Indegene Ltd IPO Analysis: Should You Subscribe?
The initial public offer (IPO) of Indegene Ltd, which kicked off today, will close for subscription on Wednesday, May 08. The firm seeks to raise Rs 1,841.76 crore through its IPO, comprising an Offer for Sale (OFS) of up to Rs 1,081.76 crore and a fresh issue of Rs 760 crore. The price band for the IPO is set at Rs 430 to Rs 452 per share. Investors can bid in lots, with each lot consisting of 33 shares. To apply for the IPO, the minimum investment is set at Rs 14,916 (calculated as 33 x 452).
According to market observers, shares of Indegene Ltd are currently trading in the grey market at a premium of Rs 262, i.e. a grey market premium (GMP) of 58% above its issue price of Rs 452. The public offer is anticipated to debut on BSE and NSE on the 13th of May, 2024.
Indegene Anchor Round
Prior to issue opening, on May 03, Indegene Ltd successfully secured Rs 548.77 crore by issuing 1,21,41,102 equity shares to 36 anchor investors at Rs 452/share. This anchor round attracted participation from prominent funds such as Capital Group, Fidelity Investments, Jupiter Asset Management, Abu Dhabi Investment Authority, SBI Mutual Fund, ICICI Prudential Mutual Fund, among others.
Indegene IPO Subscription Status
As of May 06, the first day of its IPO, Indegene's offering Indegene's offering saw full subscription, fuelled by robust interest from non-institutional investors (NIIs). Overall, the IPO was subscribed 1.67 times by the end of Day 1.
The segment allocated for NIIs was oversubscribed by more than 4.13 times, while the retail portion attracted bids 1.5 times its allocation. However, the Qualified Institutional Buyer (QIB) portion had a sluggish start, with only 5% of the allocation receiving bids thus far.
About Indegene Ltd
Indegene Ltd offers digital-driven commercialization services tailored to the life sciences sector, encompassing biopharmaceuticals, emerging biotech, and medical devices enterprises. Its support spans drug development, clinical trials, regulatory submissions, pharmacovigilance, complaint management, and sales and marketing efforts.
Key Strengths
- Strong global market presence with top biopharmaceutical companies
- Impressive client retention rates (123% in FY23, 160% in FY22, and 130% in FY21)
- Robust financial growth (CAGR of 54% in operational revenue from FY21 to FY23)
- Healthy profitability margins (EBITDA margin: 19.69%, net profit margin: 11.54% in FY23)
- Significant growth in active clientele (CAGR of 19% from 44 in FY21 to 62 in FY23)
Key Concerns
- Indegene relies heavily on a few major clients in North America and Europe, with the top five contributing nearly half of its revenue in 9MFY24.
- Its subsidiaries generate a significant majority of its revenue, making Indegene vulnerable to disruptions in their operations.
- Indegene's high credit exposure, with billed trade receivables at 33% of revenue in 9MFY24, highlights the need to manage credit risk effectively.
Final Verdict: Subscribe
Indegene Ltd has shown consistent growth in revenue and profits over the past three years, supported by strong operating margins. Positioned at the convergence of healthcare and technology, the company has carved out a unique niche in life sciences. The sector is projected to grow at a 6.5% CAGR, reaching Rs 15.5 trillion ($201 billion) by 2026 due to demographic shifts and health advancements.
From a valuation standpoint, the IPO appears fully priced with a Price-to-Earnings (P/E) multiple of 33.5x, calculated against projected FY24 earnings post-IPO. Nevertheless, considering the firm’s unique business model and near-monopoly status, the IPO is reasonably valued.
In light of these considerations, it is advisable to subscribe to this IPO from a long-term perspective.
Read the full report here: Indegene Ltd IPO Analysis
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