Syngene International IPO – Views invited

Thanks Mahesh for you response. I have read through 2014-15 AR and following are some observations/questions.

Top 3 criteria for selecting an outsourcing partner are – Quality, Consistency of Performance and Confidentiality. For first two points it becomes very important for company to hire right kind of people. The quality of research in India is rather poor and there is plagiaristic mindset. But there are some exceptional institutes in the field of chemistry as well (e.g. UDCT in Mumbai). So it would be great if we can get some insight into Syngene’s hiring process + how is research culture inside the company?

AR mentions that company does business with Baxter, DuPont, Abbott and Bristol-Myers among others. And given that some of these are fierce competitors and confidentiality is a major factor in selection of outsourcing partner, what are the internal controls and practices of Syngene for these different clients? (Dedicated scientists per client? Some period if no-activity of a scientist is switching projects? How about people in senior management – can they manage two competitors? Risk of IP theft and trading by employees?)

AR mentions that total R&D expenditure of pharma companies was $139bn, out of which $105bn was outsourc-able.
The CRO discovery market is expected to grow from $14.7bn (2014) to $22.7bn (2018).
The CRO development market is expected to grow from $28.8bn to $44.6bn.
Given the discovery + development market size of $43bn worldwide in 2014 and Syngene’s revenue of about $0.15bn (1$ = 60 Rs.) is rather minuscule, who are other large players in this space?

Another question is – what stops from big pharma companies (such as Bristol-myers) from setting up their own R&D centers in India (like Auto companies) instead of relying on external players?

Now some notes about balance sheet/technicals:

• The company has contingent liabilities of about 100Cr with Tax departments. If case goes against them, then it can be a short-term dampener on P & L and cash flows.
• All the directors of the company seem of foreign origin or foreign. So just curious to know what is the SEBI/RBI rule in this regard? Just a small technical detail.

Sorry for the long post. Looking forward for some good insights/discussions and learning.

Thanks,
Rupesh