Is Anthem Biosciences IPO a risky bet for investors?

Synopsis

Anthem Biosciences, a CRDMO, is set to launch an IPO to raise ₹3,395 crore, diluting the promoter group's stake. While revenue and profit have increased, the company faces geographical and client concentration risks. Despite a high P/E ratio compared to peers, investors with a high-risk tolerance may find the IPO appealing.

ET Intelligence Group: Anthem Biosciences, a contract research, development and manufacturing organisation (CRDMO), plans to raise ₹3,395 crore through an offer for sale. The promoter group's stake will fall to 74.7% from 76.9% after the initial public offering (IPO).

The company's revenue and profit have shown improvement over the last two years. However, over 55% of its revenue comes from Europe, while its top-five customers contributed about 71% to revenue from operations in FY25, signalling geographical and client concentration. Also, inventory days, which shows the time taken to sell the products, are higher compared with some of its peers. Considering these factors, investors with high-risk appetite may consider the IPO.

Business
Incorporated in 2006, Bengaluru-headquartered Anthem Biosciences undertakes drug discovery, development and manufacturing.

About 82% of its revenue is from CRDMO business and the rest from specialty ingredients. As of FY25, it had 242 projects with 68 discovery projects, 145 early-phase projects, 16 late-phase projects, and 13 commercial manufacturing projects. The company held one patent in India, seven overseas, and has filed 17 patent applications globally.

Agencies

Financials

Anthem ' revenue from operations and net profit grew by 32.1% and 8.2% annually to ₹1,844.6 crore and ₹451.3 crore, respectively, between FY23 and FY25. Similarly, earnings before interest, taxes, depreciation and amortisation (Ebitda) grew by 23.8% to ₹683.8 crore. The Ebitda margin declined to 36.8% in FY25 from 41.5% in FY23, but still, it is better than the 23.9-31.7% for its peers. Research and development expenses as a percentage of revenue declined to 10.6% in FY25 from 24.5% in FY23. Net working capital days, though high, declined to 222 days in FY25 from 242 days in FY23, while inventory days jumped to 135 days from 98 days.

Valuation
Considering the post-IPO equity and net profit for FY25, the company demands a price-earnings (P/E) multiple of up to 71 compared with P/Es between 51 and 147 for peers, including Syngene International, Sai Life Sciences, Cohance Lifesciences and Divi's Laboratories.

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