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Biocon’s contract research services arm’s initial public offer, which opened July 27, found much favour with investors, who bid for more than 32 times the available shares on offer.
Biocon had set a price of Rs 240-250 per share, and planned to sell 22 million shares. The IPO size came in at Rs 550 crore at the higher end of the price band. The entire proceeds of the offer will go to the selling shareholders since it is an offer for sale. Biocon is selling part of its stake. Exchange data as of 8 p.m. on closing day shows that there were bids for 512.72 million shares.
Parent company Biocon had set a billion dollar revenue target for the group by the financial year ending in March 2018. Syngene’s contribution to this figure was supposed to $250 milllion or Rs 1,550 crore. Its revenue last year came in at Rs.872 crore, offer documents showed. Chief executive Peter Bains previously pegged the last five year’s revenue growth rate at 28%.
The company’s profits had put the offer at 23 times earnings, assuming a 20% growth for FY16, an earlier Business Standard analysis had shown. Experts had pointed to the potential of the outsourcing market in the pharmaceutical industry though the stock is considered to be at a premium. Qualified institutional buyers and high net-worth individuals bid the most aggressively for the stock.
A July 17 IPO note from Phillip Capital authored by Surya Narayan Patra and Mehul Sheth too 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 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,” the report said.
