Cipla joins stock market

Company’s IPO was the most efficient with less than 5% of advertising and promotional budget compared to previous offers

Kampala, Uganda | JULIUS BUSINGE | Shares of Cipla Quality Chemicals Ltd started trading at the Uganda Securities Exchange on September 17, making it the first drug maker in the region to list on the stock exchange.

The drug maker, whose Initial Public Offering opened on August 14-30, started trading at Shs256.5 per share. It now joins the ranks of eight other local firms including Uganda Clays Limited, New Vision, dfcu and Umeme that have already done so.

The company raised Shs166.567bn through the IPO that attracted 98.8% subscription as it seeks to expand drug production capacity and portfolio.

Cipla had planned to sell 657million shares which represents 18% stake of the entire shareholdings. Emmanuel Katongole, the executive chairman for CiplaQCIL described the offer as ‘extremely successful’ after 2,600 investors bought into the company. Of these 2500 are Ugandans.

Officials named the National Social Security Fund (NSSF) of Uganda and Public Investment Corporation of South Africa as some of the top institutional investors that bought into the company.

Katongole said that the money raised through the IPO will help support the company to meet its growth strategy and become a center of excellence in the manufacturing of quality, affordable and newer medicines to improve on the quality of lives.

He said that the many Ugandans that bought into the company have trust in the economy. “We are excited,” he said.

He added that they are embarking on this journey with many Ugandan individuals, investment clubs, and institutional investors. He assured the investors that management will work hard to grow value for their investment, meet customer demands and improve lives in communities.

“We appeal to many Ugandans to trade our shares and make the stock exchange grow,” he said. Paul Bwiso, the chief executive officer of the Uganda Securities Exchange (USE) welcomed Cipla as the first company with Ugandan founders and entrepreneurs on the bourse and said in the coming months they expect to see the market busy and turnover growing.

He added that in the next three months, they expect to have made steps towards having three companies listing on the bourse. John Porter, the chief business officer for Renaissance Capital, the lead transaction advisor, said the robust participation by investors demonstrated confidence in the CiplaQCIL story and Uganda’s capital markets as an avenue for growing investors’ assets.

“It is our strong belief that the transaction will also have economic and social impact in the region by way of improving employment, national trade balance and ultimately investment climate in general,” he said.

Robert Baldwin, the chief executive officer at Crested Capital, the lead sponsoring stock broker, said more than 30 investment clubs and SACCOs participated in the offer hence deepening the engagement of the investing public in Uganda’s stock market.

He added that this IPO was the most cost-efficient with less than 5% of advertising and promotional budget compared to previous public offers. He said that the new listing is likely to boost market activity going forward.

The company started operations in 2005 as a joint venture between Quality Chemical Limited (QCL), a Ugandan company dealing in the importation and distribution of pharmaceutical drugs, and Cipla Ltd, a leading Indian pharmaceutical company specialising in manufacturing anti-retroviral drugs (ARVs) and Artemisinin-based Combination Therapies (ACTs) to combat HIV/ Aids and malaria respectively.

Since then, the firm has initiated multiple capacity expansion programs and portfolio expansion, including the launch of new therapies.

Cipla’s plant is currently approved by drug authorities in 13 Sub-Saharan African countries and its products sold in nine countries – Uganda, Kenya, Cameroon, Angola, Tanzania, Zambia, Namibia, Mozambique and South Sudan.

It also hopes to sell its products to 19 countries by the end of 2020. The firm manufactured over 1billion tablets – the highest volume in its history last year, with a monthly production in December alone reaching a record of 124 million tablets.

In terms of returns, the firm has consistently recorded growth in revenues over the last five years due to rapid expansions into new markets.

For instance, its revenues have increased from Shs89.7bn as at the end of March 2013 to Shs227.3bn as at the end of March 2018. Consequently, the firm’s net profit has increased from merely Shs8.28bn to Shs44bn. Its assets have grown from Shs106.7bn to Shs 209.29bn in the period under review.

With this upward trend curve for net profits, assets in addition to its planned expansion strategy, one can easily conclude that the company could be a good buy.

****

Additional reporting by Isaac Khisa