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Mumbai: Global private equity major The Carlyle Group has emerged as the frontrunner to buy a significant stake in Ajay Piramal-owned Piramal Group’s pharma businesses for close to 3,500 crore.

Three people aware of the development confirmed this, adding that the proposed stake sale has attracted bids from several other global investors.

“We do not comment on market speculations," said a Piramal Group spokesperson.

On 7 April, Mint reported that American private equity giants TPG Capital and KKR & Co. Inc. too were in the fray, looking to invest 3,500-4,000 crore for acquiring a 20% stake in Piramal Group’s proposed pharmaceutical entity that would combine the group’s pharma businesses.

As per Piramal’s current strategy, the pharma businesses will be demerged from Piramal Enterprises Ltd. and combined into a new entity, 20% of which will be owned by Carlyle and possibly another private equity investor, while at least 25% will be owned by the public and the remainder will remain with the promoters.

Investment bank Rothschild is advising Piramal on this transaction.

The stake sale, once completed, may value the Piramal Group’s overall pharma business at approximately $2.5 billion.

Piramal Group has been in discussions with several potential investors for a stake sale in its pharma business over the past few months. The stake sale is part of the group’s larger plan to demerge all pharma businesses, bring them under a single subsidiary and, eventually, list it on the exchanges.

Three factors are driving the talks: One, Piramal Group is looking to raise capital to pare down group and promoter level debt. Two, the group has been trying to raise capital to inorganically expand its pharma business globally, and three, demand for pharma, healthcare products and services has surged amid the Covid-19 crisis, which has propelled Piramal’s stock and can help it to dictate a premium from potential investors in the pharma business.

Pharmaceutical stocks in India have risen significantly over the past few weeks due to the improved business prospects in the wake of covid-19 crisis. Since 25 March, when a nationwide lockdown was announced, the PEL stock has shot up by a massive 93% from 682.10 to 1,316 apiece on BSE, as of 1:57 pm n Thursday.

The group has four pharma businesses, controlled by its flagship, Piramal Enterprises Ltd (PEL). Piramal Pharma Solutions is a contract development and manufacturing organisation, Piramal Critical Care is a hospital generics company with presence in 100 countries, including the US and Europe. The Consumer Products Division deals in over-the-counter (OTC) drugs, skin care, vitamins and nutrition, antacids, analgesics, gastro-intestinal and baby-care. The phytomedicines business is involved in the development of healthcare solutions from natural sources and phytopharmaceuticals.

Of late, Carlyle has been aggressively betting on pharmaceutical and healthcare businesses.

On 8 May, the Carlyle Group agreed to acquire up to 74% stake in animal health focused pharmaceutical company SeQuent Scientific Ltd. for about Rs.1,580 crore, the company said in an exchange filing on Friday.

SeQuent is a pure-play animal healthcare company with global operations and provides animal health Active Pharmaceutical Ingredients (API), formulations, and analytical services in over 100 countries, with more than 1,700 employees and manufacturing operations in India, Spain, Turkey, Germany and Brazil.

PEL also operates several other businesses in the financial services space. The group includes a non-banking financial company. However, due to liquidity crisis in the NBFC sector, the group’s balance sheet has been under pressure.

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