 "Syngene IPO subscribed nearly 32 times")
Biocon’s contract research services arm, Syngene, passed the test of its Initial Public Offer of equity with flying colours. Investors bid for nearly 32 times the shares on offer.
The IPO opened on Monday and closed on Wednesday.
It had set Rs 240-250 a share and planned to sell 22 million of these. The IPO size came to Rs 550 crore at the higher end of the price band. The entire proceeds go to the selling shareholders, as it is an offer for sale. Biocon was also selling part of its stake. Exchange data as of 5 pm on Wednesday showed bids for 509.58 mn shares.
The company’s profits had put the offer at 23 times earnings, assuming 20 per cent growth for FY16, an earlier Business Standard analysis had shown. Experts had pointed to the potential of the outsourcing market in the pharmaceutical sector, though the stock was considered to be at a premium. Qualified institutional buyers and high net worth individuals bid the most aggressively for it.
A Phillip Capital IPO note authored on July 17 by analysts Surya Narayan Patra and Mehul Sheth also mentioned growth opportunities while advising a ‘buy’ on the stock. “Syngene’s business diversification to contract manufacturing of novel drugs will provide meaningful incremental earnings growth that is not factored in our estimates. Hence, led by the novel drug CMO (contract manufacturing organisation) opportunity, we expect an earnings surprise to our estimates in FY17 and believe Syngene will command better valuation…Considering huge CRAMS opportunity (small molecule and biologics) and Syngene’s business diversification to high-margin CMO of novel molecules, we recommend a ‘subscribe’ for the IPO at the higher price band,” they'd said.
The IPO opened on Monday and closed on Wednesday.
It had set Rs 240-250 a share and planned to sell 22 million of these. The IPO size came to Rs 550 crore at the higher end of the price band. The entire proceeds go to the selling shareholders, as it is an offer for sale. Biocon was also selling part of its stake. Exchange data as of 5 pm on Wednesday showed bids for 509.58 mn shares.
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Biocon had set a $1 billion revenue target for the group by the financial year ending March 2018. Syngene’s contribution to this was to be $250 mn or Rs 1,550 crore. Its last year’s revenue was Rs 872 crore, showed the offer documents. Chief executive Peter Bains earlier said the past five years’ revenue growth had been 28 per cent annually.
The company’s profits had put the offer at 23 times earnings, assuming 20 per cent growth for FY16, an earlier Business Standard analysis had shown. Experts had pointed to the potential of the outsourcing market in the pharmaceutical sector, though the stock was considered to be at a premium. Qualified institutional buyers and high net worth individuals bid the most aggressively for it.
A Phillip Capital IPO note authored on July 17 by analysts Surya Narayan Patra and Mehul Sheth also mentioned growth opportunities while advising a ‘buy’ on the stock. “Syngene’s business diversification to contract manufacturing of novel drugs will provide meaningful incremental earnings growth that is not factored in our estimates. Hence, led by the novel drug CMO (contract manufacturing organisation) opportunity, we expect an earnings surprise to our estimates in FY17 and believe Syngene will command better valuation…Considering huge CRAMS opportunity (small molecule and biologics) and Syngene’s business diversification to high-margin CMO of novel molecules, we recommend a ‘subscribe’ for the IPO at the higher price band,” they'd said.