Two funds in final-stage talks to buy Mankind Pharma stake3 min read . Updated: 14 May 2015, 08:57 PM IST
ChrysCapital is in talks with CIPEF and Warburg Pincus to sell its 11% stake in the pharma company
Mumbai: ChrysCapital, an India-focused private equity (PE) firm, may sell its eight-year-old investment in Mankind Pharma Ltd at a price that is nearly 10 times the value of its original investment.
Two global private equity firms—Capital International Private Equity Funds, a part of Capital Group, and Warburg Pincus LLC, are in the final stages of negotiation with ChrysCapital to buy its 11% stake in Mankind Pharma, according to two people familiar with the development. The deal size is estimated at around $225-250 million, they said.
ChrysCapital invested $24 million in 2007 for an 11% stake in Mankind Pharma. The stake was put on the block about two months ago.
“ChrysCapital has received serious pre-emptive offers from a couple of global PE funds that have been forwarded to the Juneja family, promoters of Mankind Pharma. As Fund-IV comes to an end, it is true that ChrysCapital is in talks with the Junejas to provide an exit for their investment in Mankind latest by the end of calendar year 2015," said Sanjiv Kaul, managing director, ChrysCapital.
Spokespeople for Warburg Pincus and Capital International declined to comment citing company policy.
ChrysCapital has appointed EY and Avendus Capital as bankers for the transaction, according to the first person cited above. The process will be completed by August-September, he said.
The proposed deal values Mankind Pharma at about ₹ 13,000 crore, more than three times its revenue of ₹ 3,500 crore for 2014-15.
Mankind Pharma, established in 1995 by R.C. Juneja and brother Rajeev, owns brands including Manforce condoms, Manforce tablets, Manforce Staylong Gel, Unwanted-72 (emergency contraceptives), PregaNews (pregnancy test kit), Adiction (deodorants for men), Gas-O-Fast (sachet for hyper acidity), Kaloree-1 (artificial sweetener) and Heal-O-Kind (anti-bacterial balm).
Mankind also sells antibiotic, antifungal, gastro-intestinal, cardiovascular and skin care drugs. According to a 6 April statement issued by the firm, Mankind Pharma has an employee base of more than 12,000 and expects to generate revenue of ₹ 5000 crore by 2015-16.
Mankind declined to comment on the stake sale in an email, saying the company’s “spokesperson is travelling".
In November, ChrysCapital sold a 10.2% stake in Intas Pharmaceuticals Ltd to Temasek at close to 10 times its original investment, said the second person cited above.
While the fund did not disclose the details of the transaction at the time, Mint had reported that the stake was sold for ₹ 880 crore. In 2010, the fund sold its holding in Zydus Wellness Ltd, 4.7 times its original investment, Reuters reported in a report on 11 March 2010.
The strong returns are a factor of continued private equity interest in pharmaceutical firms.
According to data from VCCedge, about 275 PE or venture capital deals worth $4.4 billion happened in the Indian pharmaceutical and healthcare sector since 2012, out of which 26 deals worth $1.5 billion were secondary transactions—where one PE sells stake to another one. This year, Singapore’s sovereign fund Temasek Holdings Pte invested $299 million in Sun Pharmaceutical Industries Ltd and $151 million in Glenmark Pharmaceuticals Ltd.
“There is always demand for quality pharma assets from PE investors due to reasons such as the sector being insulated from government regulations as well as exposure to global markets. As far as the exits are concerned, strategic investors are always keen on Indian pharma and healthcare space, which makes easy exit route for PE firms," said Vineet Toshniwal, managing director, Equirus Capital.
The domestic pharmaceuticals industry is expected to grow to $47.88 billion by 2018 from $24.87 billion in 2013 at an annual average pace of 14%, according to rating agency firm CARE Ratings.
If Warburg bags the deal, it would not be its first in the Indian pharmaceutical sector. In October, the fund had invested about $92 million in the Visakhapatnam-based drug ingredients maker Laurus Labs Pvt. Ltd by acquiring a minority stake. It had earlier invested in Max Healthcare and diagnostics chain Metropolis.
Capital International Private Equity Funds (CIPEF) has invested more than $4.5 billion in 82 investments across 25 countries. CIPEF has been investing in India since 2000, when it acquired a minority stake in Multi Screen Media Pvt. Ltd.
Its investments in India include Deccan Aviation Pvt. Ltd, Manipal Global Education Services Pvt. Ltd and MindTree Ltd. In 2011, through its $3 billion emerging market fund CIPEF VI, it acquired a minority stake in L&T Financial Holdings Ltd, the non-banking financial company owned by Larsen & Toubro Ltd.