The Rs 3,043 crore-initial public offering (IPO) of Sai Life Sciences shall open for bidding on today, that is, Wednesday, December 11. The pharma company is selling its shares in the range of Rs 522-549 apiece with a lot size of 27 equity shares. The issue will close for bidding on Friday, December 13.
Incorporated in January 1999, Sai Life Sciences researches, develops, and manufactures small-molecule new chemical entities, offering its services across countries such as the US, the UK, Europe, and Japan. The issue has been able to draw limited interest from the investors with a mixed set of reviews.
Sai Life Sciences is one of the largest integrated CRDMOs in India among listed peers and has established capabilities across the discovery, drug development and commercial manufacturing value chain. Although, the company may seem slightly overvalued compared to its closest peer, said SBI Securities.
"It has delivered revenue/Ebitda/PAT CAGR of 29.8 per cent/ 53.4 per cent/264.7 per cent respectively between FY22-FY24. Furter, repayment of debt from the proceeds of the issue will reduce finance costs by Rs 56 crore thus augmenting profitability going forward. We recommend subscribing to the issue for a long-term investment horizon," it said.
On the other hand, Swastika Investmart believes that it has a cautious rating on the issue, considering the high valuation and limited direct benefits to the company. "Its financial performance has been positive with a sharp rise in profitability. High proportion of OFS, with limited direct benefits to the company. The IPO is significantly overvalued," Swastika said.
The IPO of Sai Life Sciences includes a fresh share sale of Rs 950 crore and its existing shareholders and promoters will cumulatively offload 3,81,16,934 equity shares from their stake amounting to Rs 2,092.62 crore. The net proceeds from the fresh issue shall be utilized towards repayment/prepayment of certain outstanding borrowings and general corporate purposes.
Sai Life Science is one of the leading players in CRDMOs in India. It has demonstrated a strong financial performance and company’s operating margins improved to 19 per cent in FY24. As a result, ROE and ROCE have also improved to 8.5 per cent and 11.6 per cent in FY24, respectively, said Nirmal Bang Securities.
Although company’s operating margin profile is lowest among its peers, it has a potential to improve it backed by their investments in R&D, talent development and operational excellence. Further, debt repayment worth Rs. 720 crore will result in lower finance cost in the future which will improve its overall profitability, it added with a 'subscribe for long-term' rating.
Ahead of its IPO, Sai Life Sciences raised Rs 912.78 crore from the anchor book as it allocated 1.66 crore shares at Rs 549 apiece. Marquee names including INQ Holdings, Smallcap World Fund, Fidelity, Blackrock, Abu Dhabi Investment Authority, Goldman Sachs, TIMF Holdings, Morgan Stanley, and Eastspring Investments participated in the anchor book.
The issue is priced at a P/E of 121.2x at the upper price band based on FY24 earnings, said StoxBox. "While the valuation appears high, the company’s strong performance and favorable industry trends make it a promising opportunity for medium to long-term investors. Therefore, we recommend a 'subscribe' rating for this issue," it added.
In the Financial Year 2024 and for the month ending September 30, 2024, Sai Life Sciences provided services to over 280 innovator pharmaceutical companies, including more than 230 in that month alone. Among these clients, the company worked with 18 of the top 25 pharmaceutical companies based on their revenue in the calendar year 2023.
Sai Life plans to use Rs 720 crore for repayment of borrowings, said Aditya Birla Capital in its IPO note. "We are confident in the industry growth with structural shift due to supply chain diversification by the US irrespective of passing of the Biosecure Act. The prospects are aligned to capture this opportunity and we recommend subscribe for long-term rating to the IPO," it added.
The company's business development team consists of 16 experienced and qualified professionals, with six located in the US, nine in the UK and Europe, and one in Japan. As of September 30, 2024, the company had 2,353 scientific staff, with the majority of the scientific team holding advanced degrees.
For the six months ended on September 30, 2024, Sai Life Sciences reported a net profit of Rs 28.01 crore with a revenue of Rs 693.35 crore. Sai Life Sciences has reserved 50 per cent of the net offer for the qualified institutional bidders (QIBs), while non-institutional investors (NIIs) will get 15 per cent of the allocation. Retail investors will have 35 per cent of reservation in the IPO.
Kotak Mahindra Capital Company, Jefferies India, Morgan Stanley India Company and IIFL Securities are the book running lead managers of the Sai Life Sciences IPO, while Kfin Technologies is the registrar for the issue. Shares of the company shall be listed on both BSE and NSE on December 18, Wednesday.