Mumbai: The Indian arm of UK-based Actis Advisers Pvt. Ltd and India’s ICICI Venture Funds Management Co. Ltd are among the handful of private equity firms eyeing a minority stake in Piramal Life Sciences Ltd, the recently demerged drug research company of Nicholas Piramal India Ltd, a person close to developments at the company said.
“There are quite a few investment companies already in talks with us, but nothing has been concluded,” said Swati Piramal, a director with Nicholas Piramal.
The Mumbai-based Piramal family, which holds a 58% stake in Piramal Life, is expected to sell a 9-10% interest in the company.
“The company will engage a merchant banker by next week to handle the transaction,” the person close to the developments added, asking that he not be identified.
Based on potential drug compounds it is developing, Piramal Life is valued at around $500 million (about Rs2,025 crore) by finance companies such as Lehman Brothers, Enam Securities Pvt. Ltd and Kotak Securities Ltd.
In March, Piramal group chairman Ajay Piramal had said the new research company would bring in a strategic investor after it listed on the bourses.
Piramal Life was listed last week on India’s two main stock markets, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).
The company’s market value is Rs673.27 crore, based on the closing price of its shares (Rs264.55 each) on BSE on Thursday. That would value a deal to sell a 10% stake at a little less than Rs70 crore.
“Actis does not comment on market speculation. We only make announcements on transactions once they are completed,” Actis’ spokesperson Liz King said in an email response from London.
An Actis executive in Mumbai, who didn’t wish to be identified, said the company was “looking at investment opportunities in several potential sectors including health care in India”.
Actis, which has been active in India for the past decade, has investments in Indian companies such as Paras Pharmaceuticals Ltd, Sterling Hospitals Ltd, Dalmia Cements Ltd, Jyothi Laboratories Ltd, National Stock Exchange of India, and Phoenix Lamps Ltd.
The private equity firm acquired a 14.4% stake in Mumbai-based Glenmark Pharmaceuticals Ltd in 2003 but exited this investment in 2006.
ICICI Venture’s joint managing director Rajiv Bakshi, who also oversees its health care investment portfolio, was not available for comment as he was travelling.
Piramal Life is one of four dedicated drug discovery companies in India that have been formed in recent years by large drug firms spinning off their research activities into a separate company.
This is a recent trend in the country’s drug industry, and a consequence of a need these companies see to expand their research and development (R&D) activities without risking their core business of making and selling drugs.
The other three firms that have spun off their research divisions into separate companies are: India’s largest drug maker by revenues Ranbaxy Laboratories Ltd (Ranbaxy Life Sciences Research Ltd), the country’s most valuable pharma company in terms of market capitalization Sun Pharmaceutical Industries Ltd (Sun Pharma Advanced Research Co. Ltd ), and Dr Reddy’s Laboratories Ltd (Perlecan Pharma). The last was floated in 2005 with investments by private equity companies ICICI Venture and Citi Venture Capital International Ltd.
There have been apprehensions that private equity companies will shy away from drug research companies due to the risks involved.
Sujay Shetty, associate director at audit and consulting firm PricewaterhouseCoopers, however, said that investors would still be interested in companies with a promising research profile.
“Though it’s (such apprehension) a fact, a promising research pipeline can still attract high-profile private equity investments into such companies,” he added.
“On the other side, research firms in India may be looking at these investors’ continued support, not only in terms of money but in terms of global network and future funding requirements,” Shetty said.