Lupin Ltd, the world’s largest maker of drugs to fight tuberculosis, is considering selling its unit that markets medicines in India, two people with knowledge of the matter have said.
Founding shareholders, who own a combined 47 per cent of the Mumbai-based company, have started the process of finding a buyer for the operations, say the people, who declined to be identified because the discussions are private.
The Indian business might be worth at least $1 billion, one person said.
Selling the unit, which accounted for 32 per cent of Lupin’s Rs 5,710 crore ($1.3 billion) revenue in the year ended March 31, might help finance investments in more profitable markets overseas.
Lupin is the fifth-largest supplier of generic drugs in the US based on prescriptions.
Lupin said it had no plan to sell its domestic operations. “This is baseless and there is no such activity going on,” the company said in an emailed response to questions from Bloomberg News on July 15.
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The company’s shares fell 1 per cent to Rs 479.25 in Mumbai after gaining as much as 1.1 per cent earlier in the day. India’s pharmaceuticals market will expand by about 14.5 per cent annually to $55 billion by 2020 from $12.6 billion in 2009, according to McKinsey & Co.
By the start of the next decade, India’s drug sales will be the largest after the US, Japan and China, helped by rising household incomes, population growth, improved health insurance coverage and increased prevalence of diseases such as cancer and diabetes, according to McKinsey.
HIGHER VALUATIONS
Sales at Lupin’s domestic formulations unit rose 17 per cent to Rs 1,550 crore in the year ended March 31. The business has focused more on treatments for chronic diseases over the past five years and less on acute conditions, Monica Joshi, a health care analyst with Avendus Securities Pte, wrote in a July 1 report.
If the sale does take place, the company should get at least eight-nine times the sales of its Indian unit, Hemant Bakhru, an analyst at CLSA Asia-Pacific Markets, said in an interview on Monday. “Lupin has a fairly strong domestic business, so I don’t see any reason why they should sell at a lower price.”
Piramal Healthcare Ltd sold its branded generic-drug unit in India to Abbott Laboratories for $3.72 billion last year. That acquisition valued the unit at nine times the annual sales, Chairman Ajay Piramal said in May 2010. International pharmaceutical companies have made $11.9 billion of acquisitions in the last five years in India, according to Bloomberg data.
INDIA SHARE
Lupin was founded in 1968 by Chairman Desh Bandhu Gupta, a billionaire with a Master’s degree in chemistry. Lupin had about 4,000 medical sales representatives in the domestic market, according to its 2011 annual report. Gupta and his family control 46.96 per cent of the company.
Lupin, India’s fourth-largest drug maker by revenue, has a 3 per cent share of the domestic market, according to Nomura Financial Advisory and Securities (India) Pte, making it the 6th largest pharmaceutical supplier in India by value.