Why investors are questioning logic behind Biocon Biologics deal value
1 min read . Updated: 07 Jan 2020, 10:18 PM IST
Premium- Shares of Biocon lost nearly 6% since it announced the stake sale
- Biocon Biologics has been valued at three times forward revenues, which some feel is below par
How much is Biocon Ltd’s fastest growing business segment worth? Based on a $75-million investment made by a domestic private equity fund, Biocon Biologics India Ltd is worth $3 billion.
Prima facie, this looks like a handsome valuation. All of Biocon was valued at about $5 billion before the deal was announced. The biologics business has been valued at 10.7 times annualized revenue for the first half of the year, far higher than the 5.6 times revenue multiples investors are currently attributing to the whole company.
How much is Biocon Ltd’s fastest growing business segment worth? Based on a $75 millon investment made by a domestic private equity fund, Biocon Biologics India Ltd is worth $3 billion.
Prima facie, this looks like a handsome valuation. All of Biocon was valued at about $5 billion before the deal was announced. And Biocon Biologics, which houses the fast-growing biosimilar business, accounted for less than a third of the company’s consolidated revenues in the first half of FY20. Still, it has been valued at about 60% of the total valuation of the firm.
The biologics business clocked revenue of ₹1,006 crore in first half of the current fiscal, implying annualized revenues of ₹2,012 crore ($280 million). This pegs the valuation at 10.7 times revenues, far higher than 5.6 times revenue multiple investors are currently attributing to the whole company.
