Indegene provides digital-led commercialization
services for the life sciences industry, including biopharmaceutical, emerging
biotech, and medical devices companies. The company assists in drug
development, clinical trials, regulatory submissions, pharmacovigilance, complaints
management, and sales and marketing.
The company provides a portfolio of solutions
covering all aspects of commercial, medical, regulatory, and R&D operations
of life sciences companies. It enables life sciences companies to develop
products, launch them in the market, and drive sales through their life cycle
in a more effective, efficient, and modern manner.
The company’s services can be divided into: (1)
Enterprise Commercial Solutions, (2) Omnichannel Activation, (3) Enterprise
Medical Solutions and (4) Enterprise Clinical Solutions and Consultancy Services.
Enterprise Commercial Solutions assists life
sciences companies with their digital marketing operations. Sales and marketing
were the largest segment of life sciences operations expenditure of life
sciences companies in 2022. The company helps life sciences companies drive
scale efficiency as well as technology and analytics-enabled personalization of
their engagement strategies for HCPs, patients, and operations.
Omnichannel Activation Solutions helps life
sciences companies leverage a `digital first’ approach for optimizing the
last-mile promotion of biopharmaceutical products and medical devices to HCPs
across multiple channels.
Enterprise Medical Solutions helps companies to establish
centers of excellence (CoEs) to consolidate large-scale regulatory and medical
operations for clients. Through these CoEs, the company assist with: (i)
writing medical content, regulatory submissions, product labels, and other
medical information; (ii) reviewing medical communications to ensure compliance
with regulatory guidelines and ethical practices; (iii) pharmacovigilance
services, and (iv) conducting real-world evidence (RWE)-based medical research
to support market access and pricing strategies.
Enterprise Clinical Solutions helps to obtain efficiencies
in the drug discovery and clinical trial operations of life sciences companies.
These solutions include digitally enabled patient recruitment for clinical
trials, clinical data management, and assistance with regulatory submissions.
The Enterprise Commercial Solutions segment contributed
59.27% to total revenue, Omnichannel Activation 12.06%, Enterprise Medical
Solutions 22.98%, and Enterprise Clinical Solutions and Consultancy Services
5.69% in 9M FY2024.
The company primarily executes work orders under
two revenue models: (i) resource utilization model. Clients are charged based
on the number of employees assigned per engagement or by the number of hours
spent on the engagement; and (ii) fixed price contract model. Clients are
charged a fixed fee for a particular project. Additionally, the company may
also charge clients under an outcome-based model, where fees are linked to
factors such as the HCP engagement impact of sales and marketing efforts for
the clients’ products.
The company had 65 active clients at the end of
December 2023. These clients included biopharmaceutical companies, medical
devices companies and emerging biotech companies. It had strong client
relationships with 20 largest biopharmaceutical companies in the world by
revenue in FY2023.
Biopharmaceutical companies contributed 93.29% to
total revenue, medical devices companies 3.27%, emerging biotech companies
2.73%, and others 0.7% in 9M FY 2024.
The company caters to the needs of clients from six
operation hubs and 17 offices located across North America, Europe, and Asia.
As a part of its strategy, the company continues
to strengthen its `go to market’ engine involving: (i) tapping into cross-sell,
up-sell and geographic expansion opportunities; (ii) deepening relationship
with existing clients and expanding customer base to biopharmaceutical
companies; (iii) making inroads into new market segments; (iv) focus on high
value opportunities; and (v) scaling nascent business verticals.
The company intends to expand the scale and scope
of its operations by continuing to invest in technology. The company has been
integrating Gen AI in its solutions to improve the efficiency of tools and
platforms. It is working on new Gen AI-enabled solutions to improve clinical,
pharmacovigilance and regulatory offerings and increase its market share in
these areas.
Offer
and its objects
The IPO comprises fresh issue of equity shares
worth up to Rs 760 crore and an offer for sale of 2,39,32,732 equity shares
aggregating up to Rs 1081.76 crore by the shareholders: Manish Gupta, Dr Rajesh
Bhaskaran Nair, Anita Nair, Vida Trustees, BPC Genesis Fund I SPV, BPC Genesis
Fund I-A SPV, and CA Dawn Investments.
The price band of the
IPO is Rs 430 to Rs 452 per equity share of face value Rs 2 each.
The objectives of the fresh issue include Rs 391
crore for repayment/prepayment of debt, Rs 103 crore to fund working capital
requirement, and the remaining amount to be used for general corporate purposes
and inorganic growth.
Indegene is a professionally managed company and
does not have an identifiable promoter in terms of the SEBI ICDR Regulations
and the Companies Act. Consequently, there are no members forming part of the
‘promoter group’. Nadathur Fareast Pte is the biggest shareholder in the
company with a 23.64% stake. CA Dawn Investments has a 20.42% stake and Brighton
Park Capital owns a 12% stake in the company.
The issue, through the book-building process,
will open on 6 May 2024 and close on 8 May 2024.
Strengths
The company is well positioned to benefit from
the expected growth in life sciences operations expenditure, estimated at Rs 12
trillion (US$ 156 billion) in 2022 and expected to grow at a CAGR of 6.5% to
reach Rs 15.5 trillion (US$ 201 billion) in 2026.
The company has over two decades of healthcare
domain expertise, enabling it to efficiently modernize and digitize the key
functions involved in the life sciences commercialization process.
Life sciences companies are adopting digital innovation
and enterprise-wide transformation initiatives to improve operational
efficiencies impacted by certain cost pressures like wide talent gaps and
margin pressures from drug pricing caps. Indegene is well prepared to benefit
from this trend.
The company had long-standing relationships with
marquee biopharmaceutical companies including each of the 20 largest
biopharmaceutical companies in the world by revenue in FY 2023. Moreover, the
company has high retention rates (i.e., revenue from existing customers as a
percentage of revenue from such customers earned in the previous year). The retention
rate was 122.83%, 159.89%, and 129.90% in FYs 2023, 2022 and 2021,
respectively.
The company has robust digital capabilities and an
in-house developed technology portfolio. The company also developed AI-powered
solutions across the life sciences commercialization continuum. These tools
help improve cost efficiency, speed to market, regulatory compliance, and
product quality at scale in a manner that requires less manpower and human
intervention.
The company has an experienced management team
and motivated talent pool, supported by marquee investors. Many of its key managerial
personnel have several years of experience in the healthcare domain and have
academic backgrounds in business with qualifications from various medical
institutions.
The company has successfully executed several
acquisitions and has benefited from the synergies, networks, technologies, and
talent pools of the companies acquired. Since its inception, the company has
completed 13 acquisitions.
Weaknesses
The Indegene business is focused on the life
sciences industry and derives most of its revenue from biopharmaceutical clients.
Biopharmaceutical companies contributed 93.29% to total revenue in 9M FY 2024.
The company may be adversely impacted by factors affecting the life sciences
industry and the biopharmaceutical industry, including the growth of the
overall industry, outsourcing, and other trends.
The company generates a significant portion of
its revenue from certain large clients located in North America and Europe. The
top five customers contributed 47.76% to the total revenue in 9M FY 2024. Any
downsizing of the scale of such clients or failure to retain large clients
could adversely affect financials.
The audit reports of the company for 9M FY2023
and 9M FY2024 contain certain emphasis of matter paragraphs. Further, the audit
reports issued by statutory auditors for FYs 2023, 2022 and 2021 included
statements on certain matters indicating delays in the payment of interest
amounts and delays in the deposit of provident fund dues.
The adoption of generative artificial
intelligence (Gen AI) by the life sciences industry could lead to changes in
customers’ operations and, in turn, affect the company’s revenue and
profitability. The integration of Gen AI in the company’s tools and platforms
also exposes it to additional data security and privacy risks.
The company’s operations involve extending credit
to clients for solutions offered, thereby exposing it to counterparty credit
risk, including significant delays in receiving payments or non-receipt of
payments. Its billed trade receivables amounted to Rs 638.34 crore,
representing 33% of 9M FY2024 revenue.
The company generates a substantial portion of
its total revenue from international markets, primarily North America and
Europe. This exposes the company to exchange rate fluctuations and potential
geopolitical tensions.
Some of the company’s shareholders are also
substantial shareholders in an entity with an omnichannel SaaS platform
business catering to a similar client base as the company’s Omnichannel
Activation Solutions segment. This may result in conflicts of the shareholders’
interests.
Valuation
Consolidated sales
increased 14.5% to Rs 1916.61 crore in 9M FY 2024 as compared with 9M FY2023. The
OPM increased 129 bps to 19.13%, leading to a 22.78% increase in OP to Rs
366.71 crore. Other income increased 18.42% to Rs 53.14 crore, while interest
cost rose 88.71% to Rs 37.11 crore and depreciation went up 43.7% to Rs 57.63
crore. PBT jumped 14.57% to Rs 325.11 crore. Tax expenses were Rs 83.21 crore as
compared to tax expense of Rs 66.49 crore in 9M FY2023. Net profit grew 11.33%
to Rs 241.9 crore.
Consolidated sales
increased 38.54% to Rs 2306.13 crore in FY2023 as compared with FY2022. The OPM
increased 27 bps to 17.18%, leading to a 40.73% increase in OP to Rs 396.22 crore.
Other income spurted 123.91% to Rs 57.97 crore, while interest cost surged
5154.4% to Rs 31.33 crore and depreciation jumped 78.8% to Rs 59.81 crore. PBT soared
60.29% to Rs 363.05 crore. Tax expenses were Rs 96.95 crore as compared with tax
expense of Rs 63.68 crore in FY2022. Minority interest was nil as compared with
negative 1.94 crore in FY2022. Net profit increased 61.50% to Rs 266.1 crore.
The TTM EPS on post-issue equity works out to Rs
12.15. At the upper price band of Rs 452, P/E works out to 37.2.
Indegene OPM and ROE stood at 17.18% and 25.02%,
respectively, in FY 2023. There are no listed companies in India and globally
of comparable size from the same industry and with similar business model as
that of the company. The company is positioned at the intersection of
healthcare and technology and has created a niche place in the verticals it is
operating. It caters to the life sciences industry, expected to record a CAGR
of approximately 6.5% to reach Rs 15.5 trillion (US$201 billion) by 2026, driven
by a rise in aging population, increasing prevalence of chronic diseases, and
discovery of new diseases, among other factors.
Indegene:
Issue highlights
|
For Fresh Issue Offer size (in no of shares )
|
|
- On lower price band
|
1,75,92,593
|
- On upper price band
|
1,68,14,159
|
Offer size (in Rs crore)
|
760
|
For Offer for Sale Offer size (in Rs crore)
|
|
- On lower price band
|
1029.11
|
- On upper price band
|
1081.76
|
Offer size (in no of shares )
|
2,39,32,732
|
Price band (Rs)
|
430-452
|
Minimum Bid Lot (in no. of shares )
|
33
|
Post issue capital (Rs crore)
|
|
- On lower price band
|
48
|
- On upper price band
|
47.85
|
Post-issue promoter & Group shareholding (%)
|
Nil
|
Issue open date
|
06-05-2024
|
Issue closed date
|
08-05-2024
|
Listing
|
BSE, NSE
|
Rating
|
48/100
|
Indegene: Consolidated
Financials
|
|
2103 (12)
|
2203 (12)
|
2303 (12)
|
2212 (9)
|
2312 (9)
|
Sales
|
966.27
|
1,664.61
|
2,306.13
|
1,673.89
|
1,916.61
|
OPM (%)
|
23.86%
|
16.91%
|
17.18%
|
17.84%
|
19.13%
|
OP
|
230.53
|
281.56
|
396.22
|
298.67
|
366.71
|
Other inc.
|
30.65
|
25.89
|
57.97
|
44.87
|
53.14
|
PBIDT
|
261.18
|
307.44
|
454.19
|
343.54
|
419.85
|
Interest
|
6.96
|
0.60
|
31.33
|
19.67
|
37.11
|
PBDT
|
254.22
|
306.85
|
422.86
|
323.87
|
382.74
|
Dep.
|
25.55
|
33.45
|
59.81
|
40.11
|
57.63
|
PBT
|
228.67
|
273.40
|
363.05
|
283.77
|
325.11
|
Share of Profit/(Loss) from Associates/JV
|
(0.20)
|
-
|
-
|
-
|
-
|
PBT before EO
|
228.47
|
273.40
|
363.05
|
283.77
|
325.11
|
Exceptional items
|
(2.99)
|
46.90
|
-
|
-
|
-
|
PBT after EO
|
231.46
|
226.50
|
363.05
|
283.77
|
325.11
|
Taxation
|
45.78
|
63.68
|
96.95
|
66.49
|
83.21
|
PAT
|
185.68
|
162.82
|
266.10
|
217.28
|
241.90
|
Minority Interest
|
0.01
|
(1.94)
|
-
|
-
|
-
|
Net Profit
|
185.67
|
164.76
|
266.10
|
217.28
|
241.90
|
Loss from discontinued operation after tax
|
36.27
|
-
|
-
|
-
|
-
|
Net Profit after discontinued operation
|
149.40
|
164.76
|
266.10
|
217.28
|
241.90
|
EPS (Rs)*
|
7.66
|
8.30
|
11.12
|
#
|
#
|
* EPS is annualized on post issue equity capital of Rs 47.85 crore of
face value of Rs 2 each
|
|
|
# EPS is not annualised due to seasonality of business
|
|
|
|
|
EO: Extraordinary items. EPS is calculated after excluding EO and
relevant tax
|
|
|
|
Figures in Rs crore
|
|
|
|
|
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Source: Capitaline Corporate Database
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