Anthem Biosciences IPO: A solid CDMO story, but don’t expect fireworks

Anthem Biosciences IPO: A solid CDMO story, but don’t expect fireworks

Anthem Biosciences, one of India’s top innovation-led CDMO (contract development and manufacturing organisation) platforms, is open for subscription in the primary market. And while its business model, profitability metrics, and client roster appear bulletproof on paper, analysts are urging caution: this one’s more a long-term portfolio pick than a Day 1 fireworks show.

The Rs 3,395-crore IPO, entirely an offer-for-sale by PE investor ICMG, opened on July 14 and closes on July 16. The promoter group is not selling, a move seen as a vote of confidence.

Still, the issue is priced at 65 to 70x trailing P/E — well above peers like Syngene or Suven, which trade at 30 to 35x forward. “I wouldn’t expect fireworks after listing,” said Vineet Gala, Founder & Fund Manager at Xylem PMS. “Whatever upside was there on margins has played out. Unless they onboard major new clients or molecules go commercial faster, the stock may consolidate,” he said.

Anthem has positioned itself as a dual-play CDMO, offering both biologics and small-molecule capabilities. In FY25, it reported revenue of Rs 1,234 crore (up 34.3 percent YoY), EBITDA margin of 36.3 percent, PAT margin of 24.2 percent, and ROCE of 25.7 percent — all of which place it ahead of incumbents.

“If you benchmark Anthem to peers like Syngene or Divi’s Lab, it stands apart in terms of margins and returns,” Gala said. He goes on to elaborate, “That’s largely because of the kind of CDMO work it takes on. Anthem is executing high-value projects for innovators. These businesses inherently deserve richer valuation multiples because the earnings quality is superior.”

The company has executed more than 8,000 projects to date and delivered 3,000+ in FY25 alone. It currently has 242 active molecules under development or scale-up, and services over 675 clients across the US, Europe, and Asia-Pacific. Raw material dependence on China is under 20 percent.

“They’ve built commercial capabilities in both biologics and small molecules, and that dual capacity is rare,” said Prathmesh Masdekar, Research Analyst at StoxBox. “In FY25, they delivered over 3,000 projects — that tells you the execution is there. And with 242 active molecules in the pipeline, the visibility looks good,” he added.

Still, client concentration is a concern. Nearly, 70 percent of revenue comes from the top five clients.

Client concentration is a clear red flag for Gala. He explained, “Unlike Syngene or Divi’s, Anthem’s fortunes are closely tied to a handful of molecules. And in this business, those molecules are subject to clinical and regulatory outcomes — which aren’t guaranteed.”

Masdekar, however, sees it as standard CDMO practice. “These are not vendor-type contracts. Once IP is transferred and you’re embedded, the relationship becomes sticky. Even if one project fails, the partnership often continues. So I wouldn’t call this excessive,” he added.

Another positive signal is the clean IPO structure. “The fact that the promoter isn’t selling is a big green flag,” Gala noted. “Across recent IPOs, promoters have sold lock, stock, and barrel. Here, it’s the investor exiting — that shows belief from the founder’s side.”

Capex needs are also low. “They don’t require huge capacity expansions. It’s more about capability and team depth,” Gala added.

The external backdrop also supports long-term tailwinds. Masdekar highlighted a shift away from China in the global pharma supply chain. “Innovators are handing over billion-dollar molecules. They don’t want geopolitical risk. If you’re a biologics-enabled CDMO with US approvals? That’s a huge structural advantage,” he said.

Looking ahead, both Gala and Masdekar pointed to off-patent opportunities in diabetes and oncology post-FY26. However, the street is already baking in a lot of this optimism.

“Looking at the anchor book, I expect it to get subscribed well. Mutual funds like this model — stable, long-duration cash flows. FIIs too,” said Gala. “But don’t expect the frenzy you saw in PSU or consumer IPOs. This is a valuation-sensitive story,” he emphasised.