Retail Research IPO Note

Sector: Healthcare Price Band (Rs): 430 - 452

03rd May 2024 Recommendation: Subscribe

Indegene Limited

Company Overview: Issue Details

Indegene Ltd is a technology led digital commercialization provider to the Date of Opening 06 th May 2024
life science industry, including biopharmaceutical, emerging biotech and Date of Closing 08 th May 2024
medical device companies. The company provides technology led expertise Price Band (Rs) 430 – 452
and capabilities that assists clients with drug development, clinical trials, OFS 2,39,32,732 equity shares
regulatory submissions, pharmacovigilance, complaint management and Fresh Issue (Rs cr) 700
sales & marketing services. Indegene operates across i) Enterprise Issue Size (Rs cr) 1,789 – 1,842
commercial solutions, ii) Enterprise medical solutions, iii) Omnichannel No. of shares 41,60,7,151 – 4,07,46,891
activation solutions and iv) Enterprise clinical solutions & consultancy Face Value (Rs) 2
services to 65 clients as of 9MFY24. Indegene operates through an Post Issue Market Cap
10,325 – 10,814
internally developed artificial intelligence (AI) and machine learning (ML) (Rs cr)
based proprietary platforms which allows it to offer solutions to clients Kotak Mahindra Capital, Citigroup
Global Markets India, J.P. Morgan
across the globe. BRLMs
India, Nomura Financial Advisory &
Securities
Key Highlights:
Registrar Link Intime India Pvt Ltd
1. Robust digital capabilities: The company has developed a suite of Bid Lot 33 shares and in multiple thereof
proprietary tools and platforms that automate and create AI-based QIB shares 50%
efficiencies and advanced analytic capabilities forming core components of Retail shares 35%
Indegene’s offerings. The proprietary “NEXT”-branded tools and platforms NIB shares 15%
assist in driving transformation across the commercialization lifecycle of
biopharmaceutical products and medical devices. These capabilities help Objects of Issue
the company drive efficient, effective and quality solutions for its Estimated utilization from
customers. net proceeds (Rs cr)
Repayment or prepayment of
2. Domain expertise in healthcare: Indegene’s understanding of the
indebtedness of Material 391.3
healthcare domain enables it to efficiently modernize and digitize the key Subsidiaries, ILSL Holdings, Inc.
functions involved in the life sciences commercialization process. It also Funding the capital expenditure
assists in contextualizing the use of technology, among other things, to requirements of the company and
optimize sales and marketing costs, drive omnichannel activation at scale, 102.9
material subsidiaries, Indegene,
enable faster recruitment of patients for clinical trials and accelerate time Inc.
taken to make regulatory submissions. General corporate purposes^ -
Total proceeds from fresh issue -
3. Global delivery model: The company caters to over 65 clients across the
^The cumulative amount utilized for general corporate purposes and
globe through various offices and hubs located in North America, Europe inorganic growth shall not exceed 35% of the amount being raised in the Offer
and Asia. Indegene is able to offer and execute end-to-end solutions across and the amount utilized towards inorganic growth by way of acquisitions that
multiple regions to cater to clients’ requirements because of the have not been identified in this RHP shall not exceed 25% of the amount being
streamlined global processes and the scalable nature of its solutions. raised in the Offer.
Indegene’s local presence in various countries provides them with
specialized knowledge of the regional market, culture, regulatory Shareholding Pattern
requirements and localized medical nuances, such as medical terminology,
Pre-Issue No. of Shares %
which enables it to work with clients across time zones and languages,
Promoter & Promoter Group - -
leading to better client engagement.
Public & Others 22,24,35,091 100.0
4. Long standing client relations: The company has long-standing Total 22,24,35,091 100.0
relationships with marquee biopharmaceutical companies including each
of the 20 largest biopharmaceutical companies in the world. Contracts with
Post Issue @Lower Price Band No. of Shares %
clients tend to remain sticky as the company’s offerings are integrated with - -
Promoter & Promoter Group
the clients’ workflow. Retention rate in FY21/FY22/FY23 stood at
Public & Others 24,01,09,510 100.0
129.9%/159.9%/122.8% respectively.
Total 24,01,09,510 100.0
Valuation: The company is valued at annualized FY24 P/E multiple of 30.5x
based on the upper price band on the post-issue capital. The company
operates with a unique business model with strategic client’s relationship Post Issue @Upper Price Band No. of Shares %
with 20 of the Top 20 global biopharmaceutical companies in FY23. The Promoter & Promoter Group - -
company recorded a strong PAT CAGR of 12.7% between FY21-FY23 and is Public & Others 23,92,49,250 100.0
expected to become net debt free post issue. We recommend investors to Total 23,92,49,250 100.0
SUBSCRIBE to the issue.
Source: RHP, SSL Research
For the list of our branches refer to the website: www.sbisecurities.in
 Indegene Limited Healthcare

Key Financials
FY21 FY22 FY23 9MFY24
Revenue from operation (Rs cr) 966 1,665 2,306 1,917
EBITDA (Rs cr) 231 287 396 367
Adj. PAT (Rs cr) 183 210 266 242
EBITDA Margin (%) 23.9 17.2 17.2 19.1
PAT Margin (%) 18.9 12.6 11.5 12.6
EPS (Rs) 8.2 9.5 12.0 10.9*
ROE (%) 56.4 27.5 25.0 18.2*
ROCE (%) 67.5 35.7 27.0 21.0*
Total Debt / Equity (x) 0.1 0.0 0.4 0.3*

* Not Annualized
Source: RHP, SSL Research

Risk Factors
• Industry risk: The company derives majority of its revenues from the life sciences industry. Demand for solutions and,
in turn, revenues, depend on (i) the pace of growth of the life sciences industry; and (ii) trends in the life sciences
industry, including outsourcing trends, healthcare reform and the pace of digitization. Any changes in the global life
science industry or any slowdown in the industry could materially and adversely affect business and financial results.
• Client concentration risk: Indigene derives a substantial portion of its revenue from large clients in the global life
science industry. The company derived 71.9%/71.6%/67.0%/66.7% of its FY21/FY22/FY23/9MFY24 revenue from Top
10 clients. Any downsizing of the scale of such clients’ business or any deterioration of financial conditions may result
in a reduction in the revenue derived from these customers, and could materially and adversely affect business and
financial results.
• Employee attrition risk: The company is highly dependent on its ability to attract, develop, motivate, retain and
effectively utilize skilled professionals. Indegene competes with companies in healthcare and software industry, among
others for a limited pool of trained and competent individuals. High attrition rates of qualified personnel could have
an adverse effect on its ability to expand business, as well as cause Indegene to incur greater personnel expenses and
training costs, which in turn, could affect margins and cause material or adverse effects on the business.
• Competition: Indegene operates in a competitive environment, competing not only with other companies, but also
with internal sales & marketing, software and IT departments within a clients’ organizations. Any failure to compete
may result in pricing pressure and unfavorable contract terms, which could materially and adversely affect business
and financial results.

Growth Strategy
• Increase wallet share from existing clients while onboarding new ones : Strengthen relationships with current clients
and deepen wallet share, while onboarding new clients by leveraging expertise and existing client relationships.
• Develop technological portfolio: Expand scale and size of operations through continued investment in technology to
offer better solution and capabilities to clients.
• Focus on operational excellence: Increase focus on driving operational excellence by hiring new talent, focusing on
quality and driving operational efficiencies.
• Inorganic growth: Continue to strategically identify, acquire and integrate companies and businesses to unlock
synergies.

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 Indegene Limited Healthcare

Revenue from operations – Segment wise

FY21 FY22 FY23 9MFY24
% of % of % of % of
Revenue from Segments Amount Revenue Amount Revenue Amount Revenue Amount Revenue
in Rs cr from in Rs cr from in Rs cr from in Rs cr from
Operations Operations Operations Operations
Enterprise Commercial Solutions 564.6 58.4 1,016.2 61.0 1,356.9 58.8 1,136.0 59.3
Omnichannel Activation 78.7 8.1 141.4 8.5 282.7 12.3 231.2 12.1
Enterprise Medical Solutions 305.0 31.6 431.6 25.9 560.2 24.3 440.6 23.0
Others 18.0 1.9 75.5 4.5 106.3 4.6 108.8 5.7
Total 966.3 100.0 1,664.6 100.0 2,306.1 100.0 1,916.6 100.0

Client Profile
FY21 FY22 FY23 9MFY24
Total number of Active Clients 44 46 62 65
Number of Active Clients added 10 2 16 3
No of clients contributing between USD 1-10 mn 27 23 26 27
No of clients contributing between USD 10-25 mn 5 2 4 5
No of clients contributing above USD 25 mn 3 3 4 3

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 Indegene Limited Healthcare

Industry Overview
Global Life Sciences Industry
The life sciences industry comprises entities engaged in the research, development, and manufacturing and marketing of drugs
and medical devices. The combined sales of the biopharmaceutical and medical devices segments was estimated at Rs 132.2
tn in CY22, with biopharmaceuticals valued at Rs 91.2 tn. The combined sales of the biopharmaceutical and medical devices
segments are expected to grow at a CAGR of 5.5% between CY22-CY26 to reach Rs 163.5 tn with biopharmaceuticals and
medical devices expected to be valued at Rs 113.0 tn and Rs 50.5 tn respectively.

Revenue of Global Lifescience Industry (Rs tn)

175.0 163.5

150.0
132.2 50.5
125.0
41.0
100.0

113.0
75.0
91.2

50.0
CY22 CY26

Biopharmaceuticals Medical devices

Source: RHP, SSL Research

Life sciences Industry Operations spend

Life sciences operations spend on the value chain stood at Rs 12.0 tn in CY22. The operation value chain includes drug discovery,
clinical trials, regulatory & medical affairs, marketing & sales, pharmacovigilance, manufacturing and supply chain distribut ion.
The overall life sciences operations spend is expected to grow at a CAGR of 6.5% between CY22-CY26 to reach Rs 15.5 tn by
CY26, driven by rise in aging population, increasing prevalence of chronic diseases and discovery of new diseases, among other
factors.

Life sciences operations size (Rs tn)

16.0 15.5

15.0

14.0

13.0
12.0
12.0

11.0

10.0
CY22 CY26

Source: RHP, SSL Research

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 Indegene Limited Healthcare

Financial Snapshot
INCOME STATEMENT
(Rs cr) FY21 FY22 FY23
Revenue from Operations 966 1,665 2,306
% YoY growth - 72.3 38.5
Employee Cost 536 1,014 1,465
Other Operating Expenses 200 363 445
EBITDA 231 287 396
EBITDA margins (%) 23.9 17.2 17.2
Other Income 31 26 58
Interest Expense 7 6 31
Depreciation 26 33 60
Exceptional Items 3 -47 -
PBT 231 226 363
Tax 46 64 97
Adj. PAT 183 210 266
Adj. PAT margin (%) 18.9 12.6 11.5
Adj. EPS 8.2 9.5 12.0

BALANCE SHEET
(Rs cr) FY21 FY22 FY23
Assets
Net Block 23 34 41
Right of Use Assets 23 46 105
Intangible Assets 39 58 519
Other Non-current Assets 51 86 91
Current Assets
Current Investment - 120 614
Inventories - - -
Trade receivables 285 444 642
Cash and Bank Balances 140 517 86
Short-term loans and advances - - -
Other Current Assets 34 49 107
Total Current Assets 459 1,130 1,449
Current Liabilities & Provisions
Trade payables 50 74 73
Other current liabilities 108 309 343
Short-term provisions 21 35 50
Total Current Liabilities 179 419 466
Net Current Assets 280 711 983
Total Assets 417 935 1,738
Liabilities
Share Capital - - 44
Reserves and Surplus 324 764 1,019
Total Shareholders’ Funds 325 764 1,064
Minority Interest 9 - -
Total Debt 25 18 394
Long Term Provisions 12 26 35
Lease Liabilities 27 48 108
Other Long-Term Liabilities 20 79 136
Net Deferred Tax Liability - - -
Total Liabilities 417 935 1,738

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 Indegene Limited Healthcare

Cash Flow (Rs cr) FY21 FY22 FY23

Cash flow from Operating Activities 172 297 130

Cash flow from Investing Activities -24 -160 -893

Cash flow from Financing Activities -132 233 330

Free Cash Flow 151 272 111

RATIOS
FY21 FY22 FY23
Profitability
Return on Capital (%) 67.5 35.7 27.0
Return on Equity (%) 57.2 21.3 25.0
Margin Analysis
EBITDA Margin (%) 23.9 17.2 17.2
Net Income Margin (%) 19.2 9.8 11.5
Short-Term Liquidity
Current Ratio (x) 2.3 2.6 3.0
Quick Ratio (x) 2.3 2.6 3.0
Avg. Days Sales Outstanding 108 97 102
Avg. Days Payables 19 16 12
Fixed asset turnover (x) 41.7 49.4 56.8
Debt-service coverage (x) 7.3 11.9 0.9
Long-Term Solvency
Total Debt / Equity (x) 0.1 - 0.4
Interest Coverage Ratio (x) 33.9 46.8 12.6
Valuation Ratios
EV/EBITDA (x) 43.0 33.2 26.1
P/E (x) 54.8 47.8 37.7
P/B (x) 30.9 13.1 9.4
Source: RHP, SSL Research

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 Indegene Limited Healthcare

SBICAP Securities Limited

(CIN): U65999MH2005PLC155485 I Research Analyst Registration No INH000000602
SEBI Registration No.: Stock Broker: INZ000200032 | CDSL: IN-DP-314-2017 | NSDL: IN-DP-NSDL-369-2014 | Research Analyst: INH000000602
Portfolio Manager: INP000004912 | IRDA/RW/IR2/2015/081 | IRDA/RW/IR1/2016/041 | IRDA: CA0103
Registered & Corporate Office: Marathon Futurex, A Wing, 12th Floor, N. M. Joshi Marg, Lower Parel, Mumbai-400013.

For any information contact us:

022-6854 5555
E-mail: helpdesk@sbicapsec.com I Web: www.sbisecurities.in

DISCLOSURES & DISCLAIMERS:

Analyst Certification: The views expressed in this research report ("Report") accurately reflect the personal views of the research analysts ("Analy sts") employed by SBICAP
Securities Limited (SSL) about any and all of the subject issuer(s) or company(ies) or securities. This report has been prepared based upon information available to the public
and sources, believed to be reliable. I/We also certify that no part of my/our compensation was, is, or will be directly or indirectly related to the specific recommendation(s)
or view(s) in this report.
The Analysts engaged in preparation of this Report or his/her relative:-
(a) do not have any financial interests in the subject company mentioned in this Report; (b) do not own 1% or more of the equity securities of the subject company
mentioned in the report as of the last day of the month preceding the publication of the research report; (c) do not have any material conflict of interest at the
time of publication of the Report.
The Analysts engaged in preparation of this Report:-
(a) have not received any compensation from the subject company in the past twelve months; (b) have not managed or co-managed public offering of securities for the subject
company in the past twelve months; (c)have not received any compensation for investment banking or merchant banking or brokerage services from the subject company in
the past twelve months; (d) have not received any compensation for products or services other than investment banking or merchant banking or brokerage services from the
subject company in the past twelve months; (e) has not received any compensation or other benefits from the subject company or third party in connection with the Report;
(f) has not served as an officer, director or employee of the subject company; (g) is not engaged in market making activity for the subject company.

Name Qualification Designation

Sudeep Shah MMS-Finance DVP- Technical & Derivative Research
Sunny Agrawal B.E, MBA (Finance) DVP - Fundamental Research
Rajesh Gupta PGDBM (Finance), MA (Bus. Eco) AVP - Fundamental Research
Monica Chauhan C.A. Research Analyst - Equity Fundamentals
Harsh Vasa CA Research Analyst - Equity Fundamentals
Sumeet Shah B.E., CFA Research Analyst - Equity Fundamentals
Sweta Padhi MBA (Finance) Research Analyst - Equity Fundamentals
Uday Chandgothia B-Tech, MBA (Finance) Research Associate - Equity Fundamentals
Gautam Updhyaya MBA (Finance) Research Analyst - Equity Derivatives
Vinayak Gangule BE (IT) Research Analyst - Equity Technicals
Pratik Patni BSc (Biotech Entire) Research Analyst- Equity Derivatives
Ghanshyam Gupta MBA (Finance) Research Analyst- Currency Derivative
Sagar Peswani B.Tech (ECE) Research Associate - Equity Technicals
Kalpesh Mangade B.Com MIS Analyst - Retail Research

For other Disclosures please visit: https://bit.ly/R_disclaimer02

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