What you must know about Indegene IPO?

About Indegene Ltd

Indegene Ltd was founded in 1998 and has emerged today as a digital-first, life sciences commercialization company. Indegene Ltd helps biopharmaceutical, emerging biotech, and medical device companies in their journey to develop products, take to market, and grow their impact through the life cycle. Indegene brings to the table an amalgam of healthcare domain expertise, quality technology, and an agile operating model. The focus has been on customized solutions rather than on off-the-shelf products. The customer experience is not only personalized, but also scalable and an omnichannel experience for patients and physicians. In short, the company enables healthcare organizations to be future ready. Indegene has over 5,000 team members worldwide across 17 global offices and services all the top global pharmaceutical companies globally.

Among the key offerings of Indegene Ltd is enterprise commercial solutions intended to elevate customer experience across enterprise and transform commercial operations. The other offering is enterprise medical solutions that help communicate scientific information lucidly to improve regulatory compliance and manage safety efficiently. The third business line is enterprise clinical solutions which help to accelerate clinical trials in order to bring innovative therapies to patients quicker. Indegene Ltd also offers omnichannel activation solutions to customers which help to grow revenues, elevate customer experience, and augment teams with a go-to-market approach. Finally, Indegene Ltd also offers NEXT Technology Platforms that are intended to scale up outcomes in a non-linear fashion. All these solutions are delivered to the customers by Indegene Ltd through consulting, centres of excellence, and through development and co-commercialization.

The fresh funds will be used for funding capex of the company and its material subsidiaries, repayment of loans of the group companies and to fund inorganic growth. The company, being a professionally managed company, does not have an identified promoter group. The IPO will be lead managed by Kotak Mahindra Capital, Citigroup Global Markets, JP Morgan India, and Nomura Financial Advisory; while Link Intime India Private Ltd will be IPO registrar.

Highlights of the Indegene IPO issue

Here are some of the key highlights to the public issue of Indegene IPO.

• Indegene IPO will be open from May 06th, 2024 to May 08th, 2024; both days inclusive. The stock of Indegene Ltd has a face value of ₹2 per share and the price band for the book building IPO has been set in the range of ₹430 to ₹452 per share.
   
• Indegene IPO will be a combination of a fresh issue of shares and offer for sale (OFS) component. As you would be aware, a fresh issue tends to bring in fresh funds into the company, but is also EPS and equity dilutive. On the other hand, OFS is just a transfer of ownership.
   
• The fresh issue portion of the IPO of Indegene Ltd comprises the issue of 1,68,14,159 shares (168.14 lakh shares approximately), which at the upper price band of ₹452 per share will translate into a fresh issue size of ₹760 crore.
   
• The offer for sale (OFS) portion of the IPO of Indegene Ltd comprises the sale / offer of 2,39,32,732 shares (239.33 lakh shares approximately), which at the upper price band of ₹452 per share will translate into an OFS size of ₹1,081.76 crore.
   
• Out of the OFS size of 239.33 lakh shares, 3 individual shareholders (Manish Gupta, Rajesh Nair, and Anita Nair) will offer 55.04 lakh shares in all. In addition, among the investor shareholders; Vida Trustees will offer 36 lakh shares, BPC Genesis Fund-I will offer 26.58 lakh shares, BPC Genesis Fund-IA will offer 13.79 lakh shares and CA Dawn Investments will offer 107.93 lakh shares. All selling will be by investor shareholders, since the company is professionally managed and does not identify with a promoter group. All selling shareholders are investor shareholders only.
   
• Thus, the total IPO of Indegene Ltd will comprise of a fresh issue and an OFS of 4,07,46,891 shares (407.47 lakh shares approximately) which at the upper end of the price band of ₹452 per share aggregates to total issue size of ₹1,841.76 crore.

The IPO of Indegene Ltd will be listed on the NSE and the BSE on the IPO mainboard.

Promoter holdings and investor allocation quota 

The company is professionally managed company and does not have any identified promoter group. As per the terms of the offer, not more than 50% of the net offer is reserved for the qualified institutional buyers (QIBs), while not less than 35% of the net offer size is reserved for the retail investors. The residual 15% is kept aside for the HNI / NII investors. The table below captures the gist of the allocation to various categories.

It may be noted here that the Net Offer above refers to the quantity net of employee and promoter quota, as indicated above. There is an employee quota of up to ₹12.50 crore that has been communicated by the company as the shares reserved for employees in its red herring prospectus (RHP). The anchor portion, will be carved out of the QIB portion and the QIB portion available to the public will be reduced proportionately.

Lot sizes for investing in the Indegene IPO

Lot size is the minimum number of shares that the investor has to put in as part of the IPO application. The lot size only applies for the IPO and once it is listed then it can be even traded in multiples of 1 shares since it is a mainboard issue. Investors in the IPO can only invest in minimum lot size and in multiples thereof. In the case of Indegene Ltd, the minimum lot size is 33 shares with upper band indicative value of ₹14,916. The table below captures the minimum and maximum lots sizes applicable for different categories of investors in the IPO of Indegene Ltd.

It may be noted here that for the B-HNI category and for the QIB (qualified institutional buyer) category, there are no upper limits applicable.

Key dates for Indegene IPO and how to apply?

The issue opens for subscription on 06th May 2024 and closes for subscription on 08th May 2024 (both days inclusive). The basis of allotment will be finalized on 09th May 2024 and the refunds will be initiated on 10th May 2024. In addition, the demat credits are expected to also happen on 10th May 2024 and the stock will list on 13th May 2024 on the NSE and the BSE. Indegene Ltd will test the appetite for such value added healthcare support stocks in India. The credits to the demat account to the extent of shares allotted will happen by the close of 10th May 2024 under ISIN (INE065X01017). Let us now turn to the practical issue of how to apply for the IPO of Indegene Ltd.

Investors can apply either through their existing trading account or the ASBA application can be directly logged through the internet banking account. This can only be done through the authorized list of self-certified syndicate banks (SCSB). In an ASBA application, the requisite amount is only blocked at the time of application and the necessary amount is debited only on allotment. Investors can apply in the retail quote (up to ₹2 lakh per application) or in the HNI / NII quota (above ₹2 lakh). Minimum lot sizes will be known after pricing.

Financial highlights of Indegene Ltd

The table below captures the key financials of Indegene Ltd for the last 3 completed financial years.

Data Source: Company RHP filed with SEBI (FY refers to Apr-Mar period)

There are few key takeaways from the financials of Indegene Ltd which can be enumerated as under

1. In the last 3 years, revenue growth has been robust with the sales growing nearly 139% in the last 2 years. The growth has been balanced in the last two years, but what is striking is that the company has reported very healthy net margins of 11.54% for the latest year with the average of the last 3 years also hovering above that level.
    
2. The net profits have grown have nearly doubled in the last 2 years and that is evident in the net margins. Also, the return on equity (ROE) at 25.02% and the return on assets (ROA) at 12.07% are very attractive in the latest year. The company has the advantage of being in the value added services industry where replication benefits are high on scale.
    
3. The company has a healthy sweating of assets at just around 1.05X in the latest year, although the average of the last 3 years is closer to 1.30X. However, this benefit gets magnified if you consider the robust return on assets.

Overall, the company has maintained healthy numbers in terms of growth in top line and bottom lien as well as profitability and efficiency margins.

Valuation metrics of the Indegene IPO

Let us turn to the valuations part. On the latest year diluted EPS of ₹11.97, the upper band stock price of ₹452 gets discounted at a P/E ratio of 37-38 times. However, this sort of high P/E ratios are normal in the value added services healthcare industry and it also has the number to back up. If you look at the numbers for the first 9 months of FY24, the EPS is already at ₹10.84, so full year EPS can be extrapolated to ₹14.45 per share. It now translates into P/E ratio of 31-32 times, which looks a lot more reasonable.

Here are some qualitative advantages that Indegene Ltd brings to the table.

• Indene Ltd brings very strong domain expertise to the table with most of their key personnel having healthcare related backgrounds.
   
• The company heavily leverages artificial intelligence and machine learning to create an in-house technology stack to support the business growth of clients.
   
• Apart from its track record, it also has a global delivery model that stretches across 17 offices located across North America, Europe, and Asia.

The nature of the value-added healthcare business is one that takes a substantial time to build up but can give geometric returns in the future. Indene has reached that maturity stage from where it can easily leverage its position to boost profits in a big way. That is what the investors can bet on in the IPO. However, investors in the IPO must be prepared for higher levels of risk, the possibility of temporary disruptions and a longer holding period. It is best suited to investors who are equipped to wait for over a year and are willing to assume more of business / sectoral risk.