This is what the brokerages are saying about Rs 550-crore Syngene International's IPO
With a price band of Rs 240- 250, the company plans to garner around Rs 550 crore. The company is offering as many as 2.2 crore equity shares, which includes 20 lakh equity shares for Biocon shareholders, of which it is a subsidiary
Syngene International Limited is going public with its initial public offering (IPO) starting on July 27.
With a price band of Rs 240- 250 per share, the company plans to garner around Rs 550 crore with the IPO.
The company is offering as many as 2.2 crore equity shares, which includes 20 lakh equity shares for Biocon shareholders, of which it is a subsidiary.
The IPO will close on July 29. The company expects that the listing the company will enhance its visibility and brand image among its existing and potential clients, and provide liquidity to the existing shareholder.
SIL is a subsidiary of Biocon Limited (“Biocon”), a global biopharmaceutical enterprise focused on delivering affordable formulations and compounds.
It offers a suite of integrated, end-to-end discovery and development services for novel molecular entities across industrial sectors including pharmaceutical, biotechnology, agrochemicals, consumer health, animal health, cosmetic and nutrition companies.
Biocon holds 85.5% in Syngene, out of which, it has offered 11% for sale.
As of March 31, SIL's tangible gross fixed assets were Rs 931.1 crore, and as of May 31, it had 2,122 scientists.
The company posted Rs 860 crore in revenues in FY15, and has projected that it may report an estimated Rs 1,028 crore in FY16.
Key concerns:
High Client concentration: SIL has highly concentrated revenues, wherein top 10 clients contribute 71% of revenues. Its top client BMS alone contribues 30% to revenue.
The loss of or a significant decrease in business from one or more of these clients could adversely impact the business of the company.
Conflict of interest: The interests of the promoter, Biocon may conflict with the interests of SIL.
Termination of Contracts: SIL’s contracts are generally terminable without cause upon 30 to 90 days’ notice by the client. Clients may terminate, cancel or delay contracts for various reasons. Such terminations could lower its level of resource utilisation, which would reduce SIL’s profitability.
Outsourcing of R&D: SIL is dependent on the continued outsourcing of R&D by pharmaceutical, biotechnology, agrochemistry, consumers health, animal health.
Expenses: Employee benefit expenses will continue to increase, and SIL may not be able to pass such increase on to its clients, which may adversely impact its profitability. Also, growth in contract research (CR) itself is dependent on rising share of R&D outsourcing by pharma industry; any increase in captive R&D capabilities and/or changes in actual R&D outsourced due to industry consolidation etc could impact CR growth rates.
Foreign exchange fluctuations: The company gets its revenues pre-dominantly in dollar and euro, which means, its revenues are vulnerable to exchange rate fluctuations.
Brokerage houses:
India Infoline Limited:
We believe Syngene’s existing business would chug along at robust 20% growth rate on the back of 12% growth in global contract research organisation (CRO) market plus continued market share gains given the strong 20-year track record.
This is the only company in listed space for Contract research and manufacturing services (CRAMS) in bioâ€pharmaceuticals.We recommend subscribing for the IPO for 15â€20% gain in near term.
PhillipCapital (India) Pvt. Ltd:
We expect an earnings surprise to our estimates in FY17 and believe Syngene will command better valuation than Wuxi Pharmatech (the only comparable peer in Asia). Considering huge CRAMS opportunity (small molecule and biologics) and Syngene’s business diversification to highâ€margin contract manufacturing of novel molecules, we recommend a ‘Subscribe’ to the IPO at the higher price band.
Nirmal Bang Research:
We expect SIL to maintain 25-30% growth going forward​.