Sai Life Sciences IPO: Should you Apply or Not?

Sai Life Sciences IPO: Should you Apply or Not?

Sai Life Sciences IPO is a book-built issue. The company will raise around ₹3,042.62 crores via an IPO that comprises a fresh issue of ₹3,042.62 crores and an offer for sale of up to 38,116,934 equity shares with a face value of ₹1 each. 

About Sai Life Sciences Limited 

Founded in January 1999, Sai Life Science Limited partners with innovative pharmaceutical and biotech companies, offering services in drug discovery, development, and the manufacturing of small-molecule new chemical entities (NCEs). As a leading contract research, development, and manufacturing organization (CRDMO), the company leverages its scientific expertise to address critical healthcare challenges. 

Sai Life Science envisions a future where it develops ground-breaking medicines to treat currently incurable conditions, significantly advancing healthcare. Its flexible service offerings cater to diverse client needs, from small start-ups to global pharmaceutical giants, showcasing adaptability and resilience. 

The company has outpaced competitors in the CRDMO sector, achieving impressive revenue and EBITDA Compound Annual Growth Rates (CAGR) from FY 2022 to 2024. Over the past 24 years, it has consistently delivered a broad range of NCE development programs. Sai Life Science stands out by excelling in three key areas: quality, competitive pricing, and exceptional responsiveness, creating substantial value for its clients. 

IPO Subscription Period 

• Open Date: December 11, 2024 
• Close Date: December 13, 2024 
• Allotment Date: December 16, 2024 
• Listing Date: December 18, 2024 
• Stock Exchanges: BSE and NSE 

Pricing Details  

• Price Band: ₹522 – ₹549 per Share 
• Face Value: ₹1 per Share 
• Minimum Lot Size: 27 shares 
• Investment Requirement: 
• Retail Investors: Minimum ₹14823 (27 shares) 
• Small Non-Institutional Investors (sNII): 13 lots (351 shares) – ₹207522 
• Big Non-Institutional Investors (bNII): 68 lots (1836 shares) – ₹1007964 

Reservation Structure 

• Qualified Institutional Buyers (QIB): 20% (11084225 shares) 
• Non-Institutional Investors (NII): 15% (8313168 shares) 
• Big NII (bNII): 10% 
• Small NII (sNII): 5% 
• Retail Investors: 35% (19397392 shares) 
• Anchor Investors: 30% (16626336 shares)  

Key Dates and Timeline 

• IPO Open Date: Wednesday, December 11, 2024 
• IPO Close Date: Friday, December 13, 2024 
• Basis of Allotment: Monday, December 16, 2024 
• Initiation of Refunds: Tuesday, December 17, 2024 
• Credit of Shares to Demat: Tuesday, December 17, 2024 
• Listing Date: Wednesday, December 18, 2024 
• Cut-off time for UPI mandate confirmation: 5 PM on December 13, 2024 

Book Running Lead Managers 

Sai Life Sciences Limited has appointed prominent financial institutions as book-running lead managers for the IPO: 

• Kotak Mahindra Capital Company Limited 
• Jefferies India Private Limited 
• Morgan Staley India Company Private Limited 
• IIFL Securities Limited 

Kfin Technologies Limited has been designated as the registrar for the IPO. 

Promoter Information 

• Promoter: The promoters of the company are Kanumuri Ranga Raju, Krishnam Raju Kanumuri, Kanumuri Mytrey, Sai Quest Syn Private Limited, Sunflower Partners, Lily Partners, Marigold Partners and Tulip Partners. 

• Shareholding: 
• Pre-Issue: 40.48% 
• Post-Issue: 35.1% 

Financial Highlights 

• Revenue: In FY22 revenue was ₹897 crores, in FY23 it was ₹1245 and in FY24 it is ₹1494 
• Profit After Tax (PAT): From FY22 to FY24 PAT has increased by more than 10 times, from ₹ 6.23 crores to ₹82.8 crores 
• Net Worth: ₹974 crores 
• Total Borrowing: ₹710 crores 

Key Performance Indicators (KPIs): 

• ROE: 11.79% 
• RoNW: 8.13% 
• P/BV: 10.18 
• EPS (Pre-IPO): ₹4.34 
• EPS (Post-IPO): ₹2.69 
• P/E Ratio (Pre-IPO): 126.42x 
• P/E Ratio (Post-IPO): 203.82x 

IPO Objectives 

The company propose to utilise the Net Proceeds towards funding the following objects: 

• Repayment/prepayment in full or part, of all or certain outstanding borrowings availed by the Company and 
• General corporate purposes 

Subscription Status (As of December 12, 2024, 7:02:07 PM) 

• Retail: 0.43x 
• QIB: 3.2x 
• NII: 0.6x 
• Overall Subscription: 1.26x 

Recommendation 

Sai Lifesciences, an innovation-driven CRDMO and global healthcare product developer serving 25+ leading pharma companies, has shown steady revenue growth and a sharp rise in profitability for FY24. While the IPO is aggressively priced based on FY25 earnings and offers limited direct benefits to the company, it plans to raise ₹950 crore, with ₹720 crore allocated for debt repayment. Despite high valuations, the company is well-positioned to benefit from industry growth driven by supply chain diversification. We recommend subscribing for long-term to the IPO.