Tag - PE funding

Update on the Indian Equity Market:

On Wednesday, NIFTY closed at 12,025 (-0.2%). Among the stocks, Bharti Airtel (+3.1%), Yes Bank (+2.2%) and TCS (+2.15%) were the gainers. Eicher Motors (-4.3%), Coal India (-2.5%), and LT (-2.2%) were the top losing stocks. IT (+0.4%) and FMCG (+0.1%) were the sectoral gainers. All the sectors ended in the red.

‘Biocon optimistic about hitting $1 billion in revenue by FY22 on back of new launches’ – Kiran Mazumdar Shaw, Chairperson and Managing Director, Biocon

Excerpts from an interview with Kiran Mazumdar Shaw, Chairperson and Managing Director- Biocon published in Livemint on 08^th January 2020:

• They would get a benchmark valuation through some private equity investment before they take it to the market for an initial public offering (IPO) and according to her this is the first step where True North has invested in Biocon’s Biologics and they set a base level benchmark valuation.
• They might raise little more private equity prior to the IPO. This gives them an idea of where they believe they can unlock the value in terms of Biocon Biologics in the next few years.
• They have been in discussion with several private equity forums and of course True North has been first of the block and they will be socializing and entertaining other investment opportunities from other private equity firms.
• In 2020, hopefully they will see private equity funding complete before they go for an IPO. The plan is obviously to invite private equity and use it for many of their current funding needs.
• They have set up a very expensive biologics facility. So private equity funding will actually come in very handy instead of raising extra loans, debt finance.
• They plan to extend the private equity funding to $200-300 million or more levels and True North is expected to take up additional stake along with others.
• The opportunities are very well marked out, and she feels optimistic about hitting the target of $1 billion of revenue in biologics by FY22.
• They are now in the US market with both Trastuzumab and Pegfilgrastim. Both have had pretty strong entries.
• They have also got Glargine and Bevacizumab that will make an entry into the market by FY22 and we also expect insulin Aspart to be in the US market by that time.
• There are many launches that are planned by FY22 and she believes that they have worked out a fairly conservative kind of metrics to get them to that FY22 billion dollar target. So that is why they remain quite confident that they will be able to hit that target.
• She believes that they have a very robust pipeline; they have 28 molecules, either in the market or under development. They have just commissioned first expansion of their very large biologics facility in Bengaluru.
• Biocon has to be viewed as a balanced portfolio with small molecules, biologics and research services and those who want a pure play investment opportunity in either biologics or research services can opt for either Syngene or Biocon Biologics. She thinks they have made it into an interesting investment opportunity by structuring it this way.
• Biocon will continue to be a very strong performer considering the fact that it intends to have majority stake in both Syngene and Biologics.
• As capex needs of biologics business are very high both in terms of manufacturing capacity as well as R&D investment, they will use the funding across the board.

Consensus Estimate: (Source: market screener website)

• The closing price of Biocon Ltd was ₹ 282/- as on 08^th January-20. It traded at 37x/ 28x/ 21x the consensus earnings estimate of ₹ 7.5/ 10.1/ 13.2 for FY20E/ FY21E/ FY22E respectively.
• Consensus target price is ₹ 294/- which implies a PE multiple of 22x on FY22E EPS of ₹ 13.2/-