A 26 percent rise in shares of Syngene International between January and now, the research arm of pharma giant Biocon, resulted the former outgrowing its parent in market capitalisation. The company, which reported a strong set of numbers for FY23, is expected maintain the growth momentum for the next year as well.
At the end of Monday’s close, Syngene International commanded a market valuation of Rs 29,538 core, which is Rs 831 crore higher than that of Biocon Ltd. The stock of Biocon has declined nearly nine percent so far this year. Market participants are of the view that Syngene remains a compelling play in the Contract Research Organisation (CRO) space with elite client profile and is well positioned for sustainable growth.
While the subsidiary Syngene reported slightly higher profit than its parent Biocon in FY23, the revenue reported for the year came in at 30 percent of its parent entity. At 464 crore, the net profit of Syngene surged at compounded rate of nearly nine percent between FY19-23 whereas the net profit of Biocon increased by 4.4 percent during the last five years.
However, It must be noted that there was an impact of higher minority interest due to stake dilution of Biocon shareholding in both Biocon Biologics and Syngene in the FY23 consolidated results. Parent Biocon has been reducing its stake in Syngene to fund the acquisition of Viatris Inc's biosimilars business that it announced last year. Viatris continues to provide commercial and other transition services to Biocon Biologics as part of a transition services agreement.
“We remain on track to integrate a major part of the acquired biosimilars business region-wise in a phased manner during FY 24,” said Kiran Mazumdar-Shaw, executive Chairperson of Biocon, post Q4results. The parent’s holding in Syngene has come off from about 70 percent to around 55 percent currently. The management, however reiterated that it does not plan any further dilution in Syngene, which stood at 54.6 percent at the end of March 2023.
Of the nine analysts who track Syngene on Bloomberg, 89 percent give a 'buy' rating, while the remaining 11 percent have given a 'Sell' rating on the stock.
