Tell us about what are the kind of companies which are on radar. Which are the type of companies which are taking some early work here working closely with big pharma or even hospital companies?
I think CROs are the segment that we are talking about and the best CRO presently listed entity we have is Syngene. So this is one company which we all know about and the prospect of growth also looks very high over here. On the CDMO side of the CROs, which is the research done by the innovator companies to conduct all these new drugs and develop their molecules that is called as the CDMO. There we have Suven and Divis. These are the companies which are present in this segment. There are many unlisted companies also, like the ones of Aragen, the ones of other Synth and all these are unlisted players who are bigger in the market and are well known from India. But still, the market of these companies or the number of these companies in India is still very easily countable on fingers. So the numbers of companies are few but the opportunity side is definitely very large. And these companies have been in the business for the last 10 to 15 years, like in Syngene and Divi’s and Suven and they have created long term relationships with the innovative, partners in the world, likes of Pfizer, VMS and all of these that we are aware about which are global leading pharma companies.
So this is the area where we can see the opportunity from a listed universe perspective. And I think these are the areas and the companies name, which will come up with a very strong growth outlook over the coming decade because CRO market is still very much untapped in India and we still have a lot of virgin population in India, which will help us conduct a lot of clinical research in India and for various disease profile as well as the kind of people that we have in India, the type which is largely a population, which will help us to engulf a lot of new research and getting a lot of various new disease profiles, GENIE profiles and everything. So I think this area will develop and boom in a much bigger and larger people picture as you were saying just now.
I must also talk to you about transaction which we are seeing every now and then we are looking at a lot of M&A, which is happening in CRO and CDMO. How are the valuation, I am sure these companies, which are acquiring other smaller companies, have plans. Just now, we have seen PI Industries, which is actually a speciality pharma company, a speciality chemical company and agrochemical, now they want to enter the CDMO and CRO space and have acquired two smaller companies, but have guided that in three years time they would double the profitability. Can you talk about a bit of M&A, I am sure you must have looked at if you do not track PI that is okay, but I want to understand are these kind of companies trading at good valuations?
I think we can even look at the Advent acquisition on the Suven side that is one thing that has happened here. So there is a lot of PE interest also in this sector and we will see more such investment. We have seen GSAM investment in Aragen. So, all these kinds of things are like publicly available. Of course, valuations are also higher and because these companies generally tend to have better margin profile as well as supernormal growth profile. Coming back to Syngene, we have given a high teen constant currency guidance that is a very stellar guidance to look at and their margin profile has been always around 30%. So that is the profile of this business and it tends to give more visibility and sustained earning profile for investors.
And that is the reason the valuation profile also in these deals tends to be on the higher side. Of course, there is a difference between a public and a private deal environment valuation but they will always remain on the high end of the valuation is what I can say here.
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