Carlyle Group has agreed to acquire 20 per cent stake as fresh equity capital in Piramal Pharma Ltd, a wholly-owned subsidiary of Piramal Enterprises Ltd, at a cost of $490 million (about Rs 3,700 crore).
The transaction values the pharma business at an enterprise value (EV) of $2.77 billion, with an upside component of up to $360 million depending on the company’s FY21 performance. Based on the EV (excluding the upside component), exchange rate and pharma net debt as of March 2020, the estimated equity capital investment for Carlyle’s 20 per cent stake in Piramal Pharma would amount to $490 million.
CA Clover Intermediate II Investments, an affiliated entity of CAP V Mauritius Limited, an investment fund managed and advised by affiliated entities of the Carlyle Group Inc has made the purchase agreement. Piramal Pharma will include Piramal Pharma Solutions, an end-to-end contract development and manufacturing (CDMO) business, Piramal Critical Care, a complex hospital generics business selling specialized products across over 100 countries, Consumer Products Division, a consumer healthcare business selling over-the-counter products in India and PEL’s investment in the joint venture with Allergan India, a leader in ophthalmology in the domestic market and Convergence Chemicals Pvt Ltd.
This transaction is one of the largest private equity deals in the Indian pharmaceutical sector, and is expected to close in 2020, subject to customary closing conditions and regulatory approvals.
Ajay Piramal, chairman, Piramal Enterprises, said, “This infusion of funds will further strengthen our balance sheet and provide us with a war chest for the next phase of our strategy. We are pleased to have an investor of this caliber join the Piramal family and continue our stellar track record of partnerships.”
Neeraj Bharadwaj, managing director, Carlyle Asia Partners advisory team, said: “Given global pharma industry trends, we see attractive opportunities for organic as well as inorganic growth in each of these businesses. We are excited to work with the company’s experienced management team, and will leverage our global network, extensive knowledge of the healthcare sector, and operating experience to seek to expand its platform, develop strategic opportunities and facilitate broader market access.”
Following the sale of its domestic pharma business to Abbott in 2010 for $ 3.8 billion, Piramal has demonstrated its ability to build a solid and resilient pharma business over the last 10 years. Leveraging its differentiated business model and strong quality track record, PEL’s pharma revenue since the Abbott deal has grown 3.5 times at 15 per cent from Rs 1,537 crore in FY11 to Rs 5,419 crore in FY20.
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