Wockhardt likely to sell India business to cut debt, focus on UK: Analysts

Company left with low-margin brands in India after selling profitable ones

Wockhardt, the international pharmaceuticals company, is likely to focus on its UK operations and sell the low-margin India business to pare debt, analysts have said.

Two Mumbai-based analysts told 'Business Standard' that Wockhardt had few options besides selling its Rs 670-crore domestic business. “This is the only business vertical that it can sell, and can fetch about 3-4 times the revenue multiple easily. Many players are looking for brand acquisitions if they come at a reasonable price,” said one analyst, adding that Wockhardt’s next step would be to focus on its UK and EU businesses.

Another analyst said the company sold some profitable brands to Dr Reddy’s Laboratories (DRL) in 2020 and those that remain with it are for chronic therapy. “The renowned brands like Practin, Zedex, Bro-Zedex, Tryptomer, and Biovac have been sold off to DRL. These four-five brands were almost 40 percent of the business that it sold to DRL. It sold a total of 62 brands,” the analyst said.

The brands left with the company are new and have low margin. “Instead of spending energy on building these brands, it is more pragmatic to sell those,” he said. Wockhardt sold its plant in Baddi, Himachal Pradesh, to DRL, along with the facility’s manpower.

Wockhardt officials could not be reached for an immediate comment on the matter.

Anti-diabetic brands constitute 27 per cent of Wockhardt’s India sales, vitamins and minerals around 26 percent, and gastro-intestinal drugs contribute 20 percent, said the analyst. Three brands--Methylcobal (vitamin), Spasmo Proxyvon Plus (pain and analgesic) and Wosulin (insulin)--together contribute over 50 percent of Wockhardt’s India revenues.

The company has been paring debt for the years, responding after its revenues and profits were impacted due to issues with the US drug regulator (see chart) about its plants in India. The USFDA in 2013 banned two of its main plants—Walunj and Chikalthana in Maharashtra—and later the company’s Ankleshwar plant in Gujarat also came under scrutiny. It took Wockhardt several years to emerge from this setback.

It has managed to build a successful UK business where it operates plants that supplies vaccines to the UK government. In fact, 50 per cent of Wockhardt’s business comes from the UK and EU. The US contributes roughly 11 percent and the rest of the world markets around 19 percent. India is around 20 per cent of Wockhardt’s consolidated turnover.

The company recorded a turnover of Rs 3,230 crore in FY22. In FY22, Wockhardt undertook a Rs 748 rights issue to finance long-term debt and fund research.

Murtaza Khorakiwala, managing director of Wockhardt, said in a FY22 annual report the company’s Wrexham facility supplies 100 million doses of vaccines for the UK government. Khorakiwala spoke about future growth prospects from the market.

“Our collaboration with Serum Life North Wales, will deliver a total of 150 million doses of multiple vaccines, which is a strong indicator of future growth. Focus on emerging markets, development of biosimilars and biobetters for diabetes, development of NCEs, etc. The faster-than-market growth of the India business and rapid growth in EMROK sales is testimony to the soundness of the plan,” he said.

In 2020, the company progressed in its novel antibiotics pipeline as the Indian drug regulator gave nod for two of its novel antibiotics used for acute bacterial skin and skin structure Infections including diabetic foot infections. The drug targets superbugs that are resistant to other molecules.