Indegene ltd

Economic Analysis
Overview
The past decade has witnessed remarkable growth in pharmaceuticals globally. India has
emerged as a global powerhouse, playing a pivotal role in providing affordable and high-
quality medicines worldwide. The sector’s compound annual growth has been impressive and
its share in the country’s GDP has risen, driven by a range of factors such as a dynamic global
Industry, skilled workforce, upgradation of quality systems and a robust local market.

Indian pharma has the potential for greater achievements, propelled by advancements in
research and technology. The Pharmaceuticals Secretary, in the recent CII Life Sciences
Summit, indicated that India has the potential to grow 3-4 times in value by achieving a shift
from a 10 per cent share of Pharma and MedTech in the manufacturing sector in 2020 to a 20
per cent share in 2030, signifying the immense potential of the sector.

Key Developments

As per recent estimates, the Indian pharmaceutical Industry includes a network of 3,000 drug
companies and 10,500 manufacturing units. Around 500 API manufacturers are contributing
about 8 per cent to the global API Industry. Government initiatives like FDI up to 100 per cent
through automatic routes for greenfield pharmaceuticals projects, PLI scheme for KSMs and
APIs to boost manufacturing capacity, promotion of medical devices parks, strengthening
infrastructure facilities and robust pricing policies are key steps taken in the right direction.

India is now a global force in the Active Ingredients and generics space and a major player in
the manufacturing and supply of vaccines. Contract Research and Manufacturing Services
(CRAMS) is another driver of growth for the industry. Biological drugs and biosimilars is also
a major emerging area of growth.

Challenges and Regulatory Landscape

Amidst the success narrative, challenges persist. Striking a careful balance between generic
drug production and investing in research remains a challenge. India faces increased
dependence on imports and a dichotomy between fermentation and chemical synthesis-based
APIs. There is a need to explore concepts like Accelerated Product Development and
Implementation, which are present internationally. A consortium of 2-3 manufacturers could
come together to develop the API and later technology can be shared with others.

Regulatory frameworks serve as the bedrock for pharmaceutical integrity and require
continuous refinement. Harmonization of regulations, both domestically and internationally, is
imperative for streamlining processes and ensuring global compliance. Rigorous adherence to
quality standards is non-negotiable for sustaining Indian credibility in the pharma market.

Research & Innovation: Catalysts of Transformation

At the heart of the pharmaceutical renaissance lies a commitment to research and innovation.
India’s reputation as a hub for generic drug manufacturing must be complemented by robust
and sustained investment in research and development. Collaborative initiatives among
Industry stakeholders, academia and research institutions are pivotal in nurturing an
environment conducive to groundbreaking drug discovery and technological advancements.

The opportunity of discovering and developing innovative medicines is a very exciting area
and offers a large opportunity, albeit with some challenges such as limited access to risk capital,
an underdeveloped innovation ecosystem and the challenge of deep science. We do have some
natural advantages such as a large patient pool, cost-effective clinical trial infrastructure and a
large pool of talent.

A Strategic Roadmap

India’s pharma sector stands at the crossroads of unparalleled growth. Sustained investment in
R&D, innovation and strategic collaborations with global partners is imperative in securing a
global position. Skill development initiatives and seamless integration of digital technologies
will fortify the industry’s resilience and put India on the map of the global healthcare
paradigm.

CII Pharma committee envisions a future where India not only retains its status as the
‘pharmacy of the world’ but also becomes a global leader in research and innovation.

CII’s work continues to focus on promoting vertical integration in the supply chain,
strengthening domestic manufacturing to reduce import dependency, fostering Industry-
academia collaboration, improving market access, improving supply chain issues for
combating future global pandemics, addressing regulatory issues at the national and state level,
and improving ease of doing business in pharma. Through collaborative efforts, unwavering
commitment to excellence and regulatory finesse, the Indian pharma Industry is poised not just
to adapt but to script a compelling narrative that resonates globally.

This article was contributed by Mr G V Prasad, Chairman, CII National Committee on

Pharmaceuticals and Co-Chairman & MD, Dr Reddy’s Laboratories Ltd. It was first published
in CII Communique.

Industry Analysis
Summary
 The life sciences industry primarily comprises biopharmaceutical companies and
medical devices companies, whose combined sales were estimated at ₹138.3 trillion
(US$1.8 trillion) in 2023, with biopharmaceutical companies constituting 69% or ₹95.4
trillion (US$1.2 trillion) of such sales. Combined sales of biopharmaceutical companies
and medical devices companies are estimated to reach ₹163.5 trillion (US$2.1 trillion)
by 2026 driven by a rise in aging population, increasing prevalence of chronic diseases
and discovery of new diseases, among other factors. Life sciences operations
expenditure (which includes spends on marketing and sales, drug discovery and clinical
trials, regulatory and medical affairs, manufacturing, supply chain and distribution and
pharmacovigilance or complaints management) was estimated at ₹12.0 trillion
(US$156 billion) in 2022 and is expected to grow at a CAGR of 6.5% to reach ₹15.5
trillion (US$201 billion) in 2026 in line with growth in industry sales. (Source: Everest
Report).

Indian pharmaceuticals market

▪ Indian pharmaceutical industry is known for its generic medicines and low-cost vaccines
globally. Transformed over the years as a vibrant sector, presently Indian pharma ranks third
in pharmaceutical production by volume. The Pharmaceutical industry in India is the third
largest in the world in terms of volume and 14th largest in terms of value. The pharma sector
currently contributes to around 1.72% of the country’s GDP.
▪ The domestic pharmaceuticals industry expects sales to grow 8-10% in the financial year
2023-24, as per CRISIL.
▪ In FY23, the Indian pharma market saw a year-on-year growth of nearly 5%, reaching US$
49.78 billion. During FY18 to FY23, the Indian pharmaceutical industry logged a compound
annual growth rate (CAGR) of 6-8%, primarily driven by an 8% increase in exports and a 6%
rise in the domestic market.
▪ Major Segments of the Pharmaceutical Industry are Generic drugs, OTC Medicines and
API/Bulk Drugs, Vaccines, Contract Research & Manufacturing, Biosimilars & Biologics.
▪ Market size of India pharmaceuticals industry is expected to reach US$ 65 billion by 2024,
and ~US$ 130 billion by 2030.
▪ India is 3rd largest market for APIs globally, 8% share in the Global API Industry, 500+
different APIs are manufactured in India, and it contributes 57% of APIs to the prequalified
list of the WHO.
▪ Pharmaceutical is one of the top ten attractive sectors for foreign investment in India. The
pharmaceutical exports from India reach more than 200 nations around the world, including
highly regulated markets of the USA, West Europe, Japan, and Australia.
▪ India supplied around 45 tonnes and 400 million tablets of hydroxychloroquine to around
114 countries globally.
▪ The market size of the medical devices sector in India was estimated to be US$ 11 billion in
2023 and its share in the global medical device market is estimated to be 1.5%.

R&D spending in Indian pharmaceuticals

▪ The biotechnology and pharmaceutical sectors have showcased resilience and grit in the face of the
pandemic, continuously evolving and innovating for better outcomes. The industry has witnessed
innovation in the fields of new vaccine technology and treatment methods as well as in the R&D that
goes behind making these vaccines and treatments.
 ▪ Utilizing modern technologies to manufacture pharmaceuticals, improve scientific procedures, and
identify novel treatment approaches is fast catching on.

▪ India is making an effort to build a policy framework that incorporates intellectual property and
technology commercialization, government procurement, scientific research, education, and skill
development, as well as ease of doing business, regulatory legislation, and tax and financial incentives,
these regulatory adjustments will open the door for further private sector investment in
pharmaceutical R&D.

▪ The Union Budget 2023 aims to provide stimulus towards innovation with the announcement of the
promotion of research and innovation programmes in pharmaceuticals through Centres of Excellence.

▪ For innovation in the pharmaceutical sector, through centres of excellence, a new initiative to
encourage pharmaceutical research and innovation will be implemented. The government persuades
businesses to spend money on R&D in a few chosen priority fields. At the grassroots level, the
government has also announced on building of 157 nursing colleges in co-location with government
medical colleges.

▪ The government would also facilitate select ICMR labs with facilities like research by both public and
private medical college faculty alongside, private sector R&D teams.

Company Analysis

Things to know from RHP

1. About the Company

Indegene is a provider of digitally enabled commercialization services for the life sciences
sector, encompassing the sales and marketing of goods for biopharmaceutical, emerging
biotech, and medical device firms.
Consulting, enterprise commercial solutions, omnichannel activation, enterprise medical
solutions, and enterprise clinical solutions are some of the categories into which indigene
services can be subdivided.

2. Indegene Limited IPO: Objectives of the issue

The Indegene IPO is a ₹1,841.76 crore book built issue. The issue consists of an offer to sale
2.39 crore shares, valued at ₹1,081.76 crores, and a new issue of 1.68 crore shares,
totaling ₹760.00 crores.
Indegene Limited will use the proceeds from the new offering for
a. financing inorganic growth,
b. general corporate purposes
c. Funding the capital expenditure requirements of Indegene and also its Material Subsidiary,
Indegene, Inc.;
d. Payment of consideration towards acquisition of additional shares in DT Associates Limited
by ILSL Holdings, Inc., a Subsidiary;
e. Repayment or prepayment of debt of of one of its Subsidiaries, ILSL Holdings, Inc.

3. Indegene Limited IPO: Key Risks

If Indegene Ltd is unable to generate new engagements from its clients, it may have a negative
impact on its business
If Indegene Ltd client engagements are terminated or reduced in scope, it may have a negative
impact on its business, cash flows and results of operations.

4. Indegene Limited: Promoters

Indegene Limited is a professionally managed company and does not have an identifiable
promoter in terms of the SEBI ICDR Regulations and the Companies Act.
However as per chittorgarh.com, BCP Topco VII Pte. Ltd. is the promoter of Indegene Limited.

5. Indegene Limited: : Industry Landscape

The life sciences industry comprises entities engaged in the research, development, and
manufacturing and marketing of drugs and medical devices. The two main segments within
this industry are the biopharmaceutical and medical devices segments:
Biopharmaceutical. This segment comprises companies that discover, develop, manufacture,
and sell drugs (chemical and biological-based) to cure, vaccinate, or alleviate symptoms of
medical conditions or diseases.
• Medical devices. This segment comprises companies involved in the research, development,
production, and sale of systems and devices of medical applications, i.e., to treat or diagnose
diseases or medical conditions.
The combined sales of the biopharmaceutical and medical devices segments was estimated
at ₹132.5 trillion (US$1.7 trillion). In 2021, with biopharmaceuticals constituting 69% or ₹91.4
trillion (US$1.2 trillion). By 2025, the combined sales of the biopharmaceutical and medical
devices segments are expected to reach ₹165.7 trillion (US$2.1 trillion) with
biopharmaceuticals constituting 69% or ₹114.6 trillion (US$1.5 trillion).

KEY RATIO OF THE COMPANY (F.Y 2023)

Earning per Share (EPS) = Net Profit / Total O/S share
= 226.4 / 22.24
= Rs 10.18
P/E Ratio: Current Market Price of Share/ Earning per Share
= 452/ 10.18
= 44.4
Interpretation: A P/E ratio of 44.4 is considered that the company's stock price is 44.4 times higher
than its earnings per share. Investors are willing to pay a premium for the company's stock because
they believe its earnings will grow significantly in the coming years.

book value of equity (BVE) = Total asset – Total liabilities

= 25,181.47 - 11,911.46 = 13270.01
P/B Ratio = Market Capitalization / book value of equity
= ( 22.4*452) 10124.8 / 13270.01
= 0.76
Interpretation: A P/B ratio of 0.76 means investors are willing to pay Rs. 0.76 for every Rs. 1 of
Indegene's book value. So it a undervalued stock. Investor should buy the share.

Price-to-Sales (P/S) = Market Capitalization / Total revenue

= 10124.8 / 19,697.49
= 0.52

Interpretation: A P/S ratio (price-to-sales ratio) of 0.52 indicates that Indegene Ltd's stock price is
relatively low compared to its annual sales.

Reason:

 The company may be undervalued by the market.

 The company may be in a high-growth industry where investors are willing to pay a premium
for future sales growth.