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Temasek invested `109 crore in Medreich for a 25% stake in 2005. Photo: AFP
Temasek invested `109 crore in Medreich for a 25% stake in 2005. Photo: AFP

Medreich seeks valuation to offer exit to Temasek

Two of the three promoters could consider selling stake along with Temasek

Mumbai: Bangalore-based Medreich Ltd has mandated investment bank NM Rothschild and Sons Ltd to assess its valuation so that Temasek Holdings Pte Ltd, the Singapore government’s investment arm, can sell its stake in the pharmaceutical company.

Besides, both Medreich and some of its promoters are looking to sell stakes in the company, according to four people aware of the plan, who declined to be identified.

“They (Medreich) are talking to not just PE (private equity) firms but also strategic investors. The overall deal could easily be pegged around $250-300 million," one of them said.

A second person said, “In my last conversation with the company, it was clear that two of the three promoters could consider selling stake along with Temasek." Medreich’s three promoters are Rajeev Mehta, Keith De Souza and C.P. Bothra.

Bothra, managing director, confirmed Temasek is seeking a valuation of Medreich with a view to a probable exit, but dismissed as speculation the possibility of the promoters selling their stakes.

“We have entrusted Rothschild to assist us in this valuation exercise and if Temasek deems fit to help them with their exit plans," Bothra said in reply to an email query, adding Rothschild has not submitted an estimate yet.

Medreich, which manufactures generic and branded drugs in several therapeutic areas, has been profitable since its inception in 1976.

Temasek invested 109 crore in Medreich for a 25% stake in 2005. A Temasek spokesperson declined comment, citing company policy.

NM Rothschild, known for handling some large and complex global deals, has been involved in several big cross-border transactions involving Indian companies, including Tata Steel Ltd’s $12.04 billion acquisition of the UK’s Corus Group Plc, GMR Infrastructure Ltd’s purchase of a 50% stake in the Netherlands-based power generation company InterGen NV for $1.1 billion, and Cairn Energy Plc’s 40% stake sale in Cairn India Ltd to Vedanta Resources Plc for over $6 billion.

A mail sent on Tuesday to Amitabh Malhotra, Rothschild’s managing director in India, did not elicit any response.

Investment bankers expect more mergers and acquisitions involving Indian pharma companies this year. Takeovers had slowed the last two years mainly due to uncertainties in India’s foreign direct investment policy and pricing law for the sector, besides the general economic downturn.

“As India’s pharmaceutical industry builds blocks for future growth in research, technology platforms, manufacturing, and also plugging portfolio loopholes and establishing a front-end, mergers and acquisition activity is likely to stay high through 2013," Avendus Securities said in a report on pharmaceuticals in January.

“Increasingly, more companies are customizing to strengthen their local market networks. With their focus clearly on curbing high R&D expenditure and reducing manufacturing costs, we will see pharma companies becoming more geographic-specific, more space-specific and highly localized," said a pharma and healthcare expert at a Mumbai-based investment bank, declining to be identified as his company does not allow him to speak to the media.

In 2012, when PE deals in India fell 17% to $3.3 billion, investments in primary healthcare companies surged to $520 million from $137 million in 2011, according to Thomson Reuters data.

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