Mumbai: Cipla Ltd on Tuesday cashed in on its only over-the-counter (OTC) brand when it sold its emergency contraceptive i-pill to Piramal Healthcare Ltd for Rs95 crore.
Growth opportunity: Piramal Healthcare’s Ajay Piramal. Abhijit Bhatlekar / Mint
I-pill, introduced in October 2007, registered sales of Rs30 crore in the past 12 months, making it the largest selling so-called “morning after” emergency contraceptive in the domestic market for women.
“We sold this brand as it doesn’t fit into our prescription drug portfolio, and the company doesn’t have a strategy in place to tap the OTC or consumer healthcare market at present,” Cipla’s joint managing director Amar Lulla told Mint. The sale will allow Cipla, India’s largest drug maker by revenue, to remain focused on its core strength in the local prescription drug market.
Kotak Investment Banking acted as the financial adviser to Cipla for the transaction.
Piramal Healthcare was able to value this brand at three times its sales in the past 12 months as it has a broad OTC product portfolio, comprising brands such as the Lacto Calamine skin care range, Supractiv Complete, Saridon and polycrol antacid, in its local business.
It seems a decent valuation for the buyer as the product falls in a high growth segment, a sector analyst with a foreign equity research firm said in a telephone conversation.
Calling the sale a “right decision” by Cipla, he said Piramal could increase annual sales to Rs50 crore in a year or two, given the drug’s past performance. He did not want to be named because his company’s policy does not allow him to speak to the media without a prior appointment.
“Valuing this product at three times of the sales was appropriate looking at the growth that it achieved in the first two years,” Piramal chief executive Murari Rajan said.
The OTC market in India is currently about Rs8,000 crore, and has been growing at 18% the past two years, Piramal Healthcare’s chairman and managing director Ajay Piramal said in a statement.
“We believe the OTC segment is still in its nascent stages in India and presents us with high growth opportunities,” he added.
Piramal Healthcare’s shares on Tuesday rose 3.38% to close at Rs425.65 on the Bombay Stock Exchange, while Cipla’s shares gained 2.46% to end at Rs341.70. The benchmark Sensex rose 0.23% to close at 17,451.02 points.