ChrysCapital set to exit Eris Lifesciences in $200 million IPO
Mumbai: Eris Lifesciences Pvt. Ltd has hired three investment banks to manage its initial share sale, offering private equity investor ChrysCapital an opportunity to sell its entire stake in the drug maker, three people aware of the development said.
Axis Capital Ltd, Credit Suisse Securities (India) Pvt. Ltd and Citigroup Global Markets India Pvt. Ltd will start work on the draft share sale documents, the people said, declining to be named.
The proposed initial public offering (IPO) will provide an exit to ChrysCapital, which had invested about Rs160 crore in Eris in 2011 for a 16% stake.
The initial share sale will be worth at least $200 million (over Rs1,300 crore), said one of the three people cited above.
“ChrysCapital intends to exit its entire stake through the IPO,” said the second person. Eris, “at present, does not intend to raise any primary capital through the IPO and hence the share sale will be a pure offer for sale”.
Emails sent on Friday to Amit Bakshi, founder and managing director of Eris Lifesciences, and ChrysCapital managing director Kunal Shroff went unanswered.
Credit Suisse declined to comment. Emails sent to Axis Capital and Citigroup remained unanswered.
Eris and its investor had initiated talks with investment banks to explore a public listing, Mint reported 24 August.
The move comes after ChrysCapital dropped its plans to exit the pharma company through a secondary stake sale to other private equity firms.
In December 2015, Mint reported that ChrysCapital was planning to exit its five-year-old investment in Eris for around Rs600-650 crore.
In June, The Economic Times reported that ChrysCapital had initiated talks with private equity funds Apax Partners, Advent International, Multiples Alternatives, Barings Asia and Carlyle to sell its stake in Eris.
Founded in 2007, Eris is engaged in manufacturing, marketing and selling of branded generics across the country.
The company has a presence in cardiovascular, diabetes, gynaecology, paediatrics and gastro-intestinal segments. Eris’s sales grew 25% to about Rs600 crore in the year to March 2015.
The stake sale in Eris Lifesciences through the IPO will be yet another major exit for ChrysCapital, which has been a major investor in the pharmaceutical sector.
In May 2015, ChrysCapital sold its entire 11% stake in Mankind Pharma Ltd to Capital International Private Equity Fund at close to 10 times the value of its original investment. The deal was closed at $215 million. ChrysCapital had invested $24 million in 2007 for the stake.
In November 2014, ChrysCapital sold a 10.2% stake in Intas Pharmaceuticals Ltd to Temasek Holdings Pte Ltd at close to 10 times its original investment. While the fund did not disclose the details of the transaction at the time, Mint had reported that the stake was sold for Rs880 crore.
The plan to exit Eris Lifesciences through an IPO comes at a time when public markets have shown a strong appetite for IPOs of pharma and healthcare firms.
According to industry experts, valuations in the primary market are attractive enough to make PE funds to take the IPO route to exit investments.
“The decision to go for a secondary trade sale to another PE fund or to go public would depend on the preparedness of the company to go public as well as the PE investors perspective on the growth prospects of the company. That said, the valuations in the public markets at this point of time are supportive for investors to exit through a public listing,” said Munish Aggarwal, director at Mumbai-based investment bank Equirus Capital Pvt. Ltd.
In December, generic drug maker Alkem Laboratories Ltd raised Rs1,350 crore through its IPO. The shares of the company was subscribed 44 times, with the high net-worth individual category subscribed nearly 130 times. On its listing on 23 December, shares of Alkem Labs touched a high of Rs1,401.40, 33% higher than its listing price.
In recent times, investors have lapped up shares of healthcare services firms such as Dr Lal Pathlabs Ltd, Narayana Hrudayalaya Ltd and Thyrocare Ltd. Their IPOs were subscribed 33, eight and 74 times, respectively.
Private equity exits from pharmaceuticals and healthcare sector jumped 25% in 2015 to $428 million as against $343 million in 2014, according to data from VCCEdge. The amount of fresh investments in the sector remained flat at $1.3 billion in 2015, the data shows.