The highly anticipated Sai Life Sciences IPO has opened for subscription today, 11 December 2024. The company seeks to raise approximately INR 3,042.62 crore through a combination of a fresh issue and an offer for sale. Meanwhile, several brokerage houses have come up with their recommendations. Here is a look at Sai Life Sciences IPO recommendations.
Sai Life Sciences IPO Recommendations
Swastika Investmart – Neutral on High Valuation Risks
Swastika Investmart has issued a neutral rating for the IPO. The brokerage house acknowledges the company’s improving profitability and positive financial trajectory but flags the IPO’s high valuation. At a price-to-earnings (P/E) ratio of 126.42x, Sai Life Sciences is perceived as significantly overvalued compared to its peers. Analysts also emphasize limited direct benefits from the IPO proceeds, advising potential investors to proceed cautiously.
SBI Securities – Subscribe for Long-Term Gains
Analysts at SBI Securities have adopted a more optimistic stance, assigning a subscribe rating for long-term investors. While the firm recognizes the lofty valuation multiples of 137.9x P/E and 38.6x EV/EBITDA, it argues that Sai Life Sciences’ robust revenue growth and improving profitability metrics justify the premium. Analysts believe this IPO presents a worthwhile opportunity for investors with a long-term horizon.
BP Wealth – Promising for Medium to Long-Term Investors
BP Wealth echoes a similar sentiment, recommending a subscribe rating. Despite a high valuation of 121.2x P/E, the firm is encouraged by Sai Life Sciences’ strong financial performance and the favourable growth trends in the CRDMO sector. BP Wealth positions the IPO as an attractive bet for medium to long-term investors.
Samco Securities – Avoid Due to Weak Efficiency Metrics
In stark contrast, Samco Securities recommends avoiding the Sai Life Sciences IPO. They cite inefficiencies in key financial metrics such as return on capital employed (RoCE) at 10.3% and return on equity (ROE) at 8.5%. These figures lag behind peers such as Divi’s (16% RoCE, 11.8% ROE), Suven (19.5% RoCE, 14.6% ROE), and Syngene (13.9% RoCE, 12% ROE). Coupled with a valuation of 120x, Samco’s analysts see limited value in this offering.
Aditya Birla Capital – Confidence in Long-Term Potential
Aditya Birla Capital offers a contrasting perspective, encouraging long-term investment in Sai Life Sciences. The brokerage notes the company’s plan to allocate INR 720 crore of the INR 950 crore fresh issue towards repaying borrowings, which could strengthen its financial position. Analysts also highlight opportunities arising from global supply chain shifts, particularly in response to diversification initiatives from the US pharmaceutical industry.
Financial Overview of Sai Life Sciences IPO
Sai Life Sciences is a leading contract research, development, and manufacturing organization (CRDMO) specializing in small molecule new chemical entities (NCEs). The company collaborates with over 280 global pharmaceutical innovators and has built a strong reputation in the industry.
The company’s operating revenue has surged from INR 869.6 crore in FY22 to an estimated INR 1,465.2 crore in FY24. Simultaneously, EBITDA margins have improved from 13.9% to 19.5%, showcasing a robust financial trajectory.
Use of IPO Proceeds
A significant portion of the funds raised—approximately INR 720 crore—will go towards repaying existing borrowings. This strategic move is expected to enhance profitability and support future growth initiatives.
Conclusion: Mixed Sentiment Among Analysts
Analyst opinions on the Sai Life Sciences IPO remain divided. On one hand, supporters cite strong financial growth, sectoral tailwinds, and strategic use of IPO proceeds as reasons for optimism. On the other, detractors point to excessive valuations and subpar efficiency metrics, urging caution.
For investors, the decision to subscribe hinges on individual risk tolerance and investment timelines. Long-term investors with confidence in the CRDMO sector’s growth might view the IPO favourably, while those wary of valuation risks may prefer to stay on the sidelines.
Pro Tip for Investors: When evaluating high-growth IPOs like Sai Life Sciences, focus on long-term industry trends, the company’s competitive positioning, and its ability to maintain profitability amidst valuation concerns. Balance these factors against your personal financial goals and risk appetite. For more information related to IPO GMP, SEBI IPO Approval, Live Subscription, stay tuned to IPO Central.
