Highlights
| Issue Size – 55,421,123 shares | Issue Open/Close – 11 Dec / 13 Dec, 2024 |
| Price Band (Rs.) 522 – 549 | Issue Size (Rs.) – 30,426 mn |
| Face Value (Rs) 1 | Lot Size (shares) 27 |
Sai Life Sciences Limited (SLSL) incorporated in 1999, is an innovator-focused, contract research, development, and manufacturing organization (CRDMO). They provide end-to-end services across the drug discovery, development, and manufacturing value chain, for small molecule new chemical entities (NCE), to global pharmaceutical innovator companies and biotechnology firms.
They possess both (a) discovery / contract research (CRO) and (b) chemistry, manufacturing, and control (CMC)/ contract development and manufacturing organization (CDMO) capabilities. Their CRDMO platform provides multiple entry points for SLSL to acquire customers in the intermediate stages of their new drug discovery to commercialization journey. The company operates a hub and spoke distribution model to source products and manage their in-store inventory. For their apparel category, in particular, their distribution capabilities enabled them to replenish the store inventory in quick response to latest fashion trends and store level sales.
They are also one of the few CRDMOs to have a differentiated delivery model of having research laboratories for discovery and development located near overseas innovation hubs at Watertown (Greater Boston, MA), United States and Manchester, complemented by large-scale research laboratories and manufacturing facilities in cost competitive locations in India.
During the FY24 and H1FY25, they have served more than 280 and 230 innovator pharmaceutical companies, respectively, including 18 of the top 25 pharmaceutical companies across regulated markets, including the US, the UK, Europe and Japan. They have also provided CRO services to more than 60 customers, respectively, on an ongoing basis, for their integrated drug discovery programs.
Out of total proceeds of 30,426 mn, Rs. 7,200 mn would go towards repayment/ prepayment, in full or part, of all or certain outstanding borrowings availed by thy Company, ~Rs. 2,300 mn would go towards general corporate purpose and Rs. 20,926 mn would go towards existing selling shareholders of the company.
Key Highlights
- The global small molecule contract research, development and manufacturing organization industry is expected to reach USD 159 bn by 2028, driven by increasing pharmaceutical and biotech research & development outsourcing, continued demand for small molecules and growing demand for cost-effective drugs. The Indian contract research, development and manufacturing organization market was among the fastest growing markets in Asia Pacific region over 2018-2023. The Indian market is projected to grow by 14.0 pct between 2023 and 2028, reaching an estimated value of USD 14.1 bn in 2028.
- SLSL manufacturing facilities have received several regulatory approvals from the United States Food and Drug Administration (USFDA), the Pharmaceuticals and Medical Devices Agency, Japan (PMDA) and the state level drug control departments which are arms of the Central Drug Standards Control Organization, India (CDSCO).
- They have demonstrated their capabilities to take over and scale up customers’ programs through technology transfers from other CRDMOs. Their CDMO portfolio constituted 50 late phase (products undergoing or have completed Phase III clinical trials) or commercial products, 34 of which underwent process development in their R&D facilities before entering Phase III clinical trials, and the remaining 16 were transferred to their manufacturing facilities from another facility. This indicates their ability to both follow the molecule and absorb technology quickly from the customers or their existing CDMO, providing multiple entry points to customers.
- As of H1FY25 SLSL has signed master services agreements (MSAs) with eight pharmaceutical companies, facilitating an ongoing flow of early phase products into their portfolio and creating additional opportunities to follow the molecule to enhance their commercial product portfolio.
- SLSL key strategies includes (i) Increase cross-selling with existing customers and win new customers (ii) Continue to build a strong commercial development and manufacturing portfolio of CMC capabilities (iii) Pursue more integrated Discovery projects to drive customer stickiness along with larger integrated Discovery programs (iv) Continue to expand their existing capacity and add new technical capabilities (v) Continue to drive operational excellence initiatives to improve profitability and return metric (vi) Continue to attract, train and retain quality talent to support their rapid growth.
- The company’s sales witnessed a growth of 29.80 pct YoY CAGR over the period FY22-24, with EBITDA and profit increasing by 51.30 pct and 265.44 pct on CAGR basis, during the same timeframe. In FY24, sales surged by 20.38 pct YoY to Rs. 14,652 mn, while EBITDA rose by 64.71 pct YoY to Rs. 3,001 mn, accompanied by an EBITDA margin expansion of 551 bps to 20.48 pct. Additionally, the company posted profit of Rs. 828 mn in FY24, grew 728 pct YoY.
Key Risks
- SLSL are subject to extensive government regulation, and if they fail to obtain, maintain or renew their statutory and regulatory licenses, permits and approvals required to operate their business, results of operations and cash flows may be adversely affected.
- The company conduct animal testing, which can result in adverse publicity liability and other issues, including potential disruption to their facilities as a result of protests against animal testing.
- SLSL face the risk of losing revenue from products supplied to innovator pharmaceutical companies after the expiry of their patent protection period.
Financial Performance
| (In Rs. mn, unless otherwise stated) | FY22 | FY23 | FY24 | H1FY24 | H1FY25 |
| Revenue from operations | 8,696 | 12,171 | 14,652 | 6,423 | 6,753 |
| EBITDA | 1,311 | 1,822 | 3,001 | 719 | 1,395 |
| EBITDA Margin % | 15.07% | 14.97% | 20.48% | 11.19% | 20.66% |
| Profit | 62 | 100 | 828 | -129 | 280 |
| Profit Margin % | 0.72% | 0.82% | 5.65% | -2.01% | 4.15% |
| ROCE % | 3.21% | 5.13% | 10.26% | 1.23% | 3.90% |
| ROE % | 0.71% | 1.12% | 8.49% | -1.48% | 2.68% |
| Debt to Equity (times) | 0.84 | 0.8 | 0.75 | 0.82 | 0.73 |
Peer Comparison Based on FY24
| (In Rs. mn, unless otherwise stated) | Sai Life Sciences Ltd. | Divi’s Lab Ltd. | Suven Pharma Ltd. | Syngene Intl. Ltd. |
| Revenue from operations | 14,652 | 78,450 | 10,514 | 34,886 |
| EBITDA | 3,001 | 22,350 | 4,139 | 10,033 |
| EBITDA Margin % | 20.48% | 28.49% | 39.37% | 28.76% |
| Profit | 828 | 16000 | 3003 | 5100 |
| Profit Margin % | 5.65% | 20.40% | 28.56% | 14.64% |
| ROCE % | 10.26% | 15.96% | 19.53% | 13.88% |
| ROE % | 8.49% | 11.79% | 14.64% | 11.98% |
| Debt to Equity (times) | 0.75 | -0.29 | 0.01 | 0 |
Valuation
Sai Life Sciences is the fastest-growing contract research, development, and manufacturing organisation (CRDMO). As a pure-play, full-service CRDMO, they work with over 280 global innovator pharma and biotech companies to accelerate the discovery, development, and commercialisation of their NCE small molecule programmes. At the upper end of the price of Rs. 549, the issue quotes PE of 204x on FY25 annualized earnings. The issue looks fully priced. One can avoid this issue.
Also read: Why Is Financial Advisory Important?
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