Management commentary, capex outlook hold the key for Biocon: Mayuresh Joshi

In a chat with ET Now, Mayuresh Joshi, Fund Manager, Angel Broking, talks about Biocon and the forthcoming IPO by its arm Syngene.

ET Now: What is your take on Biocon, and more importantly on Syngene? It is still early days; we are yet to see what sort of pricing they come out with. But would Syngene definitely be worth a look?

Mayuresh Joshi: Yes. If you look at how the business model has evolved for Biocon, Syngene is the one which is probably driving the overall profitability for the company.
Now, how they place their IPO would be very interesting. We are looking at figures of anywhere between Rs 250 to Rs 300 in terms of the pure size, in terms of pricing. But Biocon’s Q1 numbers came in exceptionally well for the June quarter. Now, whether the numbers hold up and the management commentary, hold the key. As far as return on equity (ROE) and return on capital (ROC) are concerned, they are still suppressed between 11 per cent and 12 per cent range. The kind of capex that the company is probably doing makes us believe that ROEs and ROCs will remain subdued. Therefore, in my opinion, the stock will react positively, but then again the triggers for the stock would be how they price Syngene and the kind of business outlook that they have got, specifically in terms of their capex plans for their standalone business.