Company Overview: Sai Life Sciences is a leading Contract Research, Development, and Manufacturing Organization (CRDMO) in India. It partners with over 280 global innovator pharma and biotech companies, focusing on accelerating the discovery, development, and commercialization of new chemical entity (NCE) small molecule programs. As the fastest-growing CRDMO among listed Indian peers, Sai Life Sciences has achieved significant growth in revenue and EBITDA between FY22 and FY24.

IPO Details: The Sai Life Sciences IPO is a book-built issue totaling ₹3,042.62 crores, with a fresh issue of ₹950.00 crores and an offer for sale of ₹2,092.62 crores. The IPO opens on December 11, 2024, and closes on December 13, 2024. The allotment is expected to be finalized by December 16, 2024, and the shares will be listed on December 18, 2024. The price band for the shares is set between ₹522 and ₹549 per share, and the market capitalization at the upper price band stands at ₹11,418.62 crores.

Financial Overview: Sai Life Sciences has reported impressive growth in revenue, EBITDA, and profit over the past few fiscal years. For FY24, the company’s revenue was ₹14,942.69 million, up from ₹12,451.05 million in FY23 and ₹8,977.41 million in FY22. The EBITDA for FY24 stood at ₹2,881.55 million, marking a significant increase from ₹1,864.78 million in FY23. The profit after tax (PAT) for FY24 was ₹828.09 million, which shows substantial improvement from ₹99.89 million in FY23 and ₹62.26 million in FY22.

However, the company’s earnings per share (EPS) stands at ₹4.53 pre-issue and ₹0.40 post-issue, with a pre-issue P/E ratio of 121.19x and a post-issue P/E ratio of 136.21x. These ratios are considerably higher than the industry average P/E ratio of 95.33x, which suggests that the IPO is priced at a premium compared to its peers.

IPO Subscription & Grey Market Premium (GMP): As of December 12, 2024, the Sai Life Sciences IPO is subscribed 0.89 times on the second day of its subscription period. The Grey Market Premium (GMP) stands at ₹48, indicating a potential listing gain of 8.66%. However, the GMP can fluctuate based on market demand and supply, and investors should be cautious as the grey market is unregulated.

Anchor Investors: The company has raised ₹912.79 crores from anchor investors at the issue price of ₹549 per share. A total of 1,66,26,336 equity shares were allocated to these investors. This demonstrates strong interest in the company from institutional investors.

Objectives of the IPO: The fresh issue proceeds will be utilized for two primary purposes:

1. Repayment/Prepayment of borrowings: ₹7,200.00 million will be used to repay or prepay the company’s outstanding borrowings.
2. General corporate purposes: The remaining funds will be allocated for general corporate purposes.

Valuation and Recommendation: Despite strong growth in revenue and EBITDA, Sai Life Sciences’ IPO comes with a high valuation. The P/E ratios, both pre and post-issue, are significantly higher than the industry average, making the IPO fully priced. This high valuation, combined with the market conditions and the company’s financial metrics, suggests that the IPO may not offer attractive listing gains or long-term investment opportunities.

Based on these factors, we recommend that investors avoid the Sai Life Sciences IPO, especially for those looking for listing gains or long-term capital appreciation.