to ₹54,516 crore. At the current price level, the stock trades 21% higher than its issue price of ₹1,080 per share.

On Wednesday, the stock ended 2.97% lower as investors resorted to profit booking to encash listing gains.

The I-T raid happened just two days after the maker of Manforce condoms and pregnancy test kit Prega News made a strong debut on the domestic stock exchanges. On Tuesday, Mankind Pharma had a blockbuster listing on bourses, with the shares listing at ₹1,300 on the BSE and NSE, a 20.4% premium to its issue price.

The Delhi-based company raised ₹4,326 crore in the country’s biggest initial public offering (IPO) so far this year, which received an overwhelming response from qualified institutional investors (QIBs) and non-institutional investors (NIIs), but failed to excite retail investors. The three-day IPO of Mankind Pharma, which opened for subscription between April 25-27, was subscribed 15.32 times, with the portion reserved for QIBs and NIIs receiving bids nearly 49.16 times and 3.8% times, respectively. However, the IPO received a tepid response from retail investors as the quota reserved for them was booked 0.92 times.

On Tuesday, foreign brokerage firm Macquarie initiated coverage on the stock with an 'outperform' rating and a target price of ₹1,400. The brokerage expects Mankind’s profit after tax (PAT) to more than double by FY26E, citing solid domestic business which contributes nearly 98% of its revenue. Within its domestic business, around 90% of revenue comes from prescription pharmaceuticals and the rest from the consumer health business.

The agency highlighted that Mankind Pharma's growth potential in the chronic segment may boost its margins and net profit. It expects margins to rise from 22% to 28% and net profit to more than double from around ₹1,300 crore to ₹2,800 crore from FY23 to FY26.

The report noted that despite a maximum market-share gain in chronic therapies (around 40 bps) in the last five years, Mankind’s chronic contribution of around 34% is below the India Pharma Market’s (IPM) average of around 38%. The agency expects its chronic therapy contribution to increase from 34% to over 40% by FY26, which will boost its margin.

The agency believes that continued sales outperformance to the Indian market, focus on chronic therapies, and improved salesforce productivity are growth drivers. However, failure to gain market share in chronic, regulatory changes in the Indian pharmaceutical market, and further stake sale by PE investors are key risks going ahead.

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