Nirmal Bang recommend to subscribe to Syngene IPO for long-term gains #BrokerAdvice http://goo.gl/kBG0oV

1. 1 | P a g e
NCDISSUENote
Syngene International Ltd.
Recommendation SUBSCRIBE – Long Term BACKGROUND
Price Band Rs 240-Rs 250 Syngene International Ltd (SIL) is one of the leading India-based contract
research organisations (CRO), offering a suite of integrated, end-to-end
discovery and development services for novel molecular entities (NMEs)
across industrial sectors. It offers service in discovery and development
cover multiple domains across small molecules, large molecules,
antibody-drug conjugates (ADC) and oligonucleotides. The integrated
discovery and development platforms help organisations conduct
discovery (from hit to candidate selection), development (including pre-
clinical and clinical studies, analytical and bio-analytical evaluation,
formulation development and stability studies) and pilot manufacturing
(scale-up, pre-clinical and clinical supplies) under one roof.
The company was incorporated in 1993 and is headquartered in
Bengaluru, India. It is a subsidiary of Biocon Limited (Biocon), a global
biopharmaceutical enterprise focused on delivering affordable
formulations and compounds.
SIL is now forward integrating into commercial-scale manufacturing of
NMEs.
Objects of the Issue
Syngene International is a cash rich company (Rs 116 cr in FY15). It’s an
offer for sale by Promoters – Biocon Ltd. Hence, there is no new issue of
shares and equity would remain same post issue.
Investment Rationale
 Talent Pool
 Integrated service offerings
 Financial Stability
 Protection of Clients IPR
Valuation and Recommendation
Between FY10-15 SIL’s revenues grew at CAGR of 26.4% while EBIDTA
grew at a CAGR of 26.5% and PAT by 42%. We expect it to maintain 20-
25% growth going forward.
On the valuation front, at the upper price of band of Rs 240-Rs 250, SIL is
commanding at PE of 18x of our rough calculations for FY17E.
Considering the healthy balance sheet, strong growth and robust
profitability, We recommend subscribing the issue for long term gains.
Financial Snapshot FY11 FY12 FY13 FY14 FY15
Revenues 321.9 416.7 550.0 699.5 859.9
%growth 29% 32% 27% 23%
EBIDTA 99.0 137.1 168.5 214.4 281.1
% margins 31% 33% 31% 31% 33%
PAT 27.2 71.0 102.1 134.8 175.0
% margins 8% 17% 19% 19% 20%
EV/EBIDTA @ Rs 250 17.3
P/E (FY15) @ Rs 250 28.4
P/BV @ Rs 250 5.9
Bidding Date 27 July – 29 July 2015
Book Running Lead
Manager
Axis Capital
Registrar Karvy Computershare
Sector Pharmaceuticals
Minimum Retail Application – Details At Cut off Price
Number of Shares 60
Application Money 15,000
Discount to retail NIL
Cheque Drawn To Syngene - Escrow Account – R
Consolidated
Financials (Rs Cr)
FY14 FY15
Total Income 699.5 859.9
EBITDA 214.4 281.1
PAT 134.8 175.0
Valuations Lower Band Upper Band
Market Cap (Rs cr) 4778.4 4977.5
EPS 8.8 8.8
BV/share 42.4 42.4
P/E ratio 27.3 28.4
P/BV 5.7 5.9
Post Issue Shareholding Pattern
Promoters 74.5%
Institutions 15.0%
Bodies Corporates &
Public 11.5%
Offer structure for different categories
QIB (Including Mutual Fund) 50%
Non-Institutional 15%
Retail 35%
Post Issue Equity (Rs cr) 199.1
Issue Size (Rs cr) 528-550
Face Value (Rs) Rs 10
Runjhun Jain
Sr. Research Analyst (+91 22 3926 8177)
runjhun.jain@nirmalbang.com

2. 2 | P a g e
NCDISSUENote
Syngene International Ltd.
Business
Syngene International Ltd (SIL) is one of the leading India-based contract research organisations
(CRO), offering a suite of integrated, end-to-end discovery and development services for novel
molecular entities (NMEs) across industrial sectors. It offers service in discovery and development
cover multiple domains across small molecules, large molecules, antibody-drug conjugates (ADC)
and oligonucleotides. The integrated discovery and development platforms help organisations
conduct discovery (from hit to candidate selection), development (including pre-clinical and clinical
studies, analytical and bio-analytical evaluation, formulation development and stability studies) and
pilot manufacturing (scale-up, pre-clinical and clinical supplies) under one roof.
The company was incorporated in 1993 and is headquartered in Bengaluru, India. It is a subsidiary of
Biocon Limited (Biocon), a global biopharmaceutical enterprise focused on delivering affordable
formulations and compounds.
SIL is now forward integrating into commercial-scale manufacturing of NMEs.
Investment Rationale
Talent Pool
Being a service oriented company, talent pool for SIL is very important. As of May 31, 2015, 90.6% of
its scientist pool of 2,122 scientists had a Master’s degree or a Ph.D. Its position as an industry
leader represents a significant competitive advantage in attracting and retaining high-quality
scientists required to successfully execute the innovative business model and to differentiate the
service offerings from those of other CROs. For the three fiscal years ended March 31, 2013, March
31, 2014 and March 31, 2015, it had an average attrition rate of 14.3%.
The company has experienced executive management team that has a median of 20 years of
experience across global clinical research, pharmaceutical and life sciences industries.
Integrated service offerings
It has evolved from being a discovery chemistry and discovery biology-focused CRO to an integrated
provider of discovery and development services for NMEs across a range of domains including small
molecules, large molecule biologics, ADCs and oligonucleotides. The depth and breadth of their
scientific capabilities and service offerings provide us multiple entry points during the life cycle of
clients’ molecules across the discovery and development process.
In addition, the company has been able to take advantage of India’s large, low-cost scientific talent
pool to deliver the services to multinational companies at competitive rates, especially when
compared with costs for comparable services in developed countries.
Financial Stability
Discovery and development is an extensive process which builds a composite of information drawn
from multiple disciplines. Typically organizations that engage in outsourcing for discovery and
development are looking for a long-term engagement where a CRO partner can support them
through the entire process. SIL provides financial stability and steady operational cash flows to
enable the extension of the platforms in line with the present and future needs of the clientele. Long
term collaborations with certain clients lead to revenue visibility. As at March 31, 2015, Debt /
Equity ratio was 0.18
Commitment to protect clients’ intellectual property
Protection of intellectual property and data confidentiality is integral to the success of R&D
outsourcing. Since the inception, it has made it a strategic priority to safeguard clients’ proprietary
rights by using well established and strictly enforced intellectual property protection procedures.
The entire physical infrastructure is access controlled, with access granted only on a need-to-work
basis. Furthermore, each of their three long-term clients, BMS (contributes 30% of revenues),

3. 3 | P a g e
NCDISSUENote
Syngene International Ltd.
Abbott and Baxter, have a dedicated, ring-fenced infrastructure with secured connectivity in
addition to ther Company-wide intellectual property protection protocols. This physical separation
of client projects ensures enhanced security and protection of thier clients’ intellectual property.
Industry Prospects
Contract Research Organisations (CROs) offer outsourced services to support discovery and
development for R&D driven organisations across industrial sectors like pharmaceuticals,
biotechnology, biopharmaceuticals, nutraceuticals, animal health, agro-chemicals, cosmetics and
electronics. CRO services span the range of R&D activities from New Molecular Entity (NME)
discovery, development and manufacturing. Growth in the CRO market has historically been driven
by growth in R&D spending and increased outsourcing of R&D activities.
The discovery and development process generally involves (1) discovery (target identification, target
validation, lead generation, lead optimisation and lead selection), (2) development (pre-clinical
testing, clinical testing and regulatory filings with the FDA and other relevant regulators), and (3)
manufacture (process development and early stage manufacture) leading to commercialisation
(manufacturing and post-marketing follow-up studies on impact and side effects).
Source: RHP
The global CRO market for discovery services was estimated to be US$14.7 billion in 2014 and is
expected to reach US$22.7 billion in 2018, reflecting a CAGR of 11.5% (2014-2018), according to the
IQ4I Report. The global CRO market for development services was estimated to be US$28.8 billion in
2014 and is expected to reach US$44.6 billion in 2018, reflecting a CAGR (2014–2018) of 11.6%
Factors driving Outsourcing of R&D
Source: RHP
Temporary lack of
capacity, 16%
Lifecycle
Mgmnt, 9%
To reduce co's
size, 7%
Others, 2%To focus on core
competencies,
36%
Company is
virtual, 30%

4. 4 | P a g e
NCDISSUENote
Syngene International Ltd.
Risks and Concerns
1. Any delay in the renewal or the termination of a large contract for services or multiple
contracts for services could adversely affect company’s revenue and profitability
2. High Client concentration: SIL has highly concentrated revenues wherein top 10 clients
contribute 71% of revenues out of which top client BMS alone provides 30% of revenues.
The loss of or a significant decrease in business from, one or more of these clients could
adversely impact the business of the company.
3. Conflict of interest: The interests of the Promoter, Biocon, may conflict with the interests
of SIL. Biocon can also means that it can influence the allocation of business opportunities
presented to Biocon, especially in areas where Biocon and its other affiliates may offer
similar services as SIL, among SIL, itself and its other subsidiaries.
4. Currency Risk: The company gets its revenues pre-dominantly in dollars and Euro, hence
exchange rate fluctuations between the Indian Rupee and foreign currencies can have a
material impact on the results of operations, cash flows and financial condition.
Valuation and Recommendation
Between FY10-15 SIL’s revenues grew at CAGR of 26.4% while EBIDTA grew at a CAGR of 26.5% and
PAT by 41.9%. We expect SIL to maintain 25-30% growth going forward.
On the valuation front, at the upper price of band of Rs 240-Rs 250, SIL is commanding at PE of 18x
of our rough calculations for FY17E. Though there are no direct listed peers to compare with, we are
comparing SIL with Divis Labs
FY15 (Rs cr) Sales EBITDA Margins % PAT EPS P/E EV/EBITDA ROE
Divis Labs 3103.2 1165.3 37.5% 851.5 64.2 30.6 22.4 24.4%
Syngene Intn'l 859.9 281.1 32.7% 175 8.79 28.4 17.3 20.7%
Considering the healthy balance sheet, strong growth and robust profitability, We recommend
subscribing the issue for long term gains.

5. 5 | P a g e
NCDISSUENote
Syngene International Ltd.
FINANCIALS
Profit & Loss (Rs cr) FY10 FY11 FY12 FY13 FY14 FY15
Net Sales 266.9 321.9 416.7 550.0 699.5 859.9
growth % 20.6% 29.5% 32.0% 27.2% 22.9%
Raw materials Consumed 70.4 87.0 114.6 148.5 189.8 249.3
Purchase of Stock-in-trade - - - - - -
Stock Adjustments (1.2) 1.0 (2.3) (3.3) 1.6 (10.3)
Employee Cost 66.6 80.0 98.4 123.5 155.6 201.9
Other Expenses 44.3 54.9 68.9 112.8 138.1 137.9
Total Expenditure 180.1 222.9 279.6 381.5 485.1 578.8
EBIDTA 86.8 99.0 137.1 168.5 214.4 281.1
margins % 32.5% 30.8% 32.9% 30.6% 30.7% 32.7%
Interest 7.7 21.0 10.2 6.5 0.4 7.9
Depreciation 45.1 51.5 54.7 59.9 65.6 81.4
Other Income 0.6 1.0 1.5 4.2 8.2 11.7
Profit Before Tax 34.6 27.5 73.7 106.3 156.6 203.5
Tax - - 4.6 5.9 23.2 28.7
Deferred Tax 4.2 0.3 (1.9) (1.7) (1.4) (0.2)
PAT 30.4 27.2 71.0 102.1 134.8 175.0
margins % 11.4% 8.4% 17.0% 18.6% 19.3% 20.4%
Adju - - - - - -
PAT 30.4 27.2 71.0 102.1 134.8 175.0
EPS Rs. (Post Issue) 1.5 1.4 3.6 5.1 6.8 8.8
P/E - @ Rs 250 163.7 183.0 70.1 48.8 36.9 28.4
B.V Per share 9.7 11.1 14.9 26.0 33.1 42.4
P/BV - @ Rs 250 25.7 22.6 16.8 9.6 7.5 5.9
Debt/Equity (x) 0.9 0.7 0.3 0.0 0.2 0.2
EV/Sales 19.3 15.9 12.1 8.9 6.7 5.7
EV/EBIDTA 59.4 51.7 36.7 29.1 21.9 17.3
ROCE % 16.2% 17.9% 22.9% 19.6% 21.6% 22.3%
ROE % 15.7% 12.3% 23.9% 19.7% 20.4% 20.7%
Source: Company data, Nirmal Bang Research

6. 6 | P a g e
NCDISSUENote
Syngene International Ltd.
Balance sheet FY10 FY11 FY12 FY13 FY14 FY15
Equity & Liabilities
Share Capital 2.9 2.9 24.1 26.1 26.1 199.1
Pref Shares -
Reserves Total 190.6 217.8 272.7 492.5 633.2 645.8
Total Shareholders Funds 193.5 220.7 296.8 518.6 659.3 844.9
Long term borrowing 28.7 - 4.2 - - 18.6
Deferred Tax Liabilities 9.8 10.1 8.2 6.5 5.1 4.9
Other Long term Liab 29.0 38.8 56.0 47.3 58.3 64.7
Long term provisions 0.3 1.2 1.2 2.8 5.8 13.2
Total Non-current Liabilities 67.8 50.1 69.6 56.6 69.2 101.4
Short term borrowings 167.3 145.0 92.6 - 154.9 136.4
Trade Payables 37.5 28.0 64.3 82.7 76.6 69.2
Other Current Liabilities 42.3 56.5 56.6 57.5 221.2 260.2
Short term provisions 3.6 3.8 6.7 8.8 9.7 9.4
Total Current Liabilities 250.7 233.3 220.2 149.0 462.4 475.2
Total Equity & Liabilities 512.0 504.1 586.6 724.2 1,190.9 1,421.5
Assets
Fixed Assets 408.2 388.5 393.8 389.8 439.4 608.4
- Tangible assets 402.7 387.6 383.0 381.0 394.1 497.6
- Intangible assets - - - - - 5.7
- CWIP 5.5 0.9 10.8 8.8 45.3 105.1
Non current investments - - 0.1 0.1 0.1 -
Long term Loans & Advances 34.0 39.2 49.7 86.3 103.1 114.2
Other non Current Assets - - 5.1 11.0 14.3 113.1
Tota Non-current Assets 442.2 427.7 448.7 487.2 556.9 835.7
Current Investments 10.9 2.6 - 69.1 352.0 146.0
Inventories 8.6 6.3 14.9 17.9 14.9 38.4
Trade receivables 32.7 38.4 43.4 76.6 94.3 179.9
Cash & Bank balance 6.6 5.9 37.7 11.8 91.6 115.7
Short term Loans & advances 7.4 6.4 7.4 16.0 26.9 33.8
Other current assets 3.6 16.8 34.5 45.6 54.3 72.0
Total Current Assets 69.8 76.4 137.9 237.0 634.0 585.8
Total Assets 512.0 504.1 586.6 724.2 1,190.9 1,421.5

7. 7 | P a g e
NCDISSUENote
Syngene International Ltd.
Disclaimer:
Nirmal Bang Securities Private Limited (hereinafter referred to as “NBSPL ”)is a registered Member of National Stock Exchange of India Limited,
Bombay Stock Exchange Limited and MCX stock Exchange Limited. NBSPL is in the process of making an application with SEBI for registering as
a Research Entity in terms of SEBI (Research Analyst) Regulations, 2014.
NBSPL or its associates including its relatives/analyst do not hold any financial interest/beneficial ownership of more than 1% in the company
covered by Analyst (in case any financial interest is held kindly disclose)
NBSPL or its associates/analyst has not received any compensation from the company covered by Analyst during the past twelve months. NBSPL
/analyst has not served as an officer, director or employee of company covered by Analyst and has not been engaged in market making activity of
the company covered by Analyst.
The views expressed are based solely on information available publicly and believed to be true. Investors are advised to independently evaluate
the market conditions/risks involved before making any investment decision .
This document, at best, represents Analyst opinion and is meant for general information only. NBSPL, its directors, officers or employees shall not
in any way be responsible for the contents stated herein. NBSPL expressly disclaims any and all liabilities that may arise from information, errors or
omissions in this connection. This document is not to be considered as an offer to sell or a solicitation to buy any securities
Nirmal Bang Research (Division of Nirmal Bang Securities Pvt. Ltd.)
B-2, 301/302, Marathon Innova,
Opp. Peninsula Corporate Park
Off. Ganpatrao Kadam Marg
Lower Parel (W), Mumbai-400013
Board No. : 91 22 3926 8000/8001
Fax. : 022 3926 8010