Syngene International IPO note by Ajcon Global

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Incorporated in 1993, SIL (subsidiary of Biocon Ltd.) is one of the leading India – based contract research organization (“CRO”), offering a suite of integrated, end to end discovery and development services for novel molecular entities across industrial sectors including pharmaceutical, biotechnology, agrochemicals, consumer health, animal health, cosmetic and nutrition companies. SIL service offerings in discovery and development cover multiple domains across small molecules, large molecules, antibody – drug conjugates and oligonucleotides. Its integrated discovery and development platforms help organizations conduct discovery (from hit to candidate selection), development (including pre –clinical and clinical studies, analytical and bio-analytical evaluation, formulation development and stability studies) and pilot manufacturing (scale – up, pre-clinical and clinical supplies) under one roof with a distinctive economic advantage. In addition, also supports the development of bio-similar and generic molecules. The Company offers services through flexible business models that are customized to its client requirements. These range from a full – time equivalent (“FTE”) to fee – for – sevice (“FFS”) model or a combination thereof. In FY15, the revenues from the sale of services stood at Rs. 8,427 mn. SIL derived 36.1% and 63.9% of its revenue from the sale of services from long term contracts with dedicated infrastructure and other contracts.

Outlook, Valuation and Recommendation -"At the upper band of the issue price, SIL is valued at 28x FY15 EPS of Rs. 8.79. With due consideration to factors like a) world-class infrastructure, systems and processes that comply with international standards to serve international markets, b) successful audits by regulatory authorities such as the FDA and EMA, c) diversified and attractive client base, d) proven track-record of successful delivery, reliability, cost efficiency & client satisfaction, e) strong past financial performance, e) historical trend of positive cashflow, f) favorable capital structure, we believe the Company’s valuation is fairly priced as compared to its global peer Wuxi Pharmatech (SIL has a better return profile compared to Wuxi with FY15 margin of 33.5% (vs. Wuxi’s 22.3%), ROE of 20.7% (vs 15.2%). we recommend “SUBSCRIBE” to the issue for a long term horizon", says Ajcon Global research report.