Mumbai: Torrent Pharmaceuticals Ltd is likely in advanced discussions to acquire the domestic formulations business of Unichem Laboratories Ltd for Rs3,200-3,300 crore, two people aware of the development said on the condition of anonymity.
Ahmedabad-based Torrent Pharma has been looking to expand its presence in the domestic market and Unichem has a good portfolio, particularly its Losar brand of drugs in the cardiovascular space, one of the persons said, adding that the deal could be announced within 10 days.
CNBC-TV18 first reported on this development on Friday.
Market share of the Losar brand of drugs, used in the treatment of high blood pressure, improved by 4.8% in FY2017 and maintained its top rank, Unichem had said in its investor presentation on 30 May. Torrent Pharma said it does not comment on speculation. Unichem did not respond to an email seeking comments.
In a conference call with analysts on 31 July, Sanjay Gupta, executive director (international business) of Torrent Pharma, had said that the company continues to evaluate acquisition opportunities in India. Abbott India and Mylan Laboratories were also in the race to buy Unichem’s domestic business but have probably backed out due to expensive valuations, said the person cited above. Unichem’s revenue from the domestic formulations business was Rs839.5 crore in financial year 2016-17, up 11% from a year ago.
The second of the two people cited earlier said the deal is valued at 16-17 times the Ebitda of Unichem’s domestic business. Ebitda is short for earnings before interest, tax, depreciation and amortization.
“The valuation Torrent is paying for the Unichem asset is quite high. But it may help Torrent to consolidate its position in the Indian pharma space," a Mumbai-based investment banker said on the condition of anonymity.
In 2016-17, Torrent Pharma’s domestic business revenue was Rs1,977 crore, up 8% from a year ago. Concerns over valuations have kept foreign buyers away from the pure generic drugs business in India, though there is interest in the injectables space, the investment banker added.
In 2016, both the major inbound deals in pharma—Fosun Pharma’s majority stake buy in Gland Pharma and Baxter International’s acquisition of Claris Lifesciences Ltd injectables business—were in companies having a strong injectables portfolio.
Until September 2017, there have been 27 mergers and acquisition (M&A) deals in the pharma and healthcare sector, valued at $719 million, which is much lower than the 54 deals, valued at $4.7 billion, in calendar year 2016, according to data from Grant Thornton Advisory Pvt. Ltd.
On Monday, shares of Torrent Pharma ended up 0.2% at Rs1,268.15 on the BSE, while shares of Unichem closed up 2.2% at Rs312.05. The benchmark Sensex rose 0.3% to 33,266.16 points.
Reghu Balakrishnan contributed to this story.