Taisho Pharma joins race to acquire Paras

Taisho Pharma joins race to acquire Paras

Mumbai: Japan’s Taisho Pharmaceutical Co. Ltd and at least another foreign drug maker looking for an entry into the Indian market have joined the fray for Ahmedabad-based Paras Pharmaceuticals Ltd, investment bankers said.

Taisho Pharma, one of the top 10 drug makers in Japan with a key focus on over-the-counter (OTC) products, had earlier sought a foreign direct investment approval from the Indian government. It has already engaged investment bankers for due diligence of the Indian firm, according to two bankers who are not willing to be named. Due diligence is a process through which a potential acquirer evaluates a target firm or its assets for acquisition.

Also See Prescription Pill (PDF)

Both of them confirmed this development separately to Mint. Mint could not identify the other overseas firm.

Several domestic companies, including Piramal Healthcare Ltd, Emami Ltd, Godrej Consumer Products Ltd (GCPL) and Dabur India Ltd have expressed interest in Paras Pharma.

“Paras is an attractive target for Taisho as it is looking for inorganic growth outside of its home market," said one banker.

An email query sent to Taisho did not elicit any reply.

Girish Patel, chairman of Paras Pharma, declined to comment when asked whether his firm is in talks with Taisho. He also did not say whether the firm will look at one buyer or a group of buyers.

“Paras’ strong brands and the distribution reach in the 11,000 crore consumer healthcare market make it an ideal target for any long-term player who can match the price expectations," said the other banker.

A privately held firm, Paras posted sales of 450-500 crore in 2009, and its operational profit was around 160 crore, according to one banker.

“The general valuation in the Indian pharma industry, especially after the Ranbaxy-Daiichi and Piramal-Abbott deal, is 20-30 times of operational profit," he added.

Muralidharan Nair, leader (life science services) at audit and consulting firm Ernst and Young India, said: “Looking at around 20% growth in India’s OTC market and almost 30% profit (of the sales) that Paras Pharma has apparently showed, I won’t be surprised if the deal touches a billion dollars."

Two private equity firms, Actis Advisors Pvt. Ltd and Sequoia Capital India Advisors Pvt. Ltd, which jointly hold around 70% in Paras—known for its OTC and personal care brands such as Moov, Krack, D’Cold and Set Wet among others—have been looking to sell their stake in the company for around $700 million (Rs 3,250 crore today), Bloomberg had reported on 6 September.

Actis Advisors and Sequoia Capital have appointed Morgan Stanley as investment bankers to the deal.

“We will definitely look at Paras as it fits with our strategy," said Vivek Gambhir, chief strategy officer of Godrej Industries Ltd, part of the Godrej group, with interests in GCPL, a mid-sized packaged consumer goods company.

Within personal care, the company has diversified into health and hygiene with the launch of Protekt hand sanitizer. “Within health and hygiene, Paras is definitely a good fit. There are parts of Paras’ portfolio that fit in our three domains (personal care, hair care and homecare) very well," said Gambhir.

The FMCG (fast moving consumer goods) index of the Bombay Stock Exchange has risen 38.55% in the past year and touched its yearly high on 15 September to close at 3,528.06. Barring two days in the second week of September, the index has been hitting a new high every day for the past month since 19 August.