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Shilpa Medicare demerging API business to take it public

Shilpa Medicare Ltd plans to raise upwards of  ₹1,000 crore through the initial public offering.  (Photo: Mnt)Premium
Shilpa Medicare Ltd plans to raise upwards of 1,000 crore through the initial public offering.  (Photo: Mnt)

Listed pharmaceutical firm Shilpa Medicare Ltd is demerging its active pharmaceutical ingredients (API) business into a separate company with the plan to take it public through an initial public offering (IPO) to raise upwards of 1,000 crore

MUMBAI : Listed pharmaceutical firm Shilpa Medicare Ltd is demerging its active pharmaceutical ingredients (API) business into a separate company with the plan to take it public through an initial public offering (IPO) to raise upwards of 1,000 crore, said three people aware of the development.

On 2 April, Shilpa Medicare informed stock exchanges that its shareholders had approved a business transfer agreement involving the slump sale of the API business along with the intermediates, polymers, peptides and CDMO business related to API business, and two manufacturing units to its subsidiary Shilpa Pharma Lifesciences. “The transaction is expected to be completed within 45 days or such other period as mutually agreed upon between the parties," the exchange notification said.

The company has already started working on the planned IPO of the API subsidiary, said one of the people cited above, speaking on the condition of anonymity.

“The company has appointed investment banks Axis Capital and Jefferies to work on the IPO. The IPO will be a mix of primary and secondary share sales where Shilpa Medicare could offload some of its stake in the API business. This is a value unlocking exercise, as API businesses have been doing well given that many global pharma companies have been trying to reduce their dependence on Chinese supplies, which is benefiting Indian companies," he said.

In its latest investor presentation released in February, the company noted that the rationale to separate the API business into a subsidiary would help provide a focused approach resulting in better operating efficiency with fundraising opportunity in the segregated business either from strategic investors through private placement or from investors at large through public issue.

According to the company’s filings, revenue from oncology related API products, its biggest segment, increased from 74.23 crore in Q3FY21 to 106.79 crore in Q3FY22, while revenue from the non-oncology segment rose from 23.67 crore to 51.12 crore.

“Momentum in the API business continues to improve in line with the measures we have taken, which is heartening. We have a deep pipeline of products," Vishnukant Bhut-ada, managing director Shilpa Medicare, said at the time of its Q3FY22 earnings in February.

An email sent to Shilpa Medicare on Friday did not elicit a response.

ABOUT THE AUTHOR

Swaraj Singh Dhanjal

" Based in Mumbai, Swaraj Singh Dhanjal is responsible for Mint’s corporate news coverage. For the past eight years he has been writing on the biggest deals in private equity, venture capital, IPO market and corporate mergers and acquisitions. An engineer and an MBA, he started his journalism career in 2014 with Mint. "
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