CiplaQCIL to go public

Cipla Quality Chemicals Industries Ltd, the largest drug maker in Uganda will go to the public as it plans to offer its Initial Public Offering (IPO). The drug maker intends to list 657 ordinary shares.

Cipla, which produces three major drugs comprising anti-malarials, anti-retrovial therapy (ARTs) and Hepatitis B and C entered into a Memorandum of Understanding with the Governmament of Zambia on the 17 May 2017. Under the memorandum, Cipla supplies ARVs, Artemininin-based combination therapy, hepatitis and other medications with a minimum value earning estimated at around Ugx 3.7b annually. This gave a boast to Cipla’s financial stability.

In February 2011, CiplaQCIL announced a US$40 million expansion to the production line to include increased production of antiretroviral and antimalarial medication.

CiplaQCIL reported a 8% reduction in gross margins from Ugx57.9b in the FY2016/17 to Ugx53.2b in 2017/18.

CiplaQCIL’s intention to list on the USE puts to  end the six year drought at USE without an IPO. The last IPO was Umeme in 2012.

“We see tremendous potential for growth,” noted Emmanuel Katongole, the Executive Chairman at CiplaQCIL. Over-optimism in projected future earnings should also be adequately weighted considering the aggregate global economy outlook. Creative utilization of offering proceeds is another key factor, investor’s should vigilantly monitor this before committing to the IPO.

Like every investment projection, CiplaQCIL’s future performance will no doubt be subjected to vagaries of other macro-economic factors considering the emerging global crisis.

If well managed, CiplaQCIL may turn out to be a good buy but investors must thread with great caution to avoid the Safaricom bubble that left the corporate class counting losses.

Will I recommend this IPO to a friend? Wait for our opinion after the offering.

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