IPO: Indegene

Indegene is a commercialisation service provider to the life sciences industry. It is coming up with its IPO (initial public offering) on May 6, 2024. Here's a breakdown of the company's strengths, weaknesses, and growth prospects to help investors make an informed decision. In a nutshell Quality: Indegene's three-year average ROE and ROCE are about 31 and 35 per cent, respectively. It generated positive free cash flows in two out of the last three financial years. Growth: Its revenue and net profit grew at an annual growth rate of 55 and 20 per cent, respectively, during FY21-23. However, its EBIT and PAT margins have plummeted during the same period. Valuation: The stock is valued at a P/E and a P/B of 37.2 and 5.2 times, respectively. For comparison purposes, there are no listed players domestically. Overview: The lack of in-house talent and domain expertise and ever-increasing regulatory scrutiny in the life sciences industry present an opportunity for third-party solutions providers to support businesses across different stages. Moreover, analysis of the latest drug pipeline from the 10 largest pharmaceutical companies reveals that 31 per cent of the drugs are in phase three (the final stage of drug development). This scenario is advantageous for commercialisation service providers like Indegene. About the company Founded in 1998, Indegene is a third-party commercialisation service provider to the life sciences industry, serving biopharmaceutical, emerging biotech, and medical devices companies. The company offers solutions across various stages of the life sciences value chain, assisting in drug development, clinical trials, regulatory processes, pharmacovigilance and complaints management, and sales and marketing. Broadly, the company offers four services: (i) Enterprise commercial solutions, (ii) Omnichannel activation, (iii) Enterprise medical solutions, and (iv) Enterprise clinical solutions and consultancy services. Strengths of Indegene High client stickiness: Its implemented solutions are deeply integrated into clients' workflows, which leads to high client stickiness. This is evident in its financials, with revenue from its top 10 clients increasing over FY21-23. Weaknesses of Indegene Geographical concentration: Indegene's business is heavily concentrated in North America and Europe (97 per cent of its FY23 revenue). Any adverse natural, economic, or geopolitical event could affect the company. Highly competitive life sciences industry: With few barriers to entry, companies offering solutions similar to Indegene's make the industry extremely price competitive. Subsequently, this could adversely impact the company's operating results. IPO details Total IPO size (Rs cr) 1842 Offer for sale (Rs cr) 1082 Fresh issue (Rs cr) 760 Price band (Rs) 430-452 Subscription dates May 6-8, 2024 Purpose of issue Repayment of loan and funding capex Post IPO M-cap (Rs cr) 10,814 Net worth (Rs cr) 2,087 Promoter holding (%) N/A Price/earnings ratio (P/E) 37.2 Price/book ratio (P/B) 5.2 Financial history Key financials 2Y growth (% pa) TTM FY23 FY22 FY21