Can Sai Life Sciences ride the global CRDMO wave? A detailed IPO analysis
Sai Life Sciences Ltd, a prominent player in the CRDMO sector, is set to launch its IPO. Dive into the details of this ambitious offering, its financials, valuation, and whether it’s a wise investment for today’s market.
About the issue
Sai Life Sciences Ltd is preparing to launch its Initial Public Offering (IPO) for equity shares. Below are the issue details.
| IPO Details |
| IPO Opening Date |
December 11, 2024 |
| IPO Closing Date |
December 13, 2024 |
| Issue Type |
Book Built Issue IPO |
| Face Value |
Re 1 per equity share |
| IPO Price |
Rs 522 to Rs 549 per equity share |
| Min Order Quantity |
27 shares |
| Listing At |
BSE, NSE |
| Total Issue |
55,421,123 shares of FV Re 1* |
| (Aggregating up to Rs 3,042.62 Cr)* |
| Fresh Issue |
17,304,189 shares of FV Re 1* |
| (Aggregating up to Rs 950.00 Cr)* |
| Offer for Sale |
38,116,934 shares of FV Re 1* |
| (Aggregating up to Rs 2,092.62 Cr)* |
| QIB Shares Offered |
50% of the Offer |
| Retail Shares Offered |
35% of the Offer |
| NII (HNI) Shares Offered |
15% of the Offer |
| *At Upper Price Band |
|
Objects of the Issue
The offer encompasses both the fresh issue and the offer for sale. It's important to note that the company will not accrue any proceeds from the offer for sale. The company plans to allocate the net proceeds raised from the fresh issue for the following purposes:
1. Repayment/prepayment in full or part, of all or certain outstanding borrowings availed by the company
2. General corporate purposes
Promoter holding
Kanumuri Ranga Raju, Krishnam Raju Kanumuri, Kanumuri Mytreyi, Sai Quest Syn Pvt Ltd, Sunflower Partners, Lily Partners, Marigold Partners and Tulip Partners are the promoters of the company. The promoters currently hold a pre-issue shareholding stake of around 35 per cent in the company.
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Company profile
The company operates as an innovator-focused Contract Research, Development, and Manufacturing Organization (CRDMO), providing comprehensive services across the drug discovery, development, and manufacturing value chain.
These services cater to small molecule new chemical entities for global pharmaceutical innovators and biotechnology firms. With expertise spanning both Contract Research (CRO) and Contract Development and Manufacturing Organization (CDMO) capabilities, the company delivers end-to-end solutions.
As of September 30, 2024, its CDMO product portfolio included over 170 innovator pharmaceutical products, 38 of which were supplied for the manufacturing of 28 commercial drugs. The company serves a global clientele across regions such as the US, the UK, Europe, and Japan.
Financials
| Rs (in crore) |
FY22 |
FY23 |
FY24 |
H1FY25 |
| Revenue |
898 |
1,245 |
1,492 |
693 |
| Profit before tax |
10 |
16 |
109 |
37 |
| Net Profit |
6 |
10 |
83 |
28 |
The company has consistently delivered strong growth in revenue over the past few years. Between FY22 and FY24, the company recorded a Compound Annual Growth Rate (CAGR) of around 29 per cent in revenue. The sharp rise in profitability, from Rs 10 crore in FY23 to Rs 83 crore in FY24, raises some concerns.
Furthermore, when annualised, the figures from H1FY25 suggest a notable decline in revenue, accompanied by an approximate 33 per cent steep drop in net profit compared to FY24, if the current pace persists.
Valuation & Outlook
| Company Name |
P/E |
P/B |
RoE (%)* |
| Sai Life Sciences Ltd |
183 |
6 |
8 |
| Listed Peers |
| Divi's Laboratories Ltd |
86 |
11 |
12 |
| Suven Pharmaceuticals Ltd |
135 |
17 |
16 |
| Syngene International Ltd |
76 |
8 |
13 |
*RoE: Based on FY24 data
The issue is priced with a P/BV ratio of 9.82 times, calculated using its Net Asset Value (NAV) of Rs 55.93 as of September 30, 2024. At the upper price cap, it is priced at a P/BV ratio of 5.74 times, considering its post-IPO NAV.
Considering the company's annualized FY25 earnings and fully diluted equity capital, the price-to-earnings (P/E) ratio stands at 183x, indicating significantly aggressive pricing.
There are other stocks in the same sector available at significantly lower valuations, offering better returns. Therefore, we advise investors to avoid this pricey bet at this time, given the associated risks.