Sai Life Sciences, a leading contract research and manufacturing organization (CRMO) and the flagship company of TPG Capital, is readying itself for the long-awaited IPO. This ₹3,042.62 crores issue has piqued investor interest because of the large capabilities it holds in the pharmaceutical space. Sai Life Sciences enables global pharmaceutical innovators through its offerings that cover drug discovery, development, and manufacturing for small molecule New Chemical Entities (NCEs).
Break-up of the IPO
The IPO has two main components:
- Fresh Issue: 1.73 crore equity shares, aggregating to ₹950 crores.
- Offer for Sale (OFS): 3.81 crore equity shares, aggregating to ₹2,092.62 crores.
The fresh issue proceeds would be used to fund growth initiatives, improve working capital, and pay off outstanding debt. The OFS enables existing shareholders, including TPG Capital, to partially sell their stakes.
Key Dates
The IPO subscription will be open for three days, that is, from December 11 to December 13, 2024. This would give ample time for both retail and institutional investors to participate in the issue. The allotment of shares is expected to be finalized by December 16, 2024, with a listing date tentatively scheduled for December 18, 2024 on both the NSE and BSE.
Price Band and Lot Size
The IPO’s price band has been set between ₹522 and ₹549 per equity share, thus offering an attractive valuation range for investors. The lot size for different investor categories is as follows:
- Retail Investors: Minimum of 27 shares, requiring an investment of ₹14,823.
- Small Non-Institutional Investors (sNII): 14 lots (378 shares), amounting to ₹2,07,522.
- Large Non-Institutional Investors (bNII): 68 lots (1,836 shares), requiring ₹10,07,964.
This flexible allocation system caters to a diversified pool of investors.
Grey Market Premium (GMP)
The IPO is presently witnessing a positive trend in the grey market. The latest GMP for Sai Life Sciences is ₹31, which means that there is a high demand and good sentiment from the investors. Based on the upper price band of ₹549, the probable listing price will be ₹580 per share, meaning a potential gain of 5.65%.
Sai Life Sciences: Business and Services
Sai Life Sciences has grown to become one of the few trusted partners for pharmaceutical innovators and biotechnology companies in the world. The Company’s end-to-end capabilities cover the entire value chain of drug discovery, development, and manufacturing. These include small molecule NCEs, which are critical in enabling groundbreaking treatments.
Strengths of the company
- Drug Discovery: Medicinal chemistry and biology expertise help deliver innovative solutions for pre-clinical trials.
- Development Services: Clinical trial support, formulation development, and analytical testing.
- Manufacturing: Commercial-scale manufacturing of APIs at state-of-the-art facilities.
Financial Performance
Sai Life Sciences’ financial health has improved over the period. In six months ending September 2024, the company reported:
- Total Income: ₹693.35 cr, up from ₹656.8 cr in the same period last year.
- Net Profit: ₹28.01 crore, with a turnaround from the previous year’s net loss of ₹12.92 crore.
These figures reflect the performance of the company in operational efficiency and revenue growth.
It has been able to create a consistent revenue growth line.
Lead Managers and Registrar
The IPO is led by a strong syndicate of book-running lead managers:
- Kotak Mahindra Capital Company Ltd
- IIFL Capital Services Ltd (formerly IIFL Securities)
- Jefferies India
- Morgan Stanley India Company
The registrar for the IPO is KFin Technologies, ensuring seamless management of the subscription and allotment process.
Why Invest in Sai Life Sciences?
Investors have several reasons to consider Sai Life Sciences’ IPO:
- Strong Industry Demand: With a growing global focus on pharmaceuticals and biotechnology, Sai Life Sciences is well-positioned to benefit from increased demand for drug discovery and manufacturing services.
- Operational Excellence: Company’s integrated value chain and world-class facilities provide it with an edge in the CRMO.
- Proven Financial Resilience: Turnaround in financial performance with a steady revenue growth and profit demonstrates the robustness of the company’s business model.
- Positive Market Sentiment: The premium GMP indicates investors’ confidence and strong demand during the listing.
Potential Risks:
While the IPO has many growth opportunities, there are some risks investors need to consider:
- Market Volatility: The stock price behavior post-listing can be impacted by the volatility of the larger market or sectoral challenges.
- Regulatory Risks: Being a pharmaceutical service company, Sai Life Sciences operates in an environment that is extremely regulated, which might cause a compliance risk.
- Debt Levels: The dependence on IPO proceeds to lower the debt levels is one reflection of the company’s present financial leverage, and such may be of some concern to investors.
This IPO by Sai Life Sciences presents a great opportunity for exposure to pharmaceutical and biotechnology markets for investors. With a proven business model, excellent financial turnaround, and favorable market outlook, the IPO is most likely to gain strong investor interest. Still, risks need to be carefully assessed and correlated with their financial goals.
Sai Life Sciences is well-prepared for long-term growth and success in the dynamic healthcare industry, given its track record of innovation and commitment to delivering value.
Disclaimer: The opinions and investment advice provided by Finaffair experts are their own and do not reflect the views of the website or its management. Finaffair encourages users to consult qualified professionals before making any investment decisions.
