Torrent Pharma open to more acquisitions

Ahmedabad-based pharmaceutical major Torrent Pharmaceuticals Ltd, which is planning to raise Rs 10,000 crore by issuing securities, is open to acquisitions to fuel its future growth. The fund raised would be used to refinance existing borrowings, as well as organic and inorganic growth.

"Torrent Pharma has taken approval of the Board of Directors for obtaining the shareholders approval for issuance of equity shares etc for an amount, not exceeding Rs 3,000 crores, increase in the borrowing limit to Rs 10,000 crores and for issuance of non-convertible debentures for an amount not exceeding Rs 7,500 crores (within the above limit of Rs 10,000 crores)," the company said over e-mail. A spokesperson further added that the company has taken these enabling approvals "for meeting its funding requirements of its capital expenditure, long term working capital, refinancing of the existing borrowings and organic and inorganic growth and would approach the market as and when there is a specific requirement of funds for any of these purposes at an appropriate time and opportunity."

Earlier as well, sources in Torrent Pharmaceuticals had indicated to Business Standard that the company was open to more acquisitions in the future in the domestic or international space. Torrent has acquired the domestic business of Elder Pharma in December 2013, a deal that gave Torrent access to new therapeutic areas where it was looking at expanding its presence. Pain and wound management and nutraceuticals were areas that Torrent had identified for organic entry over the next one to two years, the acquisition gave a good jump-start.

A Mumbai-based analyst pointed out that Torrent could be looking for brand acquisitions, which would be relatively smaller in size in stead of acquiring an entire company. "If they go for brand acquistions, it would be relatively smaller in size, around Rs 50-100 crore deals. In case they are looking at acquiring an entire company, the size of the deal would be much larger, and seems unlikely at the moment," he said adding that areas that the company could be looking at include chronic therapy segments like cardiac and anti-diabetic which are clocking over 20 per cent growth in the domestic market. While the Rs 2,004 crore Elder Pharma deal had stretched Torrent's balance sheet, with improvinf Ebitda margins thanks to Elder's portfolio, analysts now feel that in place of an earlier estimate of a seven to eight-year payback, the period is reduced to around five to six years.

Also, with change at the helm, industry insiders feel that Torrent is likely to take the inorganic route to growth in the coming years.