SAI LIFE SCIENCES IPO

Sai Life Sciences Limited IPO

The third IPO that opens for subscription this week is Sai Life Sciences Limited (SLSL), a company that researches, develops, and manufactures small-molecule new chemical entities.

The IPO opens for subscription on 11 December and closes on 13 December. Let us examine the various aspects of SLSL's business to help you decide whether to subscribe or invest in the IPO.

Below are the key details related to the SLSL IPO:

• Issue Size: Rs 3,042.62 crore
• Price Band: Rs 522 - Rs 549
• Lot Size: 27 Shares
• Issue Details: Fresh Issue Rs 950.00 crore + Remaining Offer for Sale
• Market Cap: At the upper price band, Rs 11418.63 crore
• Retail Share Offered: 35%
• Minimum Investment: Rs 14,787

Sai Life Sciences IPO: The Business

They are an innovator-focused, contract research, development, and manufacturing organization (CRDMO). Sai Life Sciences provides endto-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.

They are the fastest-growing Indian CRDMOs among listed Indian peers in revenue CAGR and EBITDA CAGR from FY22 and FY24. The company provides its services through its globally accredited manufacturing and R&D facilities, which have quality systems supported by a qualified pool of scientists, engineers, and other scientific staff.

As of September 30, 2024, they had 2,353 scientific staff, with the majority of their scientific team holding advanced degrees, including 302 Ph. D.s and 1,475 master’s degrees.

They seek to maintain high standards of health, safety, and environment (HSE) across all their facilities, including fire protection systems, effective effluent and waste management practices, and containment systems that enable efficient handling of chemicals within a closed ecosystem, minimizing exposure to both employees and the environment while also ensuring plant safety.

Sai Life Sciences IPO: Industry Overview

The global pharmaceutical market was valued at $1,451 billion in 2023 and is projected to reach $1,956 billion by 2028, growing at a CAGR of 6.2% from 2023 to 2028. This growth is primarily attributable to factors like increasing incidence of chronic diseases, sedentary lifestyles leading to diseases, and increased health consciousness amongst people.

The aging population is also an amplifying factor driving demand- according to WHO, from 2015 to 2050, the percentage of the global population over 60 years will nearly double from 12% to 22% and is anticipated to reach approximately 2.1 billion by the year 2050.

India's CRDMO industry stood at $4.0 billion (Rs 336 billion) in 2018 and reached $7.3 billion (Rs 609 billion) in 2023, growing at a CAGR of 12.6% between 2018 and 2023. By 2028, the industry is anticipated to reach $14.1 billion (Rs 1,173 billion) by growing at a CAGR of 14.0% from 2023 to 2028. Indian CRDMO industry has observed significant growth in recent years on the back of increased collaborations, partnerships, and collaborations in the industry.

Amongst the value chain functions pre-clinical development is expected to grow at a significantly faster pace at 15.7% during FY23-28F, driven by significant improvement in the technical capabilities of Indian companies driving R&D outsourcing demand from global pharma innovator companies.

Sai Life Sciences IPO: Listed Peers

As per the RHP, the company has mentioned three companies as its peers - Divi's Laboratories, Suven Pharmaceuticals, and Syngene International. Let us look at the FY24 financial performance of all the companies to give you an idea of where Sai Life stands among its peers. Here are some important numbers:

• In revenue terms, Divi's is the largest player, followed by Syngene International and Sai Life Sciences.
• Earning per share (EPS) is highest for Divi's (Rs 60.27), followed by Syngene International (Rs 12.69). SLSL has the lowest EPS among peers.
• Again, SLSL has the lowest Return on Net Worth (RoNW) of 8.50%, while the average RoNW of peers is 12.8%.

For more details, you can refer to the table below:

Sai Life Sciences IPO: Financials

Below are the financial numbers of the company from recent years:

• Sai Life Sciences reported a revenue of Rs 869.59 crore, Rs 1217.14 crore, and Rs 1465.18 crore for FY22, FY23, and FY24, respectively. The revenue has grown at a CAGR of 29.80% in this period.
• The EBITDA for FY22, FY23, and FY24 were Rs 121.06 crore, Rs 182.23 crore, and Rs 300.11 crore, respectively. The EBITDA grew at a CAGR of 51.32% in this period. The EBITDA margins for the same period were 15.07%, 14.97%, and 20.48%, respectively.
• The company has posted a net profit/loss of Rs 6.23 crore for FY22, Rs 9.99 crore for FY23, and Rs 82.81 crore for FY24. The PAT margins for the same period were 0.72%, 0.82%, and 5.65%, respectively.
• For the last three financial years, the company has posted an average EPS of Rs 2.53 (basic) and an average RoNW of 4.74 %.
• If we attribute FY25 annualized earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 204.09, and based on FY24 earnings, the P/E stands at 137.94.
• The company reported net debt-to-equity ratios of 0.84, 0.80, and 0.75 for FY22, FY23, and FY24, respectively.
• Return on Equity (ROE) for the same period was 0.71%, 1.12%, and 8.49%, respectively.

Sai Life Sciences IPO: Competitive Strengths

Below are some of the competitive strengths that investors should consider while evaluating the company:

• They are one of the largest integrated Indian CRDMOs in terms of revenue from operations for FY24, acting as a one-stop platform for discovery, development, and manufacturing.
• The company provides end-to-end development and manufacturing services covering the full value chain for intermediates and APIs.
• Sai Life is a fast-growing, integrated Discovery capability with a focus on biology, chemistry, and DMPK services.
• They have established a fully integrated CRDMO platform with access to talent from across the world.

Sai Life Sciences IPO: Risks

Below are some risks associated with their business:

• Their financial performance depends on their ability to secure business from biotechnology and pharmaceutical customers and consequently, they may be subject to risks, uncertainties, and trends that affect the customers in these industries.
• The company's business may be adversely affected if its customers fail to develop or manufacture commercially viable drugs, including due to industry-specific challenges they may face.
• They may not be able to continue to serve their customers if we fail to meet their standards in audits and inspections and this could significantly harm their reputation and result in the termination of ongoing projects by customers.
• They 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, the results of operations and cash flows may be adversely affected.