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Quality Chemicals plans IPO?

Workers at the Cipla Quality Chemicals plant in Luzira, Kampala.

Ugandan bourse managers say pharmaceutical firm’s latest plans no different from past claims

The Kampala-based pharmaceutical firm Cipla Quality Chemical Industries Ltd, often called just Quality Chemicals Ltd, has once again signaled intention to offer shares to the public in an Initial Public Offer (IPO).

The subsidiary of Indian drugs maker, Cipla, says the IPO is part of its plan to raise capital to fund its growth strategy.

Unlike in the past, the drug manufacturer might be serious.

Nevin Bradford, the chief executive officer at Cipla QCIL confirmed to The Independent in an interview that indeed the firm intents to list on the stock market but more information remain confidential.

“We are still involving various stakeholders in planned activity,” he said.

In a statement on the Cipla website on Nov 10, the company says the board of Cipla QCIL is evaluating an IPO and Renaissance Capital Kenya Limited has been appointed as the official book runner.

The subsidiary of Indian drugs maker, Cipla, enjoys a significant market share in the production and sale of World Health Organization pre-qualified life-saving medicines for the Sub Saharan African region. It holds 62.30% of the Ugandan subsidiary and said certain shareholders may consider selling down part or all of their stake to enable sufficient free float and liquidity.

The Cipla Group, represented through its subsidiaries, intends to continue holding the majority stake and control.

Cipla QCIL was founded in 2005 as a joint venture between Cipla, Ugandan pharmaceuticals firm Quality Chemicals Ltd and the government of Uganda to set up a pharmaceutical plant.

The more than US$200million manufacturing firm, which sits on 12 acres of land with a factory area of 11,800 square meters, focuses on the production of anti-malarials, anti-retrovirals and Hepatitis B drugs for the Sub-Saharan African region including Kenya, Tanzania, South Sudan, Angola and Zambia.

Although the firm has the capacity to produce 70 million tablets a month, it is currently producing at 65-70 % capacity due to instability in demand for drugs.

Keith Kalyegira, the CEO of Capital Markets Authority, however, could neither confirm nor deny whether the firm has contacted the regulator for an approval to list on the Uganda Securities Exchange.

But Paul Bwiso, the CEO of the USE told The Independent that they are not aware of Cipla QCIL’s plans to list of the stock exchange. In any case, the firm has been hinting on the listing since 2012, Bwiso said.

“We are yet to receive any communication from any company. Possibly, we should keep waiting,” he said. Since 2012, only one firm-Umeme Limited has listed on the USE.

Reports indicate that Cipla QCIL had profit after tax of about Rs 1.56 crore (US$230,018) on revenue of almost Rs 6 crore (US$884,683) in 2015-16, as per Cipla’s annual report.

That’s a fraction of the company’s consolidated profit of Rs 1,506 crore (US$ 222.06million) on revenue of Rs 14,067 crore (US$ 2.07billion).

A fortnight ago, Cipla reported a 35% fall in net profit to Rs 335 crore (US$49.4million) for the July-September quarter primarily due to lower sales in emerging markets and Europe. Total revenue rose 8.6% to Rs 3,672 crore (US$ 541.43million).

Cipla is a major pharmaceutical company in South Africa with a private market share of more than 5%, according to the annual report, with South Africa contributing 11.5% to the company’s overall revenue on a consolidated basis.

Successful listing of Cipla QCIL would bring the number of listed firms to 18. This would still be below the 21 firms listed on the Dar es Salaam Stock Exchange in Tanzania and 63 on the Nairobi Stock Exchange in Kenya.

Over the years, Ugandan firms have been reluctant to go public as most privately and family-owned businesses are not willing to list on the stock market for fear of losing their control and public scrutiny.

The USE boss said the Exchange is currently educating the public about the importance of stock market, and transaction advisors are talking to family businesses to open up for equity.


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