Dr Reddy's eyes more buys

Focus markets are the US, Italy, Spain, France and India: Satish Reddy.

Hyderabad-based Dr Reddy's Laboratories, having just sealed the biggest acquisition in the Indian pharmaceuticals history by buying German generics major Betapharm for ¤480 million, says it has appetite for more.

While the company, governed by disclosure norms of stock exchanges, cannot reveal the details, its Managing Director Satish Reddy says the focus markets are the US, Italy, Spain, France and India.

"To expand our presence geographically, we will look at acquisitions," Reddy told Business Standard.

The company is also gearing up to raise capital through an issue of foreign currency convertible bonds.

But all future acquisitions will be funded largely through target-specific debt funding. This model is being followed for buying Betapharm""70 per cent of the financing is specific to the purchase.

Any future acquisition, said Reddy, would be driven by the value on offer.

Dr Reddy's is looking at "market entry strategies" while scanning possible acquisition targets in Europe. For the US, the strategy will be to gain critical mass, and for India, increased market share.

"Acquisitions are part of our strategy. There are parts in Europe like France, Spain and Italy that need to be covered, where we have no presence," said Reddy.

"Value is what one saw in Roche's API (active pharmaceuticals ingredient) facility in Mexico. It is what that makes sense to us in terms of market size, portfolio and customer relationships," he said.

Dr Reddy's Labs recently bought 100 per cent stake in Betapharm Arzeniemittel Gmb, outbidding its competitor Ranbaxy Laboratories.

It is also open to picking up targets in the US generics market, which in the recent past has proven tough in the face of pricing pressures.

"Our intent there will be to gain critical mass. The pricing pressures will thrash out in time as more patents expire in the next 2-3 years. Consolidation will be the key and we will be looking at the US," said Reddy.

Commenting on the acquisition targets in India, Reddy said, "We have been talking to a couple of companies but the premiums they are demanding are ridiculous. The valuations, being quoted, are as much as 12 times of EBITDA margins."

Dr Reddy's currently has a market share of less than 3 per cent and is at number seven in the Indian pharmaceuticals market.