IGI Logo

Investment in the right area

Infosys (INFY) has announced its acquisition of BASE Life Science, a leading Europe-based technology and consulting firm in the life science industry. BASE has domain expertise in commercial, medical, digital marketing, clinical, regulatory, and quality. It is headquartered in Denmark and has about 200 multidisciplinary industry experts across Denmark, Switzerland, UK, Germany, France, Italy, and a nearshore technology hub in Spain.

BASE is one of the fastest-growing technology and consulting partners in the life science industry. Its revenue has grown at 52% CAGR over FY20-FY22 (fiscal year ending 30th June). Consideration for the acquisition is EUR110mn (~US$110mn) valuing BASE at 4.1x EV/Sales on FY22 revenue of EUR26.6mn (~US$26.6mn). The valuation is reasonable in our view considering the strong revenue CAGR of BASE.

The last two years of the pandemic saw unprecedented use of digital technologies across the life science and healthcare vertical, which reported highest growth in covid-impacted FY21. For INFY, this vertical (which contributes 7% of revenue) posted 14% YoY USD growth in FY21. Strong revenue momentum continued in FY22 with 23% YoY growth, USD. We expect the momentum to be healthy in this sector over the next 5-7 years driven by more patient-centric, co-created experiences making patients equal partners in decision-making throughout their journeys and help life sciences deliver more personalised outcomes.

This acquisition will strengthen INFY’s deep expertise in the life sciences and help it to scale up digital transformation and industry-specific solutions as well as expand its footprint across Nordic and European regions. INFY and BASE together will expand their portfolio of expertise into consumer health, animal health, medtech and genomics segments.

The acquisition does not materially impact our revenue and EPS estimates. Current revenue size of EUR26.6mn is only 0.2% of INFY’s FY22 revenue. The acquisition is expected to close in Q2FY23. It adds ~0.13%/0.19% to FY23E/FY24E revenue estimates considering 20% YoY growth in BASE. We believe the acquisition is a move in the right direction given that it offers high-growth opportunities in the life science space and that the partnership provides industry-specific expertise to implement cloud transformation at scale.

To Read Complete Report & Disclaimer Click Here

For More ICICI Securities Disclaimer https://www.icicisecurities.com/AboutUs.aspx?About=7

SEBI Registration Number INZ000183631

Above views are of the author and not of the website kindly read disclaimer