Should you invest in Syngene IPO? Analysts say yes


Syngene facilitySeveral brokerage houses including Anand Rathi, Way2Wealth, ICICIdirect, and Reliance Securities have recommended investors to invest in the upcoming Syngene IPO. The INR550 crore public issue opens on 27 July for subscription and closes on 29 July. The views expressed by brokerages are in line with buoyant grey market premium. Here are some critical details and brokerage views on the IPO.

IPO dates 27 July – 29 July
Price band INR240 – 250 per share
Total shares 2.2 crore shares (net offer of 2 crore shares excluding the reservation of 20 lakh shares for existing Biocon shareholders
Category allocation QIB – 50%, NII – 15%, Retail – 35%
Lead managers Axis Capital Limited, Credit Suisse Securities (India) Private Limited and Jefferies India Private Limited


Analysts at Anand Rathi Securities have recommended “Long term subscribe” on the IPO of Biocon subsidiary and has highlighted the company’s consistency in maintaining and growing profit margins. “As an experienced CRO, Syngene is well positioned to capitalize on the advantages of its flexible business models that customizes to their client’s requirements globally. On valuation front company is available in the PE of 27.4x – 28.6 xs at higher price band. EBITDA margin of the company is in the range of 31-33%, PAT margins at 18-20% and currently it is growing at CAGR of 27% for last 3 years which shows consistency,” said Anand Rathi Securities in a research note.

Syngene’s IPO has also got favorable recommendation from Way2Wealth which sees great opportunities in the CRO space. “We believe there are great opportunities for CROs from the outsourcing markets and thus increasing their share towards global R&D expenditures. The company’s increasing clientele, expanding capacities as well as capabilities, along with plans for forward integration into commercial manufacturing will enable the company to drive growth by benefiting from the opportunities in future. Hence we recommend Subscribe to this issue,” said Way2Wealth in its report. As we identified a major concern with Syngene’s prospects in our analysis, the brokerage has also highlighted concentration risk as a redflag.

Also read: Syngene’s INR550 crore IPO – What you need to know

Noting the marked reduction among willingness of global pharma players to incur large fixed costs, ICICIdirect has said Synegen will be a big beneficiary of this trend. ”Syngene is well poised to cash in on growing global pharma R&D outsourcing trend. Global pharmaceutical players are facing structural issues such as profit pressures arising from impending patent cliff, drying product pipeline and rising R&D costs. Surprisingly, however, the new product approvals from the USFDA are on the rise. Hence to maintain the cost balance at one end and maintain the new product introduction at the other, these players are inclined to outsource some of the R&D budget to CROs like Syngene.”

Reliance Securities also recommends investors to subscribe to the IPO as Syngene stands to gain from forward integration to become a Contract Manufacturing Organization (CMO). “At a price band of INR240-250, Syngene is valued at 24.7x/21.1x FY17E EPS, which we feel is fairly valued given its operational scale. Further, Syngene’s plan to foray into CMO of novel drugs will add significant upside over the next 3-4 years. We have not factored in any upside from the CMO business. Entry into the CMO business will open up the large revenue source (like Divi’s) and make Syngene a complete turnkey solution provider amongst the Indian bourses.”


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